An Employer of Record (EOR) in Mexico is a company that takes on the responsibility of being the legal employer for a worker. This includes managing payroll, benefits, and other employment-related tasks on behalf of the worker's actual employer.
Discover the key considerations and essential details you should be aware of before you hire your remote team in Mexico.
On this page:
Facts About Mexico | Employment Agreements | Employment Laws | Social Security Contributions | Personal Income Tax | Work Permits | Employee Benefits | Employee Leave Entitlements | Employees vs. Independent Contractors
Key Facts About Mexico
- Startup Powerhouse:
Mexico is the 2nd largest market in Latin America with a population of 120 million, allowing startups to scale rapidly within the domestic market. - Top Startup Hubs:
- Mexico City – Ecommerce, Fintech, Marketing
- Monterrey – Edtech, Foodtech, Ecommerce
- Guadalajara – Fintech, Social & Leisure, Ecommerce
- Notable Unicorns:
Home to rising unicorns such as Kavak, Clip, Bitso, Nowports, Merama, and Clara, spanning sectors from ecommerce to fintech and logistics. - Talent Challenge:
While tech talent is growing, startups face hiring challenges as such roles are not yet highly regarded in the broader workforce culture. - Strategic Location:
Proximity to the U.S. makes Mexico a top nearshoring destination, with strong ties via the USMCA trade agreement. - Time Zone Alignment:
Business hours overlap well with the U.S., making Mexico ideal for remote teams and real-time collaboration. - Visa & Residency Options:
Foreign professionals can apply for a Temporary Resident Visa, valid for up to 4 years. Permanent residency is possible after 4 years, and citizenship after 5 years (or 2 for Iberian and Latin American nationals).
Employment Agreements in Mexico
In Mexico, employers must give every employee a written job contract. This contract should clearly explain the job role, work hours, salary, and other basic details. While there are different types of contracts—like fixed-term, seasonal, or training-based—Mexican law generally prefers permanent (indefinite) jobs. This guide explains what these contracts should include and the rules employers need to follow.
Written Contract Required
Employers must provide a written employment agreement to all employees. It should be signed by both parties, and employees must get a copy. If there's no written contract or if the contract provides fewer benefits than the legal minimum, Mexico’s Federal Labor Law (FLL) will automatically apply.
Language
Contracts can be in any language, but if used in court, they must be translated to Spanish. Employers must prove the employee understood the contract’s language.
Employment agreements must include:
- Personal details of both employer and employee (name, age, CURP, RFC, etc.)
- Type of contract (indefinite, fixed-term, seasonal, training, probation)
- Job description and location
- Working hours and rest days
- Salary details (amount, payment method, schedule)
- Training obligations
- Benefits (vacation, bonuses, holidays, etc.)
- Designated beneficiaries (in case of death or disappearance)
Types of Employment Contracts in Mexico
- Indefinite-Term Contract
The default contract type. Used for ongoing roles without an end date. - Fixed-Term Contract
Used when the job has a clear end date, such as project-based work or temporary replacements (e.g. maternity leave). - Specific-Project Contract
Ends when a particular project is completed. Common in industries like construction or mining. - Seasonal Contract
For jobs that occur at specific times each year (e.g. holiday season). Employees are rehired each season and must receive prorated benefits. - Initial Training Contract
Used for new hires to assess their skills. Lasts up to 3 months (or 6 months for managers). If not extended, the relationship ends with no severance. Counts toward employment tenure.
Employment Laws in Mexico
Employment in Mexico is governed by the Federal Labor Law (FLL), which outlines the rights and obligations of both employers and employees. It covers key aspects such as working hours, contracts, wages, benefits, terminations, and health and safety standards. The law is designed to protect workers while ensuring fair and lawful employment practices across all industries.
Working Hours
Types of Workdays in Mexico
Under the Federal Labor Law, work shifts are divided into three categories with specific maximum hours:
|
Work Shift |
Time Covered |
Max Daily Hours |
|
Day Shift |
6:00 a.m. – 8:00 p.m. |
8 hours |
|
Night Shift |
8:00 p.m. – 6:00 a.m. |
7 hours |
|
Mixed Shift |
Spans day & night (with ≤3.5 hours at night) |
7.5 hours |
- Employees working a continuous shift are entitled to a minimum 30-minute break.
- If an employee cannot leave the workplace during break time, that period is counted as working time.
Overtime
- Normal Overtime: Employees can work up to 3 extra hours per day, for a maximum of 3 days per week. These hours must be paid at double the regular hourly rate.
- Emergency Overtime: In urgent situations—such as accidents or danger to people or the business—extra hours may be required. These are paid at the regular hourly rate.
- Excessive Overtime: If an employee works more than 9 extra hours in a week, the additional hours must be paid at triple the regular hourly rate.
- Worker Protection: Employees cannot be forced to work beyond the legal daily limits or accept overtime beyond what the law permits.
Minimum Wages
Effective January 1, 2025, Mexico's minimum wage rates have been increased to boost workers' purchasing power. The general minimum wage is now set at MXN 278.80 per day, up from MXN 248.93. In the Northern Border Free Zone (ZLFN)—which includes certain municipalities near the U.S. border—the minimum wage has risen from MXN 374.89 to MXN 419.88 per day due to the region’s higher cost of living. Additionally, the minimum wages for 61 listed professions, trades, and specialized jobs have been increased by 12%.
Payroll Cycle
Wages in Mexico are typically paid by direct deposit or wire transfer, and employers may help new employees open a payroll bank account upon request. The payment frequency can be weekly, biweekly, or any period up to 15 days, as outlined in the employment contract.
Probation Period
Training and Probation Periods in Mexico
In Mexico, new employees can start under either a training or probation period, depending on the job.
- Training Period:
For roles where the employee needs to learn new skills. - Up to 3 months, or 6 months for executive roles.
- The employee works under supervision and gets full social security benefits.
- Probation Period:
Used to check if the employee is fit for the job. - Up to 30 days, or 180 days for executive roles.
- Allowed only for indefinite contracts or fixed-term contracts longer than 180 days.
These agreements must be in writing and cannot be extended or used consecutively. If the employee continues working after the training or probation period ends, the employment is considered permanent, and the time worked during this period counts toward their seniority.
Notice Period
In Mexico, while there is no formal notice period required under the Federal Labor Law (FLL), employers must still follow specific procedures when dismissing an employee. The employer must provide a written explanation of the reason for dismissal. This can be delivered in person at the time of termination or submitted within five working days to the Conciliation and Arbitration Labor Board. If submitted to the Board, the employer must also provide the employee’s last known address so the employee can be notified. If neither step is taken, the dismissal will be deemed unjustified. Additionally, if the employer fails to act within one month of learning about the event that led to the dismissal, the termination becomes invalid.
Severance Pay
Termination payments in Mexico vary depending on the reason for ending the employment:
- Voluntary Resignation: The employee is entitled to all accrued benefits, including commissions or incentives, calculated on a prorated basis up to the termination date. If the employee has 15 or more years of service, they are also entitled to a seniority premium equal to 12 days’ salary for each year worked, capped at twice the current daily minimum wage.
- Termination with Cause: The employer must pay all due benefits and commissions up to the termination date, along with the seniority premium (12 days’ salary per year of service, capped at twice the minimum daily wage), even if the dismissal is justified.
- Termination without Cause: The employee is entitled to a severance package, which includes:
- Three months of the employee’s integrated daily salary,
- Twenty days of the integrated daily salary for each year of service,
- The seniority premium (12 days per year, capped),
- All outstanding benefits and prorated pay.
13th Month Salary
In Mexico, the Aguinaldo is a mandatory year-end bonus that employers must pay to all employees under a formal employment relationship, as required by Article 87 of the Federal Labor Law. It is intended to provide financial support during the holiday season and must be paid by December 20 each year.
Employees are entitled to at least 15 days of their base salary as Aguinaldo. If an employee has worked less than a year, the amount must be prorated based on their time worked.
Who is eligible:
- Full-time employees receive the full 15-day bonus.
- Part-time or remote employees receive a proportional amount based on hours worked.
- Employees who resigned or were terminated during the year are still entitled to a prorated Aguinaldo.
Employers must ensure timely and accurate payment of the Aguinaldo to avoid penalties and remain compliant with labor laws.
Recent Developments
Upcoming Change: 40-Hour Workweek by 2030
Mexico plans to gradually reduce the standard workweek from 48 hours to 40 hours, according to the Labor and Social Security Minister, Marath Bolaños. The change is expected to be fully implemented by January 2030.
To shape this transition, the Ministry will host public forums across major cities from June to July 2025. These discussions aim to gather input and finalize the proposal for a gradual rollout.
New Workplace Seating Requirements Under Mexican Labor Law (Effective June 2025)
Starting 17 June 2025, Mexican employers must comply with new rules under the Federal Labor Law that improve working conditions:
- Chairs with backrests must be provided to all employees for use during their duties or rest breaks.
- Standing all day is no longer allowed. Employees must be allowed to sit down periodically during their work.
- This applies to most workplaces, especially offices, service, and retail environments. Only certain industrial roles are exempt if sitting is not possible for safety or practical reasons.
- Employers must update internal work regulations to reflect these new rules and submit them to the labor authorities by 14 December 2025.
- Non-compliance can result in fines or even temporary business suspension.
Personal Income Tax in Mexico
In Mexico, personal income tax (ISR – Impuesto Sobre la Renta) applies to individuals based on their residency status and the source of their income. Residents are taxed on their global income, while non-residents are only subject to tax on income earned within Mexico. The tax system is progressive, with rates increasing alongside income levels. Understanding how income tax is calculated—whether for employees working locally or expats on assignment—is essential for ensuring payroll compliance and accurate employee withholdings.
The following sections outline the 2025 income tax brackets for residents and non-residents, as well as key withholding rules for other Mexican-source income.
Resident vs. Non-Resident Taxation
- Residents are taxed on worldwide income, regardless of nationality.
- Non-residents, including Mexican citizens who prove foreign tax residency, are taxed only on Mexican-source income.
Income Tax Rates for Residents (2025)
Resident individuals are taxed progressively based on their annual taxable income. The following rates apply for the 2025 tax year:
|
Taxable Income (MXN) |
Base Tax (MXN) |
Tax on Excess (%) |
|
0.01 – 8,952.49 |
0 |
1.92% |
|
8,952.50 – 75,984.55 |
171.88 |
6.40% |
|
75,984.56 – 133,536.07 |
4,461.94 |
10.88% |
|
133,536.08 – 155,229.80 |
10,723.55 |
16.00% |
|
155,229.81 – 185,852.57 |
14,194.54 |
17.92% |
|
185,852.58 – 374,837.88 |
19,682.13 |
21.36% |
|
374,837.89 – 590,795.99 |
60,049.40 |
23.52% |
|
590,796.00 – 1,127,926.84 |
110,842.74 |
30.00% |
|
1,127,926.85 – 1,503,902.46 |
271,981.99 |
32.00% |
|
1,503,902.47 – 4,511,707.37 |
392,294.17 |
34.00% |
|
4,511,707.38 and above |
1,414,947.85 |
35.00% |
Income Tax Rates for Non-Residents (2025)
|
Taxable Income (MXN) |
Tax Rate |
|
0 – 125,900 |
Exempt |
|
125,900 – 1,000,000 |
15% |
|
1,000,000 and above |
30% |
- The first MXN 125,900 earned in a 12-month period is tax-free.
- Income includes salaries and other compensation for services rendered in Mexico.
Withholding Tax on Other Mexican-Source Income (for Non-Residents)
|
Income Type |
Tax Treatment |
|
Interest |
0% to 35%, depending on factors like type of lender and debt instrument |
|
Real Estate Gains |
25% of gross or 35% of net gain (electable) |
|
Sale of Shares (Stock Market) |
10% withholding on profits |
|
Dividends (post-2013 earnings) |
10% WHT on dividends/distributions from Mexican companies |
|
Royalties, Rents, etc. |
Subject to standard WHTs |
Work Permits in Mexico for EOR Employment
When hiring foreign employees in Mexico through an Employer of Record (EOR), securing proper work authorization is essential. The most relevant permit in this context is the Temporary Resident Visa with Work Authorization, which allows foreign nationals to live and work in Mexico legally under the sponsorship of the EOR acting as the legal employer.
Temporary Resident Visa with Work Authorization
This is the primary work permit used for foreign professionals employed through an EOR in Mexico. It is granted to individuals who have a formal job offer from a registered Mexican company—in this case, the EOR.
- Valid for 1 year, renewable up to 4 years.
- Enables legal employment, issuance of CURP, and enrollment in IMSS (social security).
- Requires the EOR to initiate the process before the employee enters Mexico.
Notes for EOR Compliance:
- The EOR must be registered with the National Immigration Institute (INM) to sponsor foreign employees.
- The EOR should also have valid registrations with IMSS (Mexican Social Security) and SAT/RFC (tax authority).
- Foreign employees cannot start working until the work permit is officially approved.
- Processing time for the permit typically ranges from 30 to 60 days.
Employee Benefits in Mexico
When hiring employees in Mexico, employers must provide a range of mandatory benefits as outlined by local labor and social security laws. In addition to these legal requirements, many companies also offer supplementary benefits to attract and retain top talent. Below is an overview of both mandatory and common supplementary benefits provided to employees in Mexico.
Mandatory Employee Benefits
Employers in Mexico must provide the following core benefits under labor and social security laws:
|
Benefit |
Details |
|
Health Insurance |
Employees must be registered with IMSS, which provides free medical care, including outpatient services, maternity, disability, and work-related injury coverage. |
|
Retirement (AFORE System) |
Managed by CONSAR, the pension system involves contributions from the employer, employee, and government into an individual account. Standard retirement age: 65; early retirement: 60. |
|
Life Insurance |
Provided via IMSS. If death is due to a work-related risk, the employer or IMSS pays 2 months' salary for funeral expenses. |
|
Disability Coverage |
Covers temporary, permanent (partial or total), and non-occupational disabilities through IMSS. |
|
Paid Time Off (PTO) |
Includes vacation days, public holidays, maternity/paternity leave, adoption leave, and breastfeeding breaks, per the Federal Labor Law. |
Supplementary (Non-Mandatory) Benefits
While not required by law, many employers—especially multinational companies—offer enhanced benefits to attract and retain talent.
|
Benefit |
Details |
|
Group Life Insurance |
Offered to companies with 10+ employees. Terms may vary by company size. |
|
Long-Term Disability (LTD) |
Employees with permanent disability may receive a lump sum payout and waiver of premiums for continued coverage. |
|
Accidental Death & Dismemberment (AD&D) |
Usually bundled with life or personal accident insurance policies. |
|
Funeral Expense Coverage |
Commonly included in life policies. Coverage typically ranges from US$2,000 to US$7,000. |
|
Major Medical Insurance |
Covers specialized or high-cost care. Provided by 95% of global companies and 65% of local employers. May also include dental and vision. |
|
Minor Medical Plans |
Cover basic care and diagnostics within a closed insurance network. |
|
Voluntary Retirement Plans |
Employers often match employee contributions to savings accounts, sometimes up to 13% of salary. |
Employee Leave Entitlements in Mexico
Employees in Mexico are entitled to various types of statutory leave under the Federal Labor Law. Here's a summary of the key leave entitlements and conditions employers must comply with.
- Vacation Leave: Employees with one year of service receive at least 6 days of paid vacation, increasing annually up to 14 days by year five, and by 2 days every five years thereafter.
- 2nd year: 8 days
- 3rd year: 10 days
- 4th year: 12 days
- 5th to 9th year: 14 days
- Then increases by 2 days every additional 5 years.
- Vacation Premium: Employers must pay a vacation premium of at least 25% on top of regular wages during vacation days.
- Public Holidays: Mexico observes at least 7 mandatory paid public holidays each year. Additional holidays may be observed at the employer’s discretion.
- Sick Leave: Employees can receive up to 52 weeks of sick leave, paid at 60% of their salary starting from the fourth day, provided they have at least four weeks of IMSS contributions.
- Maternity Leave: Female employees are entitled to 12 weeks of paid leave—6 weeks before and 6 weeks after childbirth—funded by IMSS, assuming they meet contribution requirements.
- Paternity Leave: Fathers are entitled to 5 paid days of leave for the birth or adoption of a child.
- Adoption Leave: Adoptive mothers receive 6 weeks of paid leave, while adoptive fathers are granted 5 days.
- Childcare Leave (Medical): Parents of children under 16 with cancer may take up to 25 days per treatment cycle (maximum 364 days over 3 years), paid at 60% by IMSS.
- Breastfeeding Breaks: Nursing mothers are entitled to two 30-minute breaks per day or a one-hour reduction in their workday to breastfeed or express milk.
Employees vs. Independent Contractors in Mexico
When hiring in Mexico, it’s essential to correctly classify workers as either employees or independent contractors. The Federal Labor Law (FLL) governs employment relationships and provides strong protections to employees. Misclassification can lead to serious legal and financial consequences for employers.
Employees in Mexico are individuals who provide personal services under subordination, meaning they work under the direction and control of the employer. They typically follow a set schedule, report to a supervisor, and use tools or equipment provided by the company. Employees are hired under contracts regulated by the FLL and are paid a fixed salary on a regular basis. They are entitled to mandatory benefits such as profit sharing (PTU), a Christmas bonus (Aguinaldo), paid vacation and vacation premiums, social security coverage (IMSS), maternity or paternity leave, and severance pay when applicable. Employees may be unionized or non-unionized, and a special category known as "trust employees" includes those in managerial, oversight, or close personal roles with the employer.
Independent contractors, on the other hand, provide services on a civil or commercial basis without being subordinate to the company. Their working relationship is governed by civil or mercantile law, not the FLL. They operate independently, set their own hours, use their own tools, and often work with multiple clients. Contractors are usually paid per project or task and are responsible for their own taxes and social security contributions. They are not entitled to employment benefits under Mexican labor law.
However, if an independent contractor works under conditions similar to an employee—such as following a fixed schedule, receiving regular payments, or using company-provided equipment—Mexican labor authorities may reclassify them as an employee. This can result in retroactive payments for benefits, back social security contributions, payroll tax liabilities, and penalties for misclassification.
To remain compliant, especially for companies without a legal entity in Mexico, it’s important to ensure that contracts reflect the true nature of the working relationship. Employers should avoid exerting control over contractors that resembles an employment relationship. Partnering with an Employer of Record (EOR) can help ensure that workers are properly classified and all legal, tax, and benefit obligations are met in accordance with Mexican law.
For businesses entering the dynamic employment scene in Mexico, engaging the services of an Employer of Record (EOR) is a strategic move. The EOR assumes responsibility for intricate compliance matters, manages payroll complexities, and handles administrative intricacies, allowing companies to concentrate on core objectives free from regulatory entanglements. This collaborative partnership ensures that employees are onboarded with contracts aligning seamlessly with the labor laws and practices of Mexico. As the Mexico business landscape evolves, the role of an EOR becomes increasingly pivotal, providing businesses a streamlined entry and growth trajectory while upholding compliance standards and fostering a conducive work environment.
Social Security Contributions in Mexico
In Mexico, social security contributions are mandatory for both employers and employees. These contributions fund benefits provided by two key institutions: the Mexican Social Security Institute (IMSS) and INFONAVIT (the national housing fund).
Contributions are calculated based on the Salario Base de Cotización (SBC), which includes the employee’s base wage and most recurring fringe benefits (e.g., bonuses, commissions, and allowances). Certain benefits like illness or maternity-related payments may be excluded. The maximum SBC is capped at 25 times the daily UMA (Unidad de Medida y Actualización).
Key 2025 Figures:
Social security is calculated monthly, except for housing contributions, which are paid bimonthly (every two months by the 17th). All employees must be covered unless exempted under a tax treaty.
MSS Contribution Rates – 2025
Benefit Category
Employer (% Pattern)
Employee (% Worker)
Total
Occupational Hazards
Based on risk class
–
Varies
Illness and Maternity
20.40% + 1.10%
0.40%
21.90%
Medical for Pensioners & Beneficiaries (in kind)
1.05%
0.375%
1.425%
Medical for Pensioners (in money)
0.70%
0.25%
0.95%
Disability and Life
1.75%
0.625%
2.375%
Retirement, Severance (Old Age Withdrawal)
2.00%
–
2.00%
Retirement (CEAV – variable rate 2023–2030)
Variable
1.125%
4.275%
Daycare and Social Benefits
1.00%
–
1.00%
INFONAVIT (Housing Fund)
5.00%
–
5.00%
Components of Social Security Contributions
Here’s a simplified version in paragraph format with nine distinct points:
Occupational Hazards: Work Risk Insurance
In addition to the standard contribution categories, Occupational Hazard contributions are calculated based on the risk level of the job. The Mexican Social Security Institute (IMSS) assigns jobs into five risk classes. For example, an office worker may fall into Class I, while a construction worker might fall into Class IV or V.
Risk Class
Annual Premium (%)
I
0.54355%
II
1.13065%
III
2.59840%
IV
4.65325%
V
7.58875%
Employers are required to file a Professional Risk Insurance Premium Report by the end of February each year. Based on the company's accident record and prior risk level, the rate may increase or decrease by up to 1% annually.