Expanding Your Business: Payroll in Mexico

Payroll 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.

Mexico Employer Requirements

Starting a company in Mexico requires:

• Register your company with the Public Registery of Property and Commerce.
• Request and obtain your taxpayer identification number before the Tax Administration System (SAT).
• 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.

How to Hire Employees in Mexico

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.

Mexico Payroll Requirements

What is the Minimum Wage in Mexico?

Minimum wage is MXN 207.44 per day. In the North Border Free Zone, the minimum wage is MXN 212.41 per day.

Overtime Laws

Should extraordinary circumstances demand an increase in work hours, employees can be assigned overtime work. When there is overtime worked, the first eight hours are paid at 200% of the standard pay rate, and anything over eight 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.

Termination Policies

In Mexico, there is no notice period for terminations, as enforced by law.

Severance benefits are paid if an employee is dismissed due to the inability of the business to afford the operation, bankruptcy or other unforeseen circumstances.

Payroll Taxes in Mexico

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 17th of each following month.

Mexico HR Statutory Requirements

Leave Requirements

Employees with one year of service receive no less than 6 days of paid annual leave, increased by two 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.

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.

Retirement Policies

For full pension, workers must reach age 65 and have at least 1,250 weeks of contributions.

Holidays in Mexico

When planning to hire in Mexico, it's crucial to be aware of the official holidays when employees may not be available for work.

• 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

Easily Hire and Pay Employees in India

Is India in your hiring or expansion plans? Paylocity can help. Our cloud-based platform helps you navigate the waters of international payroll.

And don’t sweat complicated compliance — our hybrid service model includes a U.S.-based team and in-country experts in India to help when you have questions.

Want to learn more? Request a demo today!

Easily Hire and Pay Employees in Mexico

Is Mexico in your hiring or expansion plans? Paylocity can help. Our cloud-based platform helps you navigate the waters of international payroll.

And don’t sweat complicated compliance — our hybrid service model includes a U.S.-based team and in-country experts in Mexico to help when you have questions.

Want to learn more? Request a demo today!