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

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

• Register with the Public Registry of Property and Commerce.
• Obtain a Federal Taxpayer Registration (RFC) from the Tax Administration Service (SAT).
• Register as an employer with the Mexican Social Security Institute (IMSS) and other relevant state-level employment and tax authorities (such as INFONAVIT and local payroll tax offices).
• Open local in-country bank accounts for salary and social security/tax payments (RFC is required to open an account).

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 248.93/day (effective January 1, 2025). 
• Northern Border Zone: MXN 374.89/day (Significant increase approved by the National Minimum Wage Commission - CONASAMI)

Overtime Laws

Should extraordinary circumstances demand an increase in work hours, employees can be assigned overtime work. 

• First 9 hours per week: Paid at 200% of base salary.
• Any additional hours: Paid at 300%.
• Sunday premium: Additional 25% over the regular rate (not 125%).

Termination Policies

In Mexico, there is no statutory notice period, 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 in Mexico

Income Tax (ISR):

• Progressive from 1.92% to 35% for individuals (residents).
• Employers are responsible for withholding and remitting employees’ ISR monthly.

Employer Payroll Contributions:

• IMSS (Social Security)
• INFONAVIT (Housing Fund)
• Retirement Savings (SAR)
• State Payroll Tax (varies by state, generally 1–3%)

Payroll taxes and social security contributions must be paid by the 17th of each month.

Mexico HR Statutory Requirements

Leave Requirements

• 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 Policies

• Minimum retirement age: 65 years
• Contributions: Minimum 1,000 weeks.
  • Previously 1,250. Reduced under the 2020 Pension Reform. Phased implementation ongoing through 2031.

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 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!