Employer of Record (EOR) Mexico

An Employer of Record (EOR) serves as the official employer of workers in Mexico. Often known as a Global Professional Employer Organization (Global PEO), this role encompasses a wide range of employment responsibilities. This includes ensuring compliance with local labor laws and regulations, managing payroll, handling taxes, providing legally mandated benefits, and drafting employment contracts.

Simplify your global expansion with our Global PEO services, an effortless solution that eliminates the need for entity setup. Our Employer of Record (EOR) in Mexico guarantees a legal presence, ensures compliance, and protects your intellectual property. Focus on what you do best while we facilitate seamless global mobility and work visa processes, helping you build a diverse and efficient international workforce. Partner with Mercans, your trusted Employer of Record in Mexico, for a compliant and streamlined employment experience for your global team.

Things you need to know before hiring in Mexico

Employment Contracts in Mexico

• Mandatory Written Agreements: In Mexico, employers should execute an individual employment agreement in writing that lays out the terms and conditions of employment. Mexican labor law does not recognize employment at will, so termination generally requires a justified cause or the payment of statutory severance for unjustified dismissal.
• Unions and Collective Bargaining: Where unionized employees are involved, a Collective Bargaining Agreement (CBA) may regulate working conditions. A CBA cannot waive minimum statutory rights and must remain at least as favorable as the standards set by law.

What’s in the Agreement? The Federal Labor Law requires that working conditions be documented. Each party should receive a copy of the employment agreement, which must include details like:

• Employee and employer info (name, nationality, domicile, etc.)
• Job specifics, work location, and schedule
• Salary, benefits, and payment dates
• Training provisions
• Rest and vacation days

Implied Trust: Every employment agreement comes with an unspoken bond of trust. Employers cannot force employees to waive their rights to legal protections or minimum benefits.

Details of CBAs: CBAs must also be in writing, outlining:

• The parties involved and their addresses
• Work schedules and rest days
• Salary specifics and training provisions

Fixed-Term vs. Open-Ended Contracts: Most employment agreements are presumed to be for an indefinite period unless the nature of the work or a legal exception justifies a fixed term.

Trial Periods: Trial periods can last up to 30 days, or up to 180 days for managerial, executive, administrative, or specialized technical roles, subject to the legal conditions. Initial training periods generally may last up to three months, or up to six months for certain high-level positions. These arrangements must be in writing and cannot be extended or used consecutively to avoid employee rights.

Notice Period: Mexico does not have a general statutory notice period for dismissal. Instead, employers must provide written notice stating the grounds for termination. If proper written notice is not given, the dismissal may be deemed unjustified.

Working Hours

According to employment law in Mexico, the maximum legal workweek depends on the shift type: 48 hours for daytime work, 42 hours for night work, and 45 hours for mixed shifts.

13th Month Salary

The Aguinaldo, commonly referred to as the 13th-month salary, is a mandated Christmas bonus that employers are obligated to disburse to their employees by December 20 each year.

Calculating the Aguinaldo

The Aguinaldo is calculated as a minimum of 15 days’ worth of an employee’s regular salary. Here’s an example for clarification:

If an employee’s annual salary is $720,000 pesos, their Aguinaldo would amount to $30,000 pesos.

Calculation:

Termination and Severance Pay

When Is Severance Pay Necessary in Mexico?

Conditions for Ending Employment in Mexico

• Voluntary Resignation: When an employee decides to leave their position, they are entitled to payment for accrued rights such as unpaid salary, proportional vacation pay, the vacation premium, and a prorated Christmas bonus. This payout, often referred to as a finiquito, reflects the benefits accumulated until the time of resignation. For employees with 15 or more years of service, an antiquity premium may also apply, which grants 12 days’ salary for each year worked, capped according to the legal salary limit.
• Justified Termination: If an employee is dismissed for valid reasons under the Federal Labor Law, the employee is generally entitled to the finiquito and, where applicable, the antiquity premium.
• Wrongful Termination: In instances of unjust termination, employees are generally entitled to:
  • Three months’ salary.
  • An additional 20 days’ salary for each year of employment, if ordered or applicable in the specific legal route used.
  • The basic settlement and antiquity premium, if applicable.
• Voluntary Resignation: Understanding Severance Pay in Mexico In cases of voluntary resignation, the employee chooses to end their employment, and the associated final payout is commonly called the finiquito. This includes the benefits accrued up to their departure.

Employees vs Independent Contractors

As companies expand into new markets, they frequently encounter complexities related to local employment laws. A critical area of confusion in Mexico revolves around the differentiation between independent contractors and employees. This distinction is essential for ensuring legal compliance, managing financial obligations, and maintaining operational flexibility. This guide outlines the implications of these classifications and highlights the key differences that businesses need to be aware of.

Key Differences Between Independent Contractors and Employees

Social Security in Mexico

In Mexico, social security contributions are determined by an employee’s Base Listed Salary (Salario Base de Cotización). Both employers and employees contribute varying percentages toward different social security schemes.

According to Article 27 of Mexico’s Social Security Law, the Base Listed Salary is critical for calculating benefits, as it encompasses not just the regular salary but also additional forms of compensation like bonuses and commissions.

The Base Listed Salary serves as the foundation for calculating the contributions owed to the Mexican Social Security Institute (IMSS) by both parties. To accurately determine it, all cash payments made to the employee must be taken into account, including:

• Daily Salary
• Bonuses
• Premiums
• Commissions
• In-kind Payments, where they form part of the integrating salary under the law

By incorporating these components, the Base Listed Salary ensures a comprehensive approach to social security contributions and benefits in Mexico.

Class I (Clase I) – Low Risk:

• Office work
• Retail and commercial businesses
• Educational institutions
• Financial services

Class II (Clase II) – Moderate Risk:

• Restaurants and catering services
• Telecommunications
• Textile manufacturing
• Certain construction and maintenance activities

Class III (Clase III) – Intermediate Risk:

• General construction
• Light manufacturing
• Transportation and logistics services
• Health services (excluding high-risk procedures)

Class IV (Clase IV) – High Risk:

• Heavy manufacturing and assembly
• Mining operations
• Chemical production
• Major construction and infrastructure projects

Class V (Clase V) – Very High Risk:

• Oil and gas extraction
• Nuclear facilities
• High-risk health procedures
• Emergency response and firefighting

Occupational Risks

In Mexico, occupational risk premiums are classified according to five risk classes, which determine the percentage that employers must pay based on the nature of the work performed. Class I, which encompasses the lowest-risk jobs, has a premium rate of 0.54355%. As the risk increases, the rates escalate accordingly, with Class II at 1.13065%, Class III at 2.59840%, Class IV at 4.65325%, and Class V at 7.58875%.

Disease and Maternity Insurance

Disease and maternity insurance in Mexico provides coverage that includes medical care, surgeries, medications, and hospitalization through IMSS. For insured employees, maternity incapacity is generally covered for 84 days in total.

Employer Contributions

Employers in Mexico are responsible for various contributions to social security and related benefits. These include a fixed fee component for disease and maternity insurance based on the UMA, additional salary-based contributions, occupational risk premiums, nursery and social benefits, retirement, unemployment in old age and old age insurance, and housing contributions through INFONAVIT.

Worker Contributions

Workers also contribute to their social security benefits, including portions of disease and maternity insurance and retirement-related contributions as provided by law.

Disablement and Life Insurance

This type of insurance provides critical benefits for workers who suffer from work-related accidents leading to disability or death. It ensures that employees and their families receive financial support in case of unforeseen circumstances.

Retirement Benefits

Retirement benefits in Mexico include statutory retirement-related IMSS contributions and the employer’s contribution to the employee’s retirement savings system, in addition to other legal end-of-employment rights where applicable.

Nursery and Social Benefits

Nursery and social benefits provide daycare services for employees’ children and related social benefits. Employers contribute 1% of the Base Listed Salary to fund these services, while workers do not have an additional contribution for this concept.

INFONAVIT

The Instituto del Fondo Nacional de la Vivienda para los Trabajadores (INFONAVIT) requires employers to contribute 5% of the Base Listed Salary toward housing assistance for employees. This contribution aids workers in securing housing solutions and is a significant aspect of social security in Mexico.

Payroll in Mexico

Minimum Wages in Mexico

Mexico’s minimum wage was updated with effect from January 1, 2026.

As of this date, the minimum wage is as follows:

This means the general daily minimum wage is MXN 315.04 in most of the country, while the daily minimum wage in the Free Zone of the Northern Border is MXN 440.87.

Payroll Cycle in Mexico

Payroll frequency in Mexico depends on the type of employee and the employment arrangement. In practice, many employees are paid weekly, biweekly, or semimonthly. The payment cycle should be clearly stated in the employment agreement and payroll records.

Overtime Pay

In Mexico, employees earn overtime pay at a rate of 100% above their regular hourly wage for up to nine hours of overtime per week. For any overtime hours worked beyond that threshold, the rate increases to 200% above the standard hourly wage.

Mercans’ payroll capabilities

• Payroll Cycle in Mexico: Ensure your team in Mexico is paid accurately and on time. Mercans’ payroll services allow you to process payments for employees and contractors seamlessly, in the local currency, helping you meet local expectations with ease.
• Payroll Setup, Processing, and Administration: From initial setup to ongoing management, Mercans handles every aspect of payroll with precision. Our team manages payroll processing and administration with a focus on accuracy and compliance, so you can keep your operations running smoothly.
• Statutory Filings and Payments: Stay compliant with Mexico’s statutory requirements effortlessly. Mercans takes care of all necessary filings and payments, ensuring your business meets local obligations on time, every time, providing peace of mind with every payroll cycle.

Personal Income Tax in Mexico

In Mexico, the personal income tax (PIT) system applies differently to residents and non-residents. Here’s a breakdown of the main elements:

Resident vs. Non-Resident Tax Obligations

• Residents in Mexico are taxed on their worldwide income, which includes earnings from both domestic and international sources.
• Non-residents, however, are taxed only on income sourced within Mexico. This includes foreign citizens and Mexican citizens who can establish that they are tax residents in another country.

Personal Income Tax Rates for Residents (2026)

For residents, tax rates vary progressively based on income brackets, with rates increasing as taxable income rises. Here’s the current rate structure:

Personal Income Tax for Non-Residents

Non-resident tax rates differ by type and amount of Mexico-source income. For employment income, the commonly used annual thresholds remain:

• Up to MXN 125,900 in annual income: Exempt.
• Between MXN 125,900 and MXN 1,000,000: 15%.
• Above MXN 1,000,000: 30%.

Non-residents may also be subject to withholding tax on Mexican-source interest income, with rates depending on the investment type and applicable legal rules.

Mexico Employee Hiring Cost

When hiring employees in Mexico, employers must account for various mandatory contributions beyond the employee’s gross salary. These additional costs include social security, housing contributions, work risk insurance, paid annual benefits, and other legally required items. Together, these contributions can significantly increase the total annual cost of employing someone when compared to the gross salary alone.

Here’s a detailed breakdown of how these costs add up for a typical employer in Mexico:

Employee Cost Breakdown for Mexico

Salary and Associated Employer Costs for a Gross Salary of MXN 100,000

Employee Benefits in Mexico

Mandatory Employee Benefits in Mexico

In Mexico, the law mandates a range of essential benefits that companies must provide to employees. These benefits ensure basic health, retirement security, and financial support for employees and their families.

Supplementary Employee Benefits in Mexico

While not legally required, many companies in Mexico offer additional benefits to support employee well-being and attract talent. Supplementary benefits may vary by company and industry.

Work Permit in Mexico

Mexico is an increasingly popular choice for companies looking to expand operations or hire foreign talent, but before hiring foreign employees, it is essential to understand the work visa requirements. Navigating the proper visa processes ensures that your workforce remains compliant with Mexican law and can begin contributing effectively from day one.

Overview of Work Visa Options in Mexico

The National Institute of Migration (INM) governs immigration in Mexico and handles the issuance of work-related immigration authorizations. Any non-resident seeking employment in Mexico must obtain the appropriate work authorization. Employees hired by a Mexican company typically require a residence process based on an offer of employment. For short assignments of up to 180 days, the route may be a visitor condition with permission to perform paid activities, depending on the specific case and approval.

• Business Visa: For individuals visiting Mexico for up to 180 days for business activities such as meetings, professional consultations, and technical assistance. This visa does not permit paid employment.
• Temporary Resident Visa: Suitable for foreign nationals intending to live and work in Mexico for extended periods, generally over 180 days, following authorization based on an offer of employment.
• Permanent Resident Visa: Intended for individuals who plan to live in Mexico indefinitely and who qualify under the applicable migration rules.

Steps to Obtain a Work Visa

The temporary resident route based on an offer of employment is the most common option for foreign professionals. Employers are often responsible for initiating the visa authorization process through the INM, with the final consular visa step completed by the worker abroad.

General document requirements for a work visa may include:

• Completed visa application
• Valid passport
• Migratory document copy, if applicable
• Recent photo
• Invitation or offer letter from a Mexican public or private institution
• Evidence of financial status, employment, education, or family relationships in Mexico, depending on the route used

Upon approval, the worker must obtain the visa at the Mexican consulate indicated in the process. Once they arrive in Mexico, they must complete the local immigration registration and obtain the corresponding residence card within the legal deadline.

Key Considerations for Foreign Nationals

While a temporary resident status may later lead to a permanent resident route in some cases, visitor status without the appropriate work authorization does not permit regular employment. An individual seeking work in Mexico should complete the correct visa and residence process before beginning employment.

EOR Solutions in Mexico

Best Employer of Record Mexico

Why Mercans is the Leading Employer of Record (EOR) in Mexico

• Compliance with Regulatory Authorities: Mercans strictly adheres to the regulations set by the Ministry of Labour and Social Welfare (STPS), as well as local and federal labor authorities. This commitment ensures that all employment practices comply with Mexican labor laws.
• Independent Operations: Operating as an independent entity, Mercans provides tailored employment services without relying on third-party providers, ensuring reliability and responsiveness to client needs.
• Comprehensive Employment Solutions: Mercans effectively manages various employment types, including full-time employees, freelancers, contractors, and expatriates, offering flexible solutions to meet the diverse requirements of businesses.
• Scalable Services for Enterprises: Designed to cater to large enterprises, Mercans offers scalable and sophisticated employment services that accommodate complex organizational structures.
• Multi-Currency Payroll Management: Mercans facilitates payroll processing in multiple currencies, enabling smooth financial operations for global companies operating in Mexico.
• Expertise in Multi-Country Payroll: With a robust global network, Mercans excels in managing multi-country payroll, ensuring seamless operations for businesses with international teams.
• Commitment to Data Security: Mercans adheres to stringent data protection standards, ensuring compliance with GDPR regulations and maintaining high security through SOC 1 and SOC 2 certifications.
• Certified Quality Management Systems: Holding ISO 20000 and ISO 27001 certifications, Mercans showcases its commitment to delivering high-quality IT service management and information security.
• Robust Application Security: Mercans meets the OWASP ASVS 3.0 standards, ensuring strong security practices in its application development and management processes.
• Compliance with the Mexican Social Security Institute (IMSS): Mercans is well-acquainted with the requirements of the Mexican Social Security Institute (IMSS), ensuring that all employee benefits and contributions comply with local social security regulations.