Mexico is an attractive emerging market for foreign business, with the second-largest economy in Latin America. Mexico has both political and economic maturity, and the labor force is young and growing each year. There are challenges when expanding and managing payroll in Mexico. The business culture and language differences can be difficult, as Spanish is the main language used in business. The federal tax and local labor laws can be complex and very costly if not strictly adhered to.
Starting a company in Mexico requires registration at the National Registry of Foreign Investment, obtaining a tax identification card, and registering as an employer with Mexican Social Security and from governing bodies in the local jurisdiction. In-country bank accounts are mandatory for making payments to employees and to the government social security and tax agencies. Companies must supply tax identification number to open bank accounts.
Hiring employees in Mexico requires an Employee certificate of registration from the National Institute of Migration (INM). Foreign nationals can get a temporary visitor visa with work permissions, and a temporary resident visa can be obtained when a person receives a job offer from a company in Mexico.
Payroll and Tax Considerations
- Minimum wage is MXN 141.70 per day. In the North Border Free Zone the minimum wage is MXN 213.39 per day
- Employees are not legally required to work overtime unless there are exceptional circumstances. When there is overtime worked, the first 9 hours are paid at 200% the standard pay rate, and anything over 9 hours is paid at 300% of the standard pay rate
- Employees who work on Sundays are entitled to an additional premium of 125% of the standard pay rate
- There are no minimum termination notice requirements
- Severance benefits are paid if an employee is dismissed due to the inability of the business to afford the operation, bankruptcy or other unforeseen circumstance
- Residents of Mexico are subject to income tax rates between 1.92 – 35%
- Employers in Mexico must report monthly and contribute bi-monthly to the housing fund contribution. Payroll taxes must be paid and filed by the 10th of each following month
HR and Statutory Requirements
- Employees with one year of service receive no less than 6 days of paid annual leave, increased by 2 days each year until reaching 12 days
- Employers must pay the first 3 days of sick leave. Beginning the 4th day, the Social Security Institute pays 60% of the salary if it is non-work related illness and 100% if it is work-related
- Employees receive 12 weeks of maternity leave, paid by the Social Security Institute
- Fathers receive 5 paid working days following the birth or adoption of a child
- For full pension, workers must reach age 65 and have at least 1250 weeks of contributions
Holidays in Mexico
- January 1 – New Year’s Day
- February 7 – Constitution Day
- March 21 – Benito Juarez’s Birthday Memorial
- May 1 – Labor Day / May Day
- September 16 – Independence Day
- November 21 – Revolution Day Memorial
- December 25 – Christmas Day
If you are managing employees in Mexico, our cloud-based payroll platform with customized reporting gives you real-time access to your payroll. We have a dedicated US-based service team and in-country experts to help when questions come up. Let us help you simplify payroll and compliance in Mexico with technology and resources to stay ahead of evolving regulations. Talk to us today about our easy-to-use payroll and reporting tools to manage payroll in Mexico.