Thinking about expanding your team? Hiring employees in Mexico could be your next great move, regardless of your or your company’s location.
Mexico offers a rich talent pool and a prime location, making it a smart choice for many businesses. But here’s the deal: Mexican labor laws are strict, and understanding them is crucial. These laws create a fair, stable work environment and govern employee benefits, compensation, termination, payroll, taxes, social security, annual leave, overtime pay, and union rights.
Mexico also has a unique culture, with strong family and community values that influence workplace norms and expectations.
Despite the need to consider not only the cultural aspects but also the legal landscape, here’s why hiring Mexican employees is a great idea:
- Access to skilled, diverse talent
- Competitive labor costs
- Close proximity to North American markets
- Modern infrastructure and technology
This blog post will walk you through labor regulations and culture surrounding hiring in Mexico, helping you build local expertise and networks and tap into Mexico’s top talent pool, remote and otherwise, with ease.
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Labor Laws for Employment in Mexico
Mexico’s main labor laws are Ley Federal del Trabajo (Federal Labor Law) and Ley del Seguro Social (Social Security Law), both of which protect workers and define employer-employee relationships.
Secretaría del Trabajo y Previsión Social (Mexican Secretariat of Labor and Social Welfare) ensures that all federal labor and social security laws are followed by overseeing hiring, compensation, benefits, and termination.
Many employees are part of unions, particularly the Confederación de Trabajadores de México (Confederation of Mexican Workers), and are covered by collective bargaining agreements.
Proper employee classification is essential. Employees in Mexico have more rights and protections than independent contractors — who are governed by only the civil code and, therefore, easier to terminate.
Factors that determine the employment status include:
- Supervision level
- Tools provided
- Payment method (salaried vs. hourly pay)
- Integration into the business
So, you should consult a lawyer and ensure the correct classification before hiring Mexican employees.
Want to learn more about hiring employees in Mexico? Check out this video by Remote to uncover myths, unexpected benefits, unique laws, and everything else you need to know.
Finding and Hiring Employees in Mexico
Looking for the right talent in Mexico can feel like looking for a needle in a highly skilled, diverse haystack. But all you need is the right tools and information to make sure that you have a good start on your recruitment journey.
Recruitment Channels
Various recruitment channels in Mexico can help you find and hire the right talent and build a successful remote (or in-office) team in the country. Here are some avenues you should check out to find the right Mexican local talent:
- Job Boards — Post openings on local job boards like OCC and Indeed, as well as LinkedIn, to tap into Mexico’s vast pool of professionals.
- Professional Network — Personal connections are highly valued in Mexico, so leverage your network and encourage employee referrals.
- Local Recruiters — Source candidates, handle their screening, and get advise on competitive offers by engaging with local recruiters.
- University Job Fairs — Connect with graduates at career events at top universities such as Tec de Monterrey and UNAM.
- Diversity Programs — Consider diversity initiatives to reach underrepresented groups (women re-entering the workforce, LGBTQIA+ community members, etc.).
Employment Contracts and Agreements
In Mexico, all employer–employee relationships are formalized with employment contracts, written in Spanish and detailing the key terms and conditions.
Each employment contract should specify the position, compensation, benefits, and policies, as well as present clauses related to confidentiality, intellectual property rights, and noncompetition. To ensure full compliance with regulations, such as maximum trial periods, the employment contract should be reviewed by your legal counsel.
Probation Periods
Probation periods in Mexico can last up to 30 days. During this period, you can assess your new hires and terminate their employment without severance if they aren’t up to the mark.
For specialized roles or management positions, the probation period can be extended up to 180 days.
Compensation and Benefits for Employees in Mexico
Mexico’s federal labor law stipulations govern the minimum standards for wages and benefits. As an employer in Mexico, you’ll be expected to understand and comply with these requirements.
Daily Minimum Wage
Mexico’s general and professional minimum wages are set at the federal level. They are reviewed and updated annually to reflect economic conditions and ensure fair compensation.
The general minimum wage applies to most occupations, while professional minimum wages apply to jobs requiring specific skill sets.
The daily general minimum wage varies by region. As of January 1, 2024, it was:
- $248.93 Mexican pesos in most Mexican regions (including Mexico City)
- $374.89 Mexican pesos in the Free Economic Zone at Mexico’s Northern Border (including Tijuana and Juarez)
Based on the employee’s location and job role, you must adhere to the highest applicable minimum wage, whether set at the federal, state, or municipal level.
Overtime Pay
Standard working hours in Mexico are capped at 48 hours per week. You’ll be required to pay employees overtime for any number of hours exceeding this stipulated limit.
The structure for hourly overtime pay is as follows:
- First 9 hours of overtime per week are paid at 200% of the regular hourly rate.
- Additional overtime after the first 9 hours is paid at 300% of the regular hourly rate.
You may mandate up to nine hours of overtime per week under special circumstances, provided it has been approved and justified. Exceeding the nine-hour limit without proper authorization is considered labor exploitation and is liable for significant penalties, including fines and imprisonment.
You must comply with these regulations to avoid legal repercussions and ensure the fair treatment of your employees.
Employee Benefits and Paid Leave
Mexican labor laws mandate several benefits that employers must provide to their employees, including:
- Social Security — All employers must register employees with the Instituto Mexicano del Seguro Social (IMSS — the Mexican Social Security Institute), which provides healthcare, maternity leave, disability and life insurance, retirement, and other benefits. Both employers and employees contribute to the IMSS.
- Annual Profit Sharing — Your employees are entitled to 10% of your company’s pre-tax profits, typically distributed in May or June. Some exemptions may apply.
- Paid Vacation Time — For each employee, their years of service determine the number of paid vacation days:
- 1 year = 12 days
- 2 years = 14 days
- 3 years = 16 days
- 4 years = 18 days
- 5 years = 20 days
- Over 5 years = 20 days + 2 days for every 5 years of continuous service
- Christmas Bonus — Employees must receive at least 15 days of salary as an annual Christmas bonus (aguinaldo).
- Paid Sick Leave — Employees can get up to 52 weeks of paid sick leave only when they provide you with a medical note from the IMSS. The sick pay (full pay for the first three days, and 60% of the pay afterward) comes from the employer, but you can appeal for some reimbursement if applicable.
- Maternity Leave — Female employees are entitled to 12 weeks of paid maternity leave covered by IMSS, split into six weeks before and after birth.
- Paternity Leave — New fathers are eligible for five days of paid paternity leave.
- Severance Pay — Terminated employees are entitled to three months’ salary plus 20 days’ pay for each year of service.
Paid National Holidays
In Mexico, companies are required to grant 13 paid public and national holidays:
- New Year’s Day — January 1
- Constitution Day — February 5
- Benito Juárez’s Birthday — March 20
- Good Friday — April 7
- Labor Day — May 1
- Cinco de Mayo — May 5
- Independence Day — September 16
- Mexico Day of the Races — October 12
- Revolution Day — November 20
- Christmas Day — December 25
Major holidays like Christmas and New Year’s Day often extend into a week-long break.
Additional Employer-Provided Benefits
Many employers in Mexico offer several benefits beyond the Mexican government’s requirements. Here’s a non-exhaustive list:
- Private Health Insurance to make up for gaps in the employee’s IMSS coverage
- Life Insurance, which is typically one to two times what you pay employees annually
- Savings Funds, which are voluntary contribution plans supplementing retirement savings
- Meal Vouchers in the form of allowances or subsidies for employee meals
- Transportation, including shuttles, parking allowances, or public transit passes
- Phone or Internet Allowances if you have remote employees
You can also try Arc, your shortcut to the world’s best remote talent:
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Work Permits and Visas for Foreign Workers in Mexico
When employing foreign workers in Mexico, ensure that your candidate obtains or already has the proper work authorization from the Mexican immigration authorities.
This authorization comes in the form of varied visas and work permits, the issuance of which depends on the employment agreement and other conditions.
Temporary Resident Visa
Foreign employees planning to live and work in Mexico for over 180 days but less than four years need a Temporary Resident Visa.
This visa is initially valid for one year and can be renewed annually for up to four years. To apply, you need to submit the foreign employee’s job offer letter and evidence of professional experience to the Mexican consulate in your home country.
Border Worker Visa
Foreign residents who commute to work in specific Mexican border areas are eligible for a Border Worker Visa. It’s valid for one year and can be renewed annually. The application only requires the job offer letter and proof of foreign residency.
Permanent Resident Visa
With a Permanent Resident Visa, foreign nationals moving to Mexico for employment can have long-term residency with indefinite validity.
The application process is relatively complex and must be initiated within Mexico. The employee’s application must include settlement criteria such as financial solvency, proof of retirement income, or familial ties to a Mexican citizen.
Start Early To Get Ahead
Getting work authorization and visas from the Mexican government for foreign employees can be time-consuming, so start planning six months to one year before you want them to start. Also, to smoothen the process further and avoid mistakes that could cause delays or rejections, get help from an immigration attorney.
Payroll, Taxes, and Compliance
According to local regulations, employees in Mexico are subject to individual income tax based on progressive tax rates ranging from 1.92% to 35%, depending on their income level.
Individuals with established their homes in Mexico are considered tax residents and have to report their worldwide income in Mexico. Conversely, nonresidents need to report only their Mexico-sourced income.
Tax residents must file annual income tax returns by April 30 each year. Employers withhold monthly income tax from their employees’ paychecks based on estimates. Any excess taxes paid are refunded when the annual return is filed.
Payroll, Taxes, and Other Contributions
As an employer in Mexico, you’ll have several tax obligations related to payroll, including:
- Withholding income tax from employees each pay period.
- Paying employer-side contributions such as social security
- Reporting payroll information to tax authorities
- Providing employees with annual tax documentation
Tax Obligations
Employers in Mexico must stay compliant with all tax obligations. Penalties for non-compliance can be severe.
Here’s a breakdown of tax-related contributions you’ll be required to make:
- Income Tax — 10% to 35% from the employee, depending on the employee’s income level
- National Workers Housing Fund Contribution (INFONAVIT) — 5% of covered wages from employers
- Retirement Fund Contribution (SAR) — 2% of covered wages from employers
Employer social security contributions in Mexico vary by category and include work risk insurance (0.54355%), disease and maternity insurance (20.4%), and retirement benefits (2%). Conversely, employee contributions include a portion of disease and maternity insurance (0.4%) and retirement (1.125%).
All these contributions can help ensure compliance and give employees access to benefits such as healthcare, housing, and retirement savings. Using an accountant or payroll provider can help ensure full compliance with the complex tax regulations.
Payment Considerations
All employees’ salaries and tax payments in Mexico should be made electronically. To ensure compliance, follow these steps:
- Open a Local Payroll Account. With a local account specifically for payroll purposes, employees can be paid without a hitch.
- Register for Tax Payments. Registering with the Mexican Tax Administration Service to make electronic tax payments can help avoid noncompliance.
- Pay in Mexican Pesos. Net pay can be transferred via bank transfers, checks, or cash to Mexican bank accounts.
- Pay Twice Every Month. As a standard practice, employees receive semi-monthly payments in Mexico.
Cost Savings of Hiring Employees from Mexico
More and more companies are turning to Mexico for talent. Hiring employees in Mexico can be a great cost-saving avenue for your business.
For example, while U.S.-based freelance software developers typically charge between $110 and $150 per hour, their Mexican counterparts ask for around $40 to $80 per hour — translating to up to 60% savings. When comparing full-time salaries, you’ll also find notable savings.
For non-developer roles, the savings are just as impressive. In the U.S., freelance graphic designers and marketers charge $70 to $135 per hour. Similar professionals in Mexico charge only $30 to $60 per hour. This means you can access high-quality workers for nearly half the price.
Savings are especially beneficial if you run a startup or a small business that wants to stretch its budget without sacrificing quality. These cost savings also allow you to invest in more resources, grow your team, or enhance other business areas.
In short, Mexico is a smart choice for cost-effective, high-quality talent because it offers excellent quality for a fraction of the price.
Alternatives to Traditional Employment
While hiring full-time employees in Mexico has many benefits, other options that provide more flexibility may better suit your business needs. Some popular alternatives include independent contractors, outsourcing and offshoring, joint ventures and partnerships.
Independent Contractors
Hiring independent contractors in Mexico offers access to skilled talent without the overhead of traditional employment. Contractors are self-employed, so you avoid taxes, benefits, and other obligations tied to full-time jobs.
Independent contractors offer advantages like increased scalability, fewer liabilities, and higher cost savings than full-time hires. However, the drawbacks include less oversight and fewer assurances regarding performance. Hiring Mexican contractors also requires careful management and clear agreements.
Outsourcing and Offshoring
Outsourcing certain business functions to specialized firms in Mexico is a flexible option. It allows you to tap into expertise and infrastructure without building it internally. Commonly outsourced functions include IT, customer support, manufacturing, and HR.
Offshoring involves moving specific roles, such as software development or design work, to wholly-owned subsidiaries in Mexico. This option keeps the costs low and gives you access to abundantly skilled talent.
Both outsourcing and offshoring help you to optimize operations, reduce costs, and focus internal resources on core competencies. However, you may have less control and face communication and coordination challenges.
Joint Ventures and Partnerships
Collaborating with a trusted local partner through a joint venture or strategic alliance can facilitate market entry and growth in Mexico. This partner will bring on-the-ground expertise, resources, and relationships, which can be crucial for navigating the local business environment.
Partnership options include licensing deals, joint product development, channel partnerships, and joint ventures with shared equity. With the right partner, you can accelerate expansion significantly while mitigating risks and compliance obligations.
Before proceeding with any deal, thoroughly vet potential partners, focusing on their reputation and alignment with your goals, culture, and ethics. Maintain clear agreements, open communication channels, and monitor partner activities and commitment.
You can also try Arc, your shortcut to the world’s best remote talent:
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⚡️ Vetted and ready to interview
⚡️ Freelance or full-time
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Cultural Considerations for Hiring Employees in Mexico
Cultural values are part of the work environment in Mexico. Understanding and implementing them can help you integrate Mexican staff into your workforce and build cohesive, productive teams.
Formality and Hierarchy
In Mexican companies, business culture is generally more formal and hierarchical than in Western countries. Employees expect clear, direct instructions from managers without much open praise. Nonetheless, criticism should always be given privately to avoid embarrassment.
Communication Styles
Employees in Mexico prefer indirect communication. Overly direct or blunt interactions may come across as impolite, so you should be tactful in your language, tone, and nonverbal cues.
Collaboration and Personal Connections
Collaboration and personal connections are highly valued in Mexico, often more than quickly completing tasks. Socializing and building relationships is crucial to avoid any distrust caused by impersonal rules and procedures.
Loyalty and Commitment
Mexican citizens value loyalty and long-term relationships with colleagues. Rather than quickly replacing underperforming staff, focus on coaching and mentoring.
Retaining Staff
Publicly recognizing contributions and offering opportunities for skill development and career advancement can help retain staff. Benefits supporting work-life balance, like paid time off and insurance, are also important.
Respect for Traditions
Respecting traditions, flexibility, and empathy are key to building a united and motivated team. Some examples of this include offering a long lunch break, adjusting schedules according to family needs, and understanding religious and cultural holidays.
Employment Termination, Severance, and Risks
In Mexico, employment termination must be handled carefully to avoid legal issues or wrongful termination claims. Some major considerations include notice periods and severance calculations.
Termination Without Cause
Mexican labor law requirements don’t mandate specific notice periods for terminating employees without cause, but you need to provide reasons for termination and severance.
The notice periods can vary based on the employee’s tenure:
- 1 month for 1 to 5 years of service
- 2 months for 5 to 10 years of service
- 3 months for 10 to 15 years of service
- 4 months for 15+ years of service
If an employee is terminated without cause, they are entitled to severance pay based on their most recent salary (excluding statutory benefits, Christmas bonus, etc.) and their tenure:
- 3 months’ salary for less than 1 year of employment
- 6 months’ salary for 1 to 6 years of employment
- 12 months’ salary for more than 6 years of employment
Termination With Just Cause
Employees in Mexico can be terminated with just cause, examples of which include:
- Dishonesty or misconduct
- Intoxication or drug use at work
- Excessive absenteeism or lateness
- Insubordination or refusal to comply with management
- Disclosing confidential information
You can terminate an employee immediately without notice or severance if evidence exists. However, you must notify the employee of the reasons for termination within 30 days of the incident and provide evidence and proper documentation to avoid legal issues.
Avoiding Wrongful Termination
To avoid allegations of wrongful termination and minimize legal risks and lawsuits, employers should:
- Document performance issues to keep detailed records of performance problems or disciplinary actions
- Issue written warnings when applicable
- Comply with labor laws to ensure full compliance
- Consult and seek legal advice from a local employment lawyer when needed
Notice Period After an Employee Resigns
Employees in Mexico are not required to serve a minimum notice period before resigning, although it is customary to give two weeks’ notice.
Employer of Record To Hire Employees in Mexico
An Employer of Record (EOR) can streamline your hiring and payroll in Mexico by managing key HR functions such as payroll, benefits, and compliance, allowing you to focus on core business activities.
Specifically, an EOR provider will handle legal, tax, and HR administration, simplifying operations and ensuring smooth processes. They’ll also ensure that your practices comply with Mexican labor laws.
Find the Right EOR Provider for You
While an EOR provider can simplify hiring in Mexico, make sure you weigh the pros and cons to determine if this solution fits your needs. This due diligence will help you select an EOR partner that’s a perfect fit for you.
Some of the top EOR providers operating in Mexico are preferred partners of Arc.
Hire Employees in Mexico
Expanding your team into Mexico offers a strategic advantage — it blends access to skilled talent with competitive costs and proximity to North American markets.
While the hiring process requires a solid grasp of Mexican local labor laws and cultural nuances, the benefits outweigh the challenges. You can seamlessly tap into a rich talent pool and integrate new hires into your team.
If you’re ready to make your next great move, dive into Mexico’s job market and start building your dream team today.
Want to hire awesome, cost-effective talent from Mexico? Check out Arc to find top remote developers, marketers, and designers at affordable rates.
Looking for top talent fast? See how Arc can help you:
⚡️ Find developers, designers, marketers, and more
⚡️ Freelance or full-time remote + fully vetted
⚡️ Save up to 80% with global hires
