Mexico Employer of record (EOR)
Europortage Mexico Employer of Record (EOR) solution makes it easy for you to hire your talent in Mexico.
An employer of record is a third party that act as the legal employer in the country, so you can hire your talent without having to setup a legal entity.
The employer of record (EOR) has extenseive knowledge and local expertise and takes care of all Mexico compliance aspects of employment, including payroll management, taxes, statutory employee benefits, employment contracts, severance pay and more.
Our Mexico Employer of Record (EOR) Responsibilities:
✔️ Drafting locally compliant contracts
✔️Processing payroll accurately and on time
✔️ Providing an excellent employee experience
✔️Seamlessly handling global mobility
✔️ Paying your talent in local currency
Employment taxes in Mexico
Partner with an employer of record (EOR) is quite a game changer and can help you hire globally. The EOR will be the legal employer, which means they will handle employment contracts, onboarding process, compliance, benefits, payroll and more.
Social security contribution (IMSS)
The acronym IMSS stands for Instituto Mexicano de Seguro Social. Often referred to simply as IMSS, the Instituto Mexicano de Seguro Social is Mexico’s social security system.
The complex social security system comprises various schemes providing a wide range of benefits. This system includes occupational risks (occupational accident or illness), sickness, and maternity; medical care and payment of disability; disability, life (death of the insured); retirement, severance at advanced age and old age (pension based on age and years of contribution); and childcare and social benefits.
| NAME | DESCRIPTION | RATE |
| Illness and maternity | Health insurance to employees and income support for employees on sickness and maternity leave | 20.40% calculated based on one monthly UMA (MXN 3,135.70 in 2023) |
| 1.10% on the difference between Base Listed Salary (BLS) and three monthly UMAs | ||
| 1.75% on the BLS | ||
| Disability and life | A healthcare and life insurance fund for non-work-related injuries and illnesses that result in disability or death | 1.74% capped at MXN 2,593.50 |
| Retirement | The primary state-backed pension fund | 2% capped at MXN 2,593.50 |
| Unemployment and old-age | Supplemental retirement insurance for those unemployed at age 60 or 65 | 3.15% – 11.88% depending on the employee’s income bracket, capped at MXN 2,593.50 |
| Occupational risk | A fund that provides income support and medical coverage for work-related injuries and illnesses | 0.54% – 7.59% depending on the risk category of the employer’s industry, capped at MXN 2,593.50 |
| Nursery and social benefits | A childcare services program for working parents of children aged 43 days to four years | 1% capped at MXN 2,593.50 |
| Housing fund (INFONAVIT) | A fund that guarantees decent housing to Mexican employees | 5% capped at MXN 2,593.50 |
Employer payroll tax (ISN)
Employer payroll tax in Mexico is a state-level tax, and it’s pretty straightforward. It is charged as a percentage of the entire payroll and is the employer’s duty to pay it. The rate ranges between 1% and 3% of salaries, depending on the state in your business is located.
STATE | RATE | STATE | RATE |
Aguascalientes | 2% | Morelos | 2% |
Northern Baja California | 1,8% | Nayarit | 3% |
Southern Baja California | 2,5% | Nuevo Leon | 3% |
Campeche | 3% | Oaxaca | 3% |
Coahuila | 2% | Puebla | 3% |
Colima | 2% | Querétaro | 3% |
Chiapas | 2% | Quintana Ro | 3% |
Chihuahua | 4% | San Luis Potosi | 3% |
Employee taxes in Mexico
Residents of Mexico and individuals living abread but earming income in Mexico are subject to tax on a monthly basis. Employees usually spend an average of 20.1 percent of their salaries on taxes and social security contributions.
Social security contribution (IMSS)
Employees in Mexico need to make contributions to social security and retirement insurance.
Contribution item | Contribution rate |
|---|---|
| Social Security contributions | 1.65% |
| Retirement / Old age insurance | 1.125% |
Income tax (IR)
The Income Tax is an annual tax levied on the individuals by the Mexican Government. Any employer which have Mexican employees must withhold and remit income taxes on employee gross earnings on their employees’ behalf.
The amount deducted from the employee’s salary depends on his monthly income according to the following table:
| LOWER LIMIT | HIGHER LIMIT | FIXED FEE | SURPLUS RATE | |
| I | $0.01 | $746.04 | $0.00 | 1.92% |
| II | $746.05 | $6,332.05 | $14.32 | 6.40% |
| III | $6,332.06 | $11,128.01 | $371.83 | 10.88% |
| IV | $11,128.02 | $12,935.82 | $893.63 | 16.00% |
| V | $12,935.83 | $15,487.71 | $1,182.88 | 17.92% |
| VI | $15,487.72 | $31,236.49 | $1,640.18 | 21.36% |
| VII | $31,236.50 | $49,233.00 | $5,004.12 | 23.52% |
| VIII | $49,233.01 | $93,993.90 | $9,236.89 | 30.00% |
| IX | $93,993.91 | $125,325.20 | $22,665.17 | 32.00% |
| X | $125,325.21 | $375,975.61 | $32,691.18 | 34.00% |
| XI | $375,975.62 | Onwards | $117,912.32 | 35.00% |
Statutory Benefits in Mexico
Partner with an employer of record (EOR) is quite a game changer and can help you hire globally. The EOR will be the legal employer, which means they will handle employment contracts, onboarding process, compliance, benefits, payroll and more.
Christmas bonus, or Aguinaldo
Every company in Mexico must provide their employees with a Christmas bonus called Aguinaldo. The Christmas bonus is paid until December 20th but most of companies issue the bonus the second week of December.
The Aguinaldo is normally equal to 15 days of salary. For employees who joined the company during the year, they will receive a proportional part of the Christmas bonus. Absences also have an impact on the Christmas bonus calculation.
Find more info about the Aguinaldo in Mexico
Vacation bonus, or prima
In addition to paid time off, employers in Mexico must grant a vacation bonus to each of their employees so they can enjoy their vacation. The bonus is equal to 25% of the employee monthly salary and must be paid when the employee goes on holidays or in a lump sum at the end of the year.
Profit sharing, or PTU
Businesses with more than 1 year of existence in Mexico must grant their employees with a 10% share of their profits every year. This benefit does not apply to CEO, CFO, general managers and other high -ranking employees.
Companies must distribute profit-sharing payment in May, within 60 days after filling the annual tax return.
Remote allowance
To be considered a remote worker in Mexico, an employee must work at his home or at a place designated by the employer more than 40% of the working day.
In that case, the employer must provide the employee with equipment and pay a remote allowance.
Common Non-mandatory Benefits in Mexico
Employee mandatory benefits and conditions are legal rights. Then employer are not allowed to make change to the employment terms. However, the can add extra common benefits to attract and retain talents.
Kindly note that depending on the company CBA, some non-mandatory benefits can actually be mandatory.
Private Health Insurance
In Mexico, employees benefit from the Mexican public healthcare, the IMSS. However, the service provided is not always up to the same standard as private health insurance.
Medical assistance is one of the benefits most valued by professionals. Then, employer can offer premium quality care through private health insurance to attract and retain talents.
Employer can offer their own plan or provide employees with stipends to subscribe to their own private health plan.
Meal vouchers
Even if meal voucher is not a statutory benefits in Mexico, it is a really common benefits. In general, the benefit is offered as a card with a cash value that can be used in the company’s canteen or in partner restaurants. Also, it enables the employee to buy food in grocery stores and supermarket. Today, food vouchers exist on reloadable chip cards similar to debit cards.
Life insurance
Life insurance is a common benefits in Mexico and many companies choose to provide life insurance for employees.
Payments in Mexico
Minimum wage
The minimum salary is reajusted every year in January in Mexico.
From the 1st of January 2024, the minimum wages have been increased for the following:
- National minimum wage (EXEPT FREE TRADE ZONE): from MX$207.44 to MX$248.93 per day
- FREE TRADE ZONE: from MX$312.41 to MX$374.89 per hour.
Payroll frequency
Employees in Mexico are always paid two times a month, on a bi-weekly basis. Generally, the employer pays its workforce on the 15th and 30th of the month. If it falls on a Saturday, or Sunday, or on a Public Holiday, then the salary must be paid before.
Payday
Employees are usually paid on the 15th and 30th of the month.
Working time and overtime in Mexico
Working hours
The standard workweek is 48 hours, made up of six days of eight hours and one rest day.
Generally full-time employees work a 6-day work week of 48h from Monday to Saturday. However, the time can be divided so employees work 4 or 5 days per week with the same maximum number of hours per week.
Overtime
The weekly working hours are 48 hours. Hours worked beyond this quota are compulsory paid as overtime. Work shifts may be extended, but must not exceed 3 hours per day, nor 3 times a week, for a maximum of 9 hours per week.
Leave in Mexico
Annual leave & Public holidays
Annual leave policies has been updated in 2023 and employees in Mexico are now entitled to the following annual leave:
- 12 days after the first full year of employment
- 14 days’ vacation after two years of service
- 16 days’ vacation after three years of service
- 18 days’ vacation after four years of service
- 20 day’s vacation after five years of service
After the sixth year of service, an employee’s vacation entitlement will increase by two days for every further five years of service. Only business days are considered when calculating vacation days. Weekly rest days and holidays are not considered.
Public holidays
When you hire in Mexico, remember that your remote workers are going to have different public holidays in they do not work in the same state.
- New Year’s Day (Jan 1)
- Constitution Day (First Monday in February)
- Benito Juarez Day (Third Monday in March)
- International Labor Day (May 1)
- Independence Day (Sep 16)
- Revolution Day (Third Monday in November)
- Presidential Inauguration Day (every six years – December 1)
- Christmas Day (Dec 25)
Sickness and disability leave
Employees in Mexico are entitled to maximum 52 days of sick leave. After 52 days, the employee will qualify for total or partial permanent disability.
Employees receive up to 60% of their salary from the fourth day of their illness and up to one year. If the employee has suffered a work-related accident, the federal labor law requires employers to pay employee’s full regular wage.
Paternity and maternity leave
Female pregnant employee are entitled to a minimum of six weeks befire and after the birth of the child. During that time, they receive their regular wage.
Male employees are entitled to enjoy a paid paternity leave of five days when the child is born.
Learn more about parental leave in Mexico.
End of employment in Mexico
Mexico is not a at-will employment country exept for employee who wishes to terminate their own employment. Employers cannot terminate Mexican workers without cause unless they pay severance packages, which can be extremely substantial.
Termination notice period
There is no minimum required notice period in Mexico.
Severance
In Mexico, severance pay can be very substantial, especially if the employers terminates its employee without cause. Mandated severance amounts diverge from one to another.
Check our complete guide on end of employment in Mexico.
How to hire in Mexico
Entity setup
Establish a legal entity in a specific country will allow your business to operate legally in the country, hire, pay and manage your talents there.
Independent contractor
This solution might seem a good fit to reduce the cost of setting up an entity or hiring a full-time employee. Engaging a contractor can be a winning strategy in some cases and will depend of your business strategy and goals. For instance, it is a great solution when you need a talent for a short-term project.
Use an Employer of record in Mexico
Partner with a Mexico employer of record (EOR) is quite a game changer and can help you hire globally. The EOR will be the legal employer, which means they will handle employment contracts, onboarding process, compliance, benefits, payroll and more.