Employer of Record (EOR) in Mexico | 2025 Update
Expanding into Mexico is an exciting opportunity, offering access to a skilled workforce and a strategic market. However, navigating Mexico’s complex labor laws, payroll systems, and compliance requirements can be challenging. This is where an Employer of Record (EOR) can streamline the process, allowing your company to hire talent in Mexico without setting up a legal entity.
In this guide, discover how EOR services can help your business grow in Mexico while maintaining full compliance.
What Is an Employer of Record in Mexico?
An Employer of Record (EOR) is a local entity that handles the legal and administrative responsibilities of employing staff in Mexico. The EOR becomes the legal employer for your workforce, managing payroll, taxes, benefits, and compliance, while you maintain control over the employees’ day-to-day activities.
With an EOR, you can focus on growing your business instead of dealing with the complexities of setting up a local entity.
➡️ Learn more: What Is an Employer of Record (EOR)?.
Employment In Mexico
Mexico’s Federal Labor Law governs all employment, from hiring to termination. It protects workers with benefits like sick leave, overtime pay, and compensatory time off. This law applies to all employees in Mexico, regardless of nationality.
Employers must strictly follow the law to avoid legal issues. Compliance ensures smooth hiring and operational success.
Employment agreements in Mexico
In Mexico, written employment agreements are legally required. Both the employer and employee must sign these agreements, which include:
- Personal details of both parties.
- Employment duration and probationary terms (if applicable).
- Job duties and responsibilities.
- Work location and schedule.
- Salary and benefits.
- Training provisions and other agreed terms.
- Designated beneficiaries in case of employee death.
These agreements ensure compliance with Mexico’s labor laws and clarify expectations for both sides.
Probationary periods Mexico
Although not mandatory, probationary periods are common in Mexico. Initial training periods can last up to 90 days for general employees. For indefinite-term contracts exceeding 180 days, probation cannot extend beyond 30 days. However, leadership or management roles may allow training periods of up to 180 days.
Average working hours in Mexico
A standard workweek in Mexico is 48 hours, with many employees working six days a week. Ensuring compliance with work-hour regulations is essential to avoid legal issues and maintain employee satisfaction.
Overtime
Overtime in Mexico is strictly regulated to protect workers. Employees are entitled to double their regular hourly wage for the first nine overtime hours worked per week. Any additional hours beyond nine must be compensated at triple the regular rate. However, overtime cannot exceed three hours per day or three times per week.
Leave in Mexico
Annual Leave Accrual Entitlement
Under Mexican federal labor law, employees are guaranteed annual paid leave based on their length of service. The statutory minimum leave entitlements are:
- Six days of paid leave after one year of service.
- Eight days after two years of service.
- Ten days after three years of service.
- Twelve days after four years of service.
- Beyond the fourth year, employees earn two additional days for every four years of service.
Additionally, employees are entitled to a vacation premium. This premium equals 25% of their regular salary and is paid during their vacation period. Partnering with an Employer of Record (EOR) in Mexico ensures compliance with these entitlements and helps you offer competitive benefits.
➡️ Check our complete guide: Employee Holiday & Leave Entitlement in Mexico
Public Holidays
Mexico observes seven national public holidays annually. These holidays are separate from statutory annual leave entitlements. Employees take these holidays in addition to their vacation days. The recognized holidays include:
- New Year’s Day (January 1)
- Constitution Day (February, date varies)
- Benito Juarez Day (March, date varies)
- Labor Day (May 1)
- Independence Day (September 16)
- Revolution Day (November, date varies)
- Christmas Day (December 25)
Maternity, Paternity and adoption Leave
Mexican labor law supports working parents with statutory parental leave. Maternity leave provides mothers six weeks of paid leave before and after childbirth, as outlined in Article 170 of the federal labor law.
Fathers benefit from five days of paid paternity leave, including for adoption.
➡️ Check our complete guide: Parental Leave in Mexico
Sick Leave
Employees in Mexico can take up to 52 weeks of sick leave for illness or injury, provided the condition is certified by the Instituto Mexicano del Seguro Social (IMSS). IMSS pays employees 60% of their regular wages starting from the fourth day of absence. Employers working with an EOR in Mexico ensure accurate compliance with these provisions while managing payroll effectively.
➡️ Check our complete guide: Sick Leave in Mexico
Payroll in Mexico
Payroll cycles in Mexico
In Mexico, employers can choose between biweekly and monthly payroll cycles, as permitted by labor law. However, biweekly payroll cycles are the most widely used in the country due to their alignment with employee preferences and business practices.
Wages in Mexico
As of January 1, 2025, Mexico’s daily minimum wage has increased by 12%. In most regions, it rose from 248.93 pesos to 278.80 pesos per day. In the Northern Border Free Zone, it increased from 374.89 pesos to 419.88 pesos per day
Payroll contributions for employers
- Payroll Tax: Levied by states, ranging from 1% to 3%. Some benefits, like Christmas bonuses and vacation exemptions, incur additional taxes of 30%.
- Withholding Tax: Taxes on non-resident employee income, such as dividends (10%) and interest (4.9%-40%), depend on double-taxation treaties.
- Social Security: Employers contribute 7.58% for retirement, insurance, daycare, and occupational risk coverage.
➡️ Check our complete guide: Mastering Payroll in Mexico: Employer Contributions to Payroll Taxes
Payroll contributions for employees
- Income Tax: Residents pay based on a progressive structure:
- 1.92% on income up to 8,952.49 pesos.
- 35% for earnings over 4,511,707.37 pesos.
- Social Security: Employees contribute 1.65% toward retirement and unemployment benefits.
➡️ Check our complete guide: Mastering Payroll in Mexico: Employee contributions
Streamline Your Expansion with EOR Services in LATAM
Expand across Latin America effortlessly with our Employer of Record (EOR) services. We handle compliance, payroll, and employee management, ensuring smooth operations while you focus on growing your business.
Benefits in Mexico
Federal benefits in Mexico
In Mexico, the Instituto Mexicano del Seguro Social (IMSS) oversees federal benefits. Established in 1943, IMSS manages social security services for the nation, ensuring critical support for workers and their families. Both employers and employees contribute to the social security scheme, which covers a wide range of benefits, including:
- Pensions for retirement and survivors
- Disability benefits (short-term and long-term)
- Healthcare services for workers and their dependents
- Paid leave entitlements for illness, maternity, and other qualifying situations
➡️ Check our complete guide: Employee Mandatory Benefits in Mexico
Supplemental benefits in Mexico
Supplemental benefits go beyond federal requirements to attract and retain top talent. Here are the most common perks:
- Private Health Insurance: Essential due to public healthcare limitations, providing faster, high-quality medical services.
- Transportation Benefits: Fixed allowances, fuel vouchers, or shuttle services support commuting needs; free parking is highly valued.
- Productivity Bonuses: Tax-free rewards for meeting performance goals benefit both employees and employers.
- Food Vouchers: Reloadable cards for essentials like groceries and medicine, deductible as business expenses.
These benefits improve employee satisfaction, increase retention, and showcase a company’s commitment to worker well-being. An Employer of Record in Mexico can help you design compliant, competitive benefits packages.
Terminations in Mexico
Notice Periods in Mexico
In Mexico, there is no legal requirement for employers or employees to provide notice before termination or resignation. Notice periods are only enforceable if both parties agree to them in advance, but this is rare in practice. Instead, employment termination often involves severance payments, ensuring employees are compensated fairly.
➡️ Check our complete guide: End of employment and termination in Mexico
Severance pay in Mexico
When employees are terminated without cause, Mexican labor law mandates specific severance payments to protect their rights. These payments include:
- 90 days’ wages as a base compensation.
- 20 days’ wages for each year of service, ensuring long-term employees are rewarded proportionally.
- 12 days’ wages per year of service, capped at twice the daily minimum wage, offering additional support.
- Accrued benefits, such as unpaid wages, vacation pay, vacation bonuses, and the mandatory Christmas bonus, also form part of the severance package.
➡️ Check our complete guide: Severance pay in Mexico
By working with an Employer of Record (EOR) in Mexico, businesses can navigate these requirements with ease, ensuring compliance and fair treatment for employees.
Types of Visas in Mexico: Understanding Your Options
If you’re planning to work or reside in Mexico, understanding the visa options is crucial. Below is a detailed table explaining the main visa categories, their purposes, and durations.
| Visa Type | Purpose | Duration |
|---|---|---|
| Temporary Resident Visa | For foreign nationals who plan to stay temporarily in Mexico. Includes student, work, and family visas. | More than 180 days, up to 4 years |
| Permanent Resident Visa | For individuals intending to live in Mexico long-term. Also available for temporary residents after four years. | More than 4 years |
These visa types allow foreign nationals to legally work and live in Mexico, provided they meet the eligibility criteria. Partnering with an Employer of Record (EOR) in Mexico ensures compliance with all legal requirements, making the hiring and visa process seamless for businesses.
Frequently Asked Questions (FAQ)
What are my options if I want to hire a worker in Mexico?
HQ Country Employment & Payroll:
Employees are hired and paid through the company’s headquarters.
Cons: Often illegal in the long term if the employee isn’t a tax resident in the HQ country.Independent Contractor Agreements:
Workers operate as sole proprietors and invoice for their services.
Cons: Not compliant for full-time roles under Mexican law, making it hard to attract and retain top talent.Setting Up a Local Entity:
Establish a compliant local employer in Mexico.
Cons: Costly, time-consuming, and requires ongoing management of payroll, taxes, and local regulations.Partnering with an Employer of Record in Mexico:
Employment is managed by the EOR on your behalf.
Cons: Slightly higher ongoing costs, but saves significant time and ensures compliance.
How does an Employer of Record (EOR) ensure HR compliance in Mexico?
EORs work with local legal and HR experts to ensure employment contracts and processes comply with Mexican labor laws. They handle contracts, payroll, benefits, and terminations in line with regulations, reducing your risk of legal liabilities.
Who is responsible for paying taxes and contributions in Mexico through an EOR?
The EOR manages and files all employment-related taxes and contributions, ensuring compliance with Mexican tax authorities. Employers only pay a consolidated invoice to the EOR.
What taxes do I need to pay as an employer in Mexico?
Employers in Mexico are responsible for:
- Social Security Contributions: 7.58%–15% of salary
- Payroll Tax: 2%–3% depending on the state
- Retirement and housing fund contributions
Employees pay income taxes ranging from 1.92% to 35%, which the employer withholds and remits.
Can I hire in Mexico without using an EOR?
Yes, but you’ll need to set up a legal entity in Mexico, manage local compliance, and handle payroll and tax obligations directly. Using an EOR simplifies the process and ensures compliance without requiring a local presence.
Can I employ people as independent contractors in Mexico?
While possible, treating full-time employees as independent contractors is risky. Misclassification violates Mexican labor laws, potentially leading to fines and legal repercussions. It’s better to hire through an EOR to ensure compliance.
How long does it take to set up a company in Mexico?
Setting up a legal entity in Mexico can take several months due to the complexity of registration, tax setup, and regulatory compliance. An EOR eliminates this delay, enabling you to hire employees in Mexico quickly.
Get Started with an Employer of Record in Mexico
Hiring in Mexico can seem complex, but an Employer of Record (EOR) simplifies the process. Europortage handles employment contracts, payroll, benefits, and compliance, letting you focus on growth.
Ready to expand your team in Mexico? Contact us today to learn more about how we can support your business expansion.
