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Mercans CountryIntel ® Mexico Payroll And HR Insights

Mercans offers complete payroll, PEO and HR services in Mexico

Offering competitive wages for skilled workers and lower transportation costs, Mexico is a great place to do business given its proximity to the US and Canada. A federation of 31 states, Mexico is a favourite for foreign direct investment and the Department of Economy provides support through programmes that promote investment.

Doing Business in Mexico

In general, foreigners can own 100% of a Mexican corporation and can open a business in Mexico. The legal and tax environment does not discriminate between foreign-owned or Mexican-national owned businesses. The new free trade agreement (the United States - Mexico- Canada Agreement USMCA) is expected to provide economic stability across a number of industries. There are also no restrictions on doing business with certain countries or jurisdictions.

Entity Registration & Incorporation Requirements

Setting up a new business or expanding an existing one in Mexico is straightforward. Choose how your company operates from a range of entity types which suit your individual circumstance.

Banking

Banks are open from Monday to Friday 9 am to 4 pm.

Working Week

The standard working week is 42-48 hours per week usually worked from Monday to Saturday

Labor Law

Generally, the conditions of employment and details of what has been agreed upon needs to be documented in an employment contract between the employer and employee. Employers must understand that individual states may make changes to labor laws (which differ from state to state) and may do so without notice.

Main Industries

Food and beverage, tobacco, chemicals, iron and steel, petroleum

GDP Growth

2.11%

Dates & Numbers

dd-mm-yyyy

Official State Name

United Mexican States

Population

128.9 million

Capital

Mexico City

Major Languages

Spanish

Currency

Mexican Peso

Internet Domain

.mx

International Dialing Code

+52

Mexico
Mexico City, MX
4:40 pm, May 19, 2022
30°C
few clouds

Payroll

Employers are responsible for federal income tax withholding and remittances, Social Security withholding and contributions and state payroll tax payments. Particularly for companies that operate global payroll, it is important to note that all salary and statutory payments must be made from an in-country bank account. The need for extra timelines should be considered when setting up payroll in the country.

It is acceptable to provide employees with online pay slips

Payslip

Five years

Reports

Six days after the first full year of employment

Annual Leave

52 weeks and paid no lower than 60% of the salary

Sick Leave

12 weeks of paid maternity leave and five days of paid paternity leave

Maternity & Paternity Leave

3 months’ salary if terminated without just cause.

Employee Termination

The 13th salary is compulsory and has to be paid by the 20th of December

13th Salary

$141.70 Mexican pesos per day

Minimum Wage

3 hours per day without exceeding nine hours per week, and with a compensation of 100% over the regular hourly pay

Overtime

20 days of daily total compensation for each year of service

Severance Pay

Tax and Social Security

The main taxes that could potentially apply to a business vehicle are income tax, value added tax (VAT) and local tax (which include payroll tax, real estate tax and transfer tax). In most states, employers must pay a payroll tax, generally between 1.5 to 3% on the total payroll.

Tax

Thanks to a tax treaty with the US and Canada, there is relief from double taxation on all income. Tax resident employees must pay income tax on total income, regardless of its  source. Income tax is payable at the rate applicable for the bracket in which the employee’s income falls. Non-tax resident employees are exempt from income tax if they remain in Mexico for less than 183 days in any given 12 month period and wages are paid by a foreign resident.

30%

Corporate Income Tax

35%

Personal Income Tax

16%

Sales Tax

16%

VAT

Social Security

Tax resident employees must pay their share of social security contributions on their total income, regardless of its source. These contributions are withheld by the employer under Social Security law.

9.23%

Social Security Rate

7.58%

Social Security Rate for Employers

1.65%

Social Security Rate for Employees

Employment Law

The main regulatory laws are the Federal Labor Law 1970, the Social Security Law 1997 and the Employees National Housing Fund Institute Law 1972. Irrespective of the foreign law applicable in any employment contract, these laws apply to all who work in Mexico (whether Mexican citizens or not) and Mexican citizens working abroad who are employed by a Mexican company.

Employment Agreement

Every employee must enter into a written employment agreement that sets out the terms, obligations and rights of each party. But the absence of a written agreement does not affect the existence of an employment relationship or the rights granted by law to the employee.

Working condition

If an individual works for at least a month for a Mexican employer, they are presumed to be a permanent employee. Generally, discrimination against workers is prohibited under Federal Labor law and employment is heavily regulated. Federal Labour Law establishes the maximum number of work hours daily.

Leaves

Minimum paid vacations depend on the number of years of service qualifying for days of paid leave. Employees are entitled to six days of paid vacation after one year of work. An additional two days annually for every added year of service until the end of the fourth year of service and two days paid vacation every additional five years of work.

Employment termination

Terminating an employee can be complicated and costly in Mexico if you do not know the relevant rules and regulations. Dismissals must be justified in order for an employee to be terminated without employer liability.

1 week

Minimum notice period for terminating an employee

10 days

Total number of public holidays

42 - 48

Working hours per week

4 weeks

Total number of days for Compassionate & Bereavement Leave

Immigration

There are a number of different visa types that allow for an individual to work in Mexico legally. There are visas for temporary visitors, temporary residents and permanent residents.

Residency Permit

Generally,  non-Mexicans must have a visa to do business or work in Mexico. Visa types available include those for multiple immigration, temporary residence permits and permanent residence permits.

Work Permit validity

Six months from the day the permit is issued

Required Documents

Original university diploma or transcript, notarized and (affixed with an Apostille)

Copy of the employee’s and family member’s passports (all pages)

Five color identification photos

A utility bill for confirmation of the residential address

An updated resume

Confirmation letter of the job offer which includes the job title, description and salary information

Birth certificates ((affixed with an Apostille) of the employee and family members

Marriage certificate (affixed with an Apostille)

Compliant, reliable, error-free and touchless payroll in Mexico

Build the best team and hire top talent compliantly in Mexico. Get in touch with Mexico payroll outsourcing & PEO specialists for a free consultation!

This document was prepared for informational purposes only. As local laws & regulations keeps on changing. Please consult your tax & legal advisors as well.
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