Employer of Record & PEO in Mexico
Hire & manage teams remotely in Mexico without a local entity. We handle HR compliance, payroll & taxes so you can focus on your business.
How NNRoad Employment & PEO Services Work?
NNRoad provides professional employment organization (PEO) & employer of record (EOR) services for companies looking to hire and manage teams in Mexico. Registering a legal entity in Mexico as a means for employment is an outdated practice that takes both time (months) and money (thousands of USD). NNRoad’s employer of record and PEO services enables companies to hire and manage employees in Mexico in full accordance with local labor laws in under a week.
Employer of Record in Mexico
Employer of Record (EOR) services are for companies who do not have a legal entity in Mexico, but who want to hire in Mexico. Employment and full liability are outsourced to NNRoad.
➊ You interviews & select the candidates you want to hire in Mexico.
➋ NNRoad arranges a local labor contract with your new employee.
➌ NNRoad arranges a service contract between your organization & NNRoad.
➍ NNRoad organizes, manages & processes payroll in Mexico in full compliance with local employment laws.
➎ You maintain a normal working relationship and manage your team in Mexico while NNRoad manages payroll & HR liabilities.
- Recruiting process outsourcing – including but not limited to resume screening, shortlisting candidates, coordination for interviews, and assistance for salary negotiation
- Hiring of and termination of employees/local labor contracts (contract administration – engagement, extension termination and conversion to permanent hire, confidentiality agreement)
- On-boarding and off-boarding employees following local law practice
- Complete payroll solution and statutory benefit administration
- Employee management – employee handbook, employee record retaining, time keeping, bonus and allowance management, expense and claims, and leave employee database management accordingly to the local law
- Mandatory social security insurance compliance according to the local laws
- Advisory of fringe benefits that are given in their field for employees, example: major medical insurance, life insurance, and car, etc
- Working VISA application assistance, if needed
- Assist with vendor search on behalf for any vendor like insurance vendor for medical insurance or pension fund management, etc
- Local individual income tax reporting, if needed
Payroll & PEO in Mexico
Professional Employment Organization (PEO) services are for companies who have a legal entity in Mexico, and want to outsource their payroll. Employment liabilities are shared between your organization and NNRoad.
➊ You interviews & select the candidates you want to hire in Mexico.
➋ NNRoad organizes, manages and processes payroll for your local employees in full compliance with local employment laws.
➌ You maintain a normal working relationship and manage your team in Mexico while NNRoad manages payroll & HR compliance.
- Registering the necessary company and personnel information for payroll calculation in the payroll software and system:
- Raw data collection and cleaning
- Employee data maintenance: including new hire, resign, salary change, retire, etc.
- Local government bureau registration
- Set up payroll policy, maintenance and update
- Maintain employee record accordingly to the requirements by local government
- Monthly payroll processing:
- Calculation of gross salary, salary deductions (e.g. social insurances, unpaid leaves, etc.), and net salary based on information provided by the Company including irregular payments such as incentive/bonus, commission, allowance, severance, retirement payment, etc.
- Pro-rata calculation for people who join/resign
- Providing a monthly payroll summary to the Company
- Payroll disbursement – Issuing payment notice to the Company for payroll distribution to employees (E-Paystubs Delivery (CFDI) and employee’s expense claim according to the Mexican IRS laws
- Employee’s enrollment to the company’s social insurance they join the company
- Employee un-enrollment to the company’s social insurance when they leave/exit the company
- Calculation and contribution of (1) mandatory social security (2) saving fund (if applicable), and (3) other benefit plans (i.e. Infonavit (Housing) Deductions)
- Year-End Adjustment and Annual Declaration
- Adjustment of taxes owed or to be refunded to the employee based on the cumulative income of the employee for the entire year
- Prepare annual payroll related reconciliation report
- Prepare and filing of social Insurance reporting
- Prepare individual income tax reporting, if needed
Advantages of NNRoad's Mexico Employment Services
- With EOR/PEO solutions you can manage client meetings, sales, quality control, marketing, R&D and customer support without a local company in Mexico.
- Pay as you go
- Dedicated account manager – One point of contact for multiple locations
- Employment & termination processing
- Complete payroll solution and statutory benefit according to local laws
- With EOR/PEO solutions you can hire staff while waiting for the registration of your company in Mexico.
- NNRoad only works with professional locally licensed partners
- GDPR compliant
- NNRoad manages employee record timekeeping, bonus and allowance, expenses claims and personal leaves according to local law.
- NNRoad provides foreigner VISA application services, if needed
Employment Compliance in Mexico
Taxes & Payroll in Mexico
Employee Income Taxes:
Individual income tax rates in Mexico are based on progressive tax brackets.
1.92%: 0 – 7,735 MXN
6.40%: 7,735.00 MXN – 65,651.07 MXN
10.88%: 65,651.07 MXN – 115,375.90 MXN
16.00%: 115,375.90 MXN – 134,119.41 MXN
17.92%: 134,119.41 MXN – 160,577.65 MXN
21.36%: 160,577.65 MXN – 323,862.00 MXN
23.52%: 323,862.00 MXN – 510,451.00 MXN
30.00%: 510,451.00 MXN – 974,535.03 MXN
32.00%: 974,535.03 MXN – 1,299,380.04 MXN
34.00%: 1,299,380.04 MXN – 3,898,140.12 MXN
35.00%: Over 3,898,140.12 MXN
Yearly income = 150,000 MXN
1.92% * 7,735 = 148.51
6.40% * 57,916.07 = 3,706.62
10.88% *49,724.83 = 5,410.06
17.92% * 15,880.59 = 2,845.80
148.51+3706.62+5410.06+2845.80 = 12110.99
Yearly income tax = 12,110.99 MXN
Employer Costs in Mexico
26.54% – 33.58% – Social Security contributions (IMSS) (Maximum annual contribution 138,479.00 MXN)
5.15% – Retirement
5% – National Housing Fund (INFONAVIT)
Total employment cost: 36.69% – 43.73%
1.65% – Social Security contributions (IMSS) (Maximum annual contribution 22,243 MXN)
1.125% – Retirement/Old age insurance
Total employee cost: 2.775%
Working Hours in Mexico
Working Hours per Week
The typical working week in Mexico consists of 8 hours a day or 40 hours per week.
Overtime is compensated at twice the regular rate. Employees must be paid triple their standard base salary rate for any overtime over 9 hours per week.
Benefits & Insurance in Mexico
All workers, including members of production cooperatives, worker-run and joint worker-management companies, traditional agrarian communities of common ownership, joint property communities, small farmers, small property owners organized in groups, and local societies or credit unions covered by the Agricultural Credit Law, are required to be covered by social security.
The social security system is financed from contributions by workers, employers, and the government. The contributions are based on salary levels.
The law now states that Social Security serves the following purposes:
- Medical assistance
- Protection of fundamental subsistence requirements
- Individual and communal well-being necessitates the provision of social services
- Providing a pension that will be guaranteed by the state if all legal requirements are met
Mexico’s present pension system is a fully funded defined contribution system with three pillars:
- a guaranteed minimum pension for low-wage workers;
- mandated individual savings accounts with competitive mutual fund management;
- voluntary savings.
Both men and women who have attained the age of 65 and have made at least 1,250 weeks of social security contributions are eligible for normal retirement benefits. At the age of 60, an early retirement benefit is offered.
National Housing Fund (INFONAVIT)
INFONAVIT is the major Mexican government agency in charge of ensuring that families are able to exercise their constitutional right to adequate housing.
Termination Laws in Mexico
Only when an employee shows cause for dismissal can an employer fire him or her. Employees must demonstrate “integrity at work” according to Mexican labor law. When work is completed with great care, attention, and effort at the agreed-upon time, place, and manner, an employee is said to be acting with integrity. In addition, “lack of integrity” is a common reason for dismissal.
The termination payout is computed based on the following factors:
- Employer must pay all benefits owed, including sales incentives, on a prorated basis up to the termination date if the employee voluntarily resigns.
- Employer must pay all benefits owed, including commissions, on a prorated basis until the day of termination, as well as the seniority premium of twelve days of salary for each year of service, if the employee is terminated with cause.
- Employees who are terminated without cause are entitled to the following lump sum severance:
- three months’ aggregate daily salary, plus;
- twenty days’ aggregate daily salary for each year of service;
- a seniority premium of twelve days’ salary for each year of service (but with a cap of twice the minimum daily salary);
- benefits due.
Holidays in Mexico
Public Holidays in Mexico
- New Year’s Day – January 1st
- Constitution Day – February 7th
- Benito Juarez’s birthday – March 21st
- Maundy Thursday – April 14th
- Good Friday – April 15th
- Labour Day – May 1st
- Independence Day – September 16th
- Revolution Day – November 21st
- Day of the Virgin of Guadalupe – December 12th
- Christmas Day – December 25th
Paid Leave in Mexico
Paid leave in Mexico is defined as a minimum of 6 days of paid vacation per year, plus an additional two days per year of service after completing a year of service.
Employment Contract in Mexico
Written contracts are mandatory in Mexico. In Mexico, it is valid the principle of stability and the contracts are signed usually for an indefinite term unless otherwise indicated differently.
As a general rule, the probation period is for 3 months. For executive positions is extended to 6 months.
Types of Leaves in Mexico
Employees are entitled to up to 52 weeks of sick leave paid at 60% of regular salary when verified by the IMSS affiliated medical authorities. For work-related injury, the employee is entitled to 100% paid sick leave.
All female employees are entitled to 12 weeks of paid maternity leave, which the employee must take six weeks before the birth and six weeks after that. The IMSS contributes 60.00% of the cost and the employer 40.00%.
Fathers are entitled to 5 days paid leave.
Immigration Laws in Mexico
The National Institute of Immigration is in charge of all immigration and work visas in Mexico. A visa is required for any foreigner who wishes to work in the country. Working for a Mexican company, for example, necessitates a residency visa with work authorization. Individuals working in Mexico for less than six months for a foreign company can instead obtain a visitor’s visa with work authorization.
There are two types of visas that allow foreigners to work in Mexico:
- Temporary resident visa: this is the visa for foreigners that want to stay more than 180 days in Mexico.
- Permanent resident visa: a permanent resident visa is required for foreigners who wish to live and work in Mexico permanently. Permanent residents can also apply if they have close familial ties to Mexico or have lived in the nation for a long time.
The majority of employees who accept a position with in Mexico will require a permanent resident visa, often known as a Visa de Residencia Permanente. Not all employees, however, will be able to meet the standards, since they must have family in the nation, a significant monthly salary, or four years of regular status as a temporary resident. Companies might consider applying for a temporary resident permit for personnel who have been asked to work in Mexico or who own property or have close family ties to the nation.