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Global Payroll Team
Written by Global Payroll Team
Last updated May 1, 2026
Expert Reviewed
Mexico map

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Mercans offers complete payroll, PEO and HR services in Mexico

Mexico remains one of the largest economies in Latin America and a major manufacturing and export platform due to its proximity to the US and Canada, broad industrial base and extensive trade links. A federation of 31 states and Mexico City, it continues to attract foreign direct investment across manufacturing, automotive, electronics, logistics, food processing and business services.

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Doing Business in Mexico

In general, foreign investors may own 100% of a Mexican company in many sectors, although certain activities remain restricted or subject to specific limits under foreign investment rules. Mexico’s trade integration, especially through the USMCA framework, continues to support cross-border business, manufacturing and supply chain activity.

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

Banking hours vary by institution and branch, but many banks operate from Monday to Friday during standard business hours.

Working Week

The standard working week depends on the shift. The legal maximum is generally 48 hours for daytime work, 45 hours for mixed shifts and 42 hours for night work.

Labor Law

The key employment rules are established at federal level under the Federal Labor Law. Employers should document employment terms clearly in writing, although the absence of a written contract does not eliminate employee rights under Mexican law.

Main Industries

Automotive, electronics, food and beverage, chemicals, steel, petroleum, logistics, business services

GDP Growth

1.4%

Dates & Numbers

dd-mm-yyyy

Official State Name

United Mexican States

Population

129.7 million

Capital

Mexico City

Major Languages

Spanish

Currency

Mexican peso (MXN)

Internet Domain

.mx

International Dialing Code

+52

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Mexico
Mexico City, MX
5:06 pm, May 4, 2026
27°C
scattered clouds
36 %
Wind Gust: 28 mph
Clouds: 40%
Sunrise: 6:06 am
Sunset: 7:00 pm

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Payroll

Employers are responsible for payroll tax withholding and remittances, social security withholding and contributions, and applicable state payroll tax payments. Payroll in Mexico should also account for mandatory benefits such as aguinaldo, vacation premium, profit sharing where applicable, and statutory registrations with agencies such as IMSS and INFONAVIT.

It is acceptable to provide employees with online pay slips

Payslip

Five years

Reports

12 days after the first full year of employment, increasing with seniority

Annual Leave

IMSS cash sickness benefits generally start from the fourth day of incapacity and may continue for up to 52 weeks, subject to eligibility

Sick Leave

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

Maternity & Paternity Leave

Termination without just cause generally triggers statutory severance obligations rather than a fixed notice requirement

Employee Termination

The 13th salary is compulsory and must be paid before 20 December each year

13th Salary

$315.04 Mexican pesos per day in most of the country

Minimum Wage

Up to 3 extra hours per day, not exceeding 3 times per week, with the first 9 hours generally paid at 200% of the regular hourly rate

Overtime

In unjustified dismissal cases, employees are commonly entitled to 3 months’ salary, plus other applicable statutory amounts such as 20 days per year in certain cases and seniority premium where due

Severance Pay

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Tax and Social Security

The main taxes that may apply to a business vehicle are income tax, value added tax and local taxes such as payroll tax. In many states, employers must pay a payroll tax on total payroll, with rates varying by state.

Tax

Tax resident employees are generally taxed on worldwide income, while non-residents are taxed on Mexico-source income under domestic law and applicable tax treaties. Employers must withhold income tax from salaries under the progressive withholding tables issued by SAT.

30%

Corporate Income Tax

35%

Personal Income Tax

16%

Sales Tax

16%

VAT

Social Security

Employers and employees both contribute to the Mexican social security system. The actual combined rates vary depending on salary level, risk classification and the contribution concept involved, and payroll may also include INFONAVIT and retirement-related contributions.

Variable

Social Security Rate

Variable

Social Security Rate for Employers

Variable

Social Security Rate for Employees

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Employment Law

The main regulatory laws include the Federal Labor Law, the Social Security Law and the INFONAVIT framework. Irrespective of the foreign law chosen in any employment contract, mandatory Mexican employment rules apply to work performed in Mexico.

Employment Agreement

Every employee should enter into a written employment agreement that sets out the terms, obligations and rights of each party. However, 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

Mexican labor law is protective of employees and discrimination is prohibited. The Federal Labor Law establishes maximum daily and weekly hours depending on the type of shift, and overtime is tightly regulated.

Leaves

Minimum paid vacations depend on the number of years of service. Employees are now entitled to 12 days of paid vacation after the first year of work, with entitlement increasing as seniority grows. Employees are also entitled to a vacation premium of at least 25% during the vacation period.

Employment termination

Terminating an employee can be complex and costly in Mexico if the relevant rules and regulations are not followed. Dismissals must be justified for the employer to terminate without liability, and unjustified dismissals generally trigger severance and other statutory payments.

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No notice

Minimum notice period for terminating an employee

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Varies annually

Total number of public holidays

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42 – 48

Working hours per week

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Not mandated

Total number of days for Compassionate & Bereavement Leave

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Immigration

There are different immigration routes that may allow an individual to work in Mexico legally, including temporary residence options with permission to perform remunerated activities. The route used depends on nationality, assignment type and the employer’s immigration registration status.

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Residency Permit

Generally, non-Mexicans who intend to work in Mexico need immigration status that authorises remunerated activities. A common route is temporary resident status with permission to work, usually supported by a Mexican employer registered with the immigration authorities.

Work Permit validity

Commonly linked to temporary residence and renewable, subject to the approved immigration status

Required Documents

Valid passport or travel document

Job offer or employment support letter from the Mexican employer

Employer immigration registration documents, where applicable

Visa application forms and government fee payment receipts

Photographs and personal identification documents

Civil status documents for dependants, where applicable

Any additional documents requested by the National Immigration Institute

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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    FAQs

    What is an Employer of Record (EOR) in Mexico and how does it work for foreign companies?

    An Employer of Record in Mexico, provided by Mercans, acts as the legal employer for your team in the country. Mercans manages employment contracts, payroll, tax withholdings, social contributions, and compliance with Mexican labor laws, allowing foreign businesses to hire employees in Mexico without forming a local entity.

    Why should businesses use an EOR instead of establishing a legal entity in Mexico?

    Partnering with Mercans as your EOR in Mexico helps you avoid the time and expense of setting up a local company. It enables quick and compliant hiring, reduces administrative burdens, and ensures adherence to all employment and tax regulations while you focus on your business goals.

    How does payroll outsourcing in Mexico ensure compliance with labor and tax regulations?

    Mercans ensures full compliance by managing payroll processing, tax deductions, social security contributions, and statutory filings according to Mexican federal and state labor laws. This process ensures that all payments and reports are accurate, timely, and fully compliant with local regulations.

    Can an Employer of Record in Mexico hire employees and manage work permits for international companies?

    Yes. Mercans can hire employees on behalf of international companies and manage all aspects of work permits, visas, and employment authorization for foreign nationals, ensuring that both local and expatriate employees are legally employed in Mexico.

    What are the main benefits of using EOR and payroll services in Mexico for global expansion?

    Mercans offers fast access to the Mexican market, ensures total legal and tax compliance, minimizes operational risk, and provides expert local HR and payroll support. This allows your company to expand globally with flexibility, efficiency, and peace of mind.

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