Mexico

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.

Native Language

Spanish

Employee Protection

Medium

Payroll Frequency

Weekly, semi-monthly, monthly

Capital city

Mexico City

Termination

Easy

Internet

Slow

Currency

Mexican Peso (MXN)

Immigration

Hard

English Speaking

<20%

Population

131.10 Million

Employment Cost

Low

Cost of Living

Low

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 Registering a legal entity in Mexico as a means for employment is an outdated practice that takes both time (months) and money (thousands of USD).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

  1. With EOR/PEO solutions you can manage client meetings, sales, quality control, marketing, R&D and customer support without a local company in Mexico.
  2. Pay as you go
  3. ​​Dedicated account manager – One point of contact for multiple locations
  4. Employment & termination processing
  5. Complete payroll solution and statutory benefit according to local laws
  6. With EOR/PEO solutions you can hire staff while waiting for the registration of your company in Mexico.
  7. NNRoad only works with professional locally licensed partners
  8. GDPR compliant
  9. NNRoad manages employee record timekeeping, bonus and allowance, expenses claims and personal leaves according to local law.
  10. 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.

Individual income tax, locally known as Impuesto Sobre la Renta de las Personas Físicas (ISR), is a tax levied on individual citizens of Mexico. It applies to all forms of income including wages, salaries, investments and overseas income.

Taxpayers must submit an individual annual declaration to the Mexican Tax Administration within three months of the end of each fiscal year. Different personal deductions can be applied in order to reduce individual’s final taxable amount depending on individual’s circumstances. The standard rates for individual income tax range from 1.92% up to 35%. In addition, taxpayers are also required to pay a flat rate local tax, called Derechos de Impuestos Locales (DIL).

In order to ensure compliance with individual income tax obligations, taxpayers are required to keep accurate records of all their financial transactions. Mexico has also implemented a withholding system in which employers must withhold individual income tax payments from an individual’s salary and pay it directly to the Mexican Tax Administration on behalf of the individual.

Overall, individual income tax is an important source of revenue for the Mexican government and understanding the rules and regulations surrounding this type of taxation is essential in staying compliant with one’s individual income tax obligations. Individuals should ensure that they remain informed about any changes or updates related to individual income taxes in order to avoid any non-compliance issues.

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

Sample Calculation

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

Employers in Mexico are responsible for making a number of contributions and payments towards the benefit of their employees. These employer costs include social security contributions, vacation pay and severance pay. Mexico has a federal social security system administered by the Mexican Social Security Institute (IMSS). All employers are required to make mandatory contributions to IMSS for each of their employees. The employer must also contribute 3% of the employee’s salary to Mexico’s National Workers’ Housing Fund Institute (INFONAVIT) and one percent as an additional contribution for old age retirement.

Vacation pay is another prerequisite cost employers must factor into their budget when hiring staff, which amounts to 6 days per year for workers employed between 1-3 years; 8 days for 7-10 years of service; and 10 days for 11 or more years. Mexico’s labor laws also require employers to provide employees with a minimum of 15 working days’ severance pay upon termination, which must be paid within 24 hours.

Employers in Mexico must take into account these employer costs when budgeting for staff, as the Mexican government enforces strict regulations and hefty fines on companies that fail to comply. It is important for employers to ensure they are up-to-date with Mexico’s ever-evolving labor codes and laws to ensure compliance and avoid any potential legal issues.

Employer Contributions:

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%

Employee Contributions:

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

Mexico has a 40-hour workweek consisting of 8 hours per day. Mexico also requires 1 mandatory rest period of at least 12 consecutive hours per 24-hour period. The maximum daily working time is 10 hours, with 4 additional hours allowed in certain circumstances. Additionally, all employers are required to provide workers with one fixed day off each week as well as 14 paid national holidays annually, though industries such as tourism may be exempt from this rule.

Mexico’s labor regulations are enforced by the Secretaría del Trabajo y Previsión Social (STPS) and employers found in violation of Mexico’s labor laws may be subject to fines or other penalties. It is important for employers and employees to understand Mexico’s work hours regulations in order to comply with the law and ensure that all workers are properly compensated for overtime hours. Mexico’s labor regulations serve as an important safeguard for protecting workers’ rights and should always be respected.

Working Hours per Week

The typical working week in Mexico consists of 8 hours a day or 40 hours per week.

Overtime

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

Social Security

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

Retirement

Mexico’s present pension system is a fully funded defined contribution system with three pillars:

  1. a guaranteed minimum pension for low-wage workers;
  2. mandated individual savings accounts with competitive mutual fund management;
  3. 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.

Severance pay

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.

holidays mexico peo employer of record

Employment Contract in Mexico

Employment Contract

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.

Probation Period

As a general rule, the probation period is for 3 months. For executive positions is extended to 6 months.

Types of Leaves in Mexico

Sick Leave

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.

Maternity 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%. 

Paternity Leave

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.

Scroll to Top