Expanding Your Business: Payroll in Mexico

Doing Business in Mexico

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.

Getting Started in Mexico

Entity Registration

To legally operate and employ staff in Mexico, companies must:

• Register with the Secretaría de Economía at the federal level 
• Obtain a Federal Taxpayer Registration (RFC) from the Servicio de Administración Tributaria (SAT)
• Register with local state or municipal authorities, as required

Tax & Social Security Registration

After registering with the Secretaría de Economía and receiving a federal taxpayer ID from SAT, companies should next register with Instituto Mexicano del Seguro Social (IMSS) for management of employee social security benefits. Additional registrations may be required with the following agencies:

• Instituto del Fondo Nacional de la Vivienda para los Trabajadores (INFONAVIT) to manage housing funds and loans
• Comisión Nacional del Sistema de Ahorro para el Retiro (CONSAR) for retirement savings and retirement fund administrators

While the above registrations are separate from the registration with IMSS, both INFONAVIT and CONSAR employer contributions are administered through the IMSS system and distributed to the appropriate third-party agencies, companies, and employee accounts.

Banking Requirements

A local Mexican bank account is required to remit tax payments, housing funds, and other benefits, including employee salaries in Mexican pesos (MXN).

Mexico Payroll Requirements

What is the Minimum Wage in Mexico?

Effective January 1, 2025, the minimum wage in Mexico is:

• General Minimum Wage: MXN 278.80/day
• Northern Border Zone: MXN 419.88/day

Additional minimum wage requirements may apply for certain professionals

Pay Frequency

The laws surrounding the frequency of payments to employees in Mexico depend on the type of work performed, whether the company is in the public or private sector, and any union agreements in place.

Salary must be paid at least weekly (52) for employees classified as performing manual labor or material workers, while employees deemed office workers or professionals must be paid at least bi-weekly (26).

For additional legislation and employment-related details, employers are encouraged to review Mexico’s federal labor law.

Overtime Laws

In Mexico, time worked more than the normal or weekly hours, typically 48 hours, must be paid at a premium.

• First additional 9 hours per week: Paid at 200% of base salary
• Any additional hours: Paid at 300% of base salary
• Sunday premium: Additional 25% over the regular rate

Exceptions to the above overtime laws include any overtime worked by minors automatically paid at 300% the normal rate, where minors under the age of 16 cannot be required to work overtime. 

Termination Policies

• A statutory notice period is not required, but documentation is key
• Severance is required for dismissals without cause:
  • 90 days’ salary + 20 days for each year of service + accrued benefits
• Voluntary resignations or terminations with cause do not require severance

Payroll Taxes

The Mexican tax year runs from January 1 through December 31.

Mexico Labor Laws and HR Statutory Requirements

Maternity and Paternity Leave

Employees receive 12 weeks of maternity leave, paid by the Mexican Social Security Institute (IMSS).

Fathers receive five paid working days following the birth or adoption of a child.

Annual Leave Requirements

Under Mexico Federal Labor Law, employees are entitled to annual leave based on completed years of service.

• After 1 year of service: 12 days minimum (effective Jan 1, 2023, under new labor reform).
• Increases 2 days/year until reaching 20 days.
• Afterward, 2 additional days every 5 years.

Retirement Requirements

• Minimum retirement age: 65 years
• Contributions: Minimum 1,000 weeks (was 1,250 but reduced under the 2020 Pension Reform – phased implementation ongoing through 2031).

Termination Requirements

Mexico’s labor law mandates that written notice be provided to terminated employees personally and in writing within 5 business days. The notice should include the reason for termination and effective date.

Public and Bank Holidays

Public holidays in Mexico include 11 official bank holidays. Employees who are required to work on public holidays are entitled to double the salary for the service provided, in addition to the normal salary for mandatory public holidays worked.

For a full list of public holidays, please visit the National Banking and Securities Commission