MexicoRead on for an employer’s guide to employment laws, regulations, and Employer of Record (EOR) in Mexico.
Looking to hire in Mexico? An EOR can help
Are you setting up shop in Mexico? An Employer of Record (EOR) can help you hire, onboard, and manage employees without having to set up a local entity.
An EOR acts as the legal employer for your Mexico-based workers, onboarding local employees, administering payroll, and managing benefits and taxes – all in compliance with local employment laws.
With an EOR streamlining and automating global employee management, you can avoid the difficulties associated with navigating international labor law and focus on what really matters.
How to hire in Mexico
Step 1: Choose between establishing a local entity and using an EOR
You can either set up a local entity or use an EOR service when hiring employees in Mexico.
Creating a local entity in Mexico gives you full control over your HR function, but it requires a substantial investment in time, money, and effort. Setting up a local entity can take several weeks or even months, which may delay your hiring process.
Additionally, with a local entity, you will be directly responsible for adhering to all Mexican employment laws and regulations.
Using an Employer of Record service can streamline the complexities of Mexican labor laws. An EOR allows you to onboard employees quickly and manage HR functions more efficiently.
If you plan to hire a large workforce and establish a significant presence in Mexico, setting up a local entity may be beneficial. However, if you seek a faster and more straightforward hiring process, an EOR could be a more practical choice.
Step 2: Finding the right EOR
It is essential to select the right Employer of Record (EOR) for your operations in Mexico. A poor choice could lead to compliance issues, unexpected costs, and dissatisfaction among your new hires.
Here are important factors to consider:
- Legal compliance. Verify that the EOR is well-versed in Mexican labor laws, employee entitlements, tax obligations, and local benefits. Look into their track record and experience with industry-specific requirements.
- Customer service. Check if the EOR offers continuous support. Multiplier, for instance, offers round-the-clock human support and dedicated account manager to assist you.
- Transparent pricing. EOR services that offer low upfront costs may have hidden fees or complex pricing structures. Ensure you understand all potential costs from the beginning before making a decision.
- Total cost of ownership. When selecting an EOR, ensure you are investing in a quality service that fits your budget and meets your needs.
Step 3: Employing and onboarding in Mexico
Send over the contract
Once you’ve selected your ideal candidate and the right EOR, the next step is to issue a compliant employment contract. An effective EOR can prepare contracts that adhere to Mexican labor laws, allowing you to customize terms such as job responsibilities, working hours, salary, and termination conditions. After drafting the contract, your EOR will securely send it to the employee and ensure all necessary signatures are obtained.
Enhance compensation with competitive benefits
To offer an attractive benefits package, an EOR can provide access to various locally administered options without you having to handle local vendors directly. Additionally, the EOR can coordinate the provision of necessary IT equipment and other resources needed for the new hire to start effectively.
Get all your documentation in order
You’ll need to collect the new hire’s tax and banking details. If using an EOR, this information is typically gathered automatically to set up payroll. The EOR will manage all required documentation, streamlining the process and minimizing paperwork.
With the right EOR, onboarding in Mexico can be simplified, making the process more efficient and less stressful for both you and your new employees.
Step 4: Run payroll for employees based in Mexico
Managing payroll for employees in Mexico requires attention to local tax regulations and mandatory contributions. Mexico has a progressive income tax system with rates that vary based on income levels.
Employers must also handle contributions to the Mexican Social Security Institute (IMSS) and the National Housing Fund for Workers (INFONAVIT).
The IMSS provides health coverage, disability benefits, and retirement pensions. Employers are required to contribute a percentage of each employee’s salary to the IMSS to ensure they receive necessary medical care and benefits.
INFONAVIT supports employees in acquiring housing. Employers must contribute to INFONAVIT, which helps employees access affordable housing options.
Managing these requirements can be complex, particularly for international companies operating in Mexico. An EOR simplifies this process by ensuring accurate and timely salary payments while handling all local taxes, contributions, and withholdings.
With a global payroll solution from an EOR, you can streamline payroll management for all your international employees through a single platform, eliminating the need to work with multiple local providers.
Employment laws and regulations in Mexico
Mexico has a robust legal framework governing employment. The federal labor law regulates employment conditions, such as working hours, rest periods, overtime pay, and termination processes. It ensures fair treatment and sets the minimum standards for employment agreements.
Employers must also provide written contracts outlining the terms of employment, such as job responsibilities, salary, working hours, and conditions for termination. These contracts must comply with the Federal Labor Law and other relevant regulations.
Employ top talent in Mexico through an EOR
Onboard, pay, and manage all your international employees
Employee benefits and compensation in Mexico
Mexico has established regulations regarding employee benefits and compensation. Here are some notable regulations:
- Minimum wage. Mexico’s minimum wage varies by region and industry.
- Paid annual leave. Employees are entitled to at least six days of paid annual leave after one year of service. This entitlement increases progressively with each year of service.
- Paid sick leave. Employees are eligible for paid sick leave, with compensation based on the severity of the illness and length of employment. A medical certificate is required to validate the sick leave.
- Paid maternity leave. Female employees are entitled to 12 weeks of paid maternity leave, typically divided between pre and post-natal periods. Under certain conditions, maternity leave can be extended for those with at least one year of service.
Employers in Mexico often provide additional benefits beyond the legal requirements. To enhance your attractiveness as an employer, use a comprehensive benefits package that meets local compliance standards like Multiplier.
Termination and offboarding procedures
When terminating employment in Mexico, employers must adhere to regulations concerning notice periods and severance pay. The standard notice period is generally 30 days, but it may vary depending on the terms of the employment contract.
Severance pay is governed by Mexican labor law and is typically calculated based on the employee’s length of service. The severance pay structure is as follows:
- Three months’ salary for employees with less than one year of service.
- Three months’ salary plus 20 days’ salary for each year of service for employees with one year or more of service.
Employers may offer notice pay in lieu of requiring the employee to work through the notice period, provided this is clearly stated in the employment contract.
An EOR like Multiplier can simplify the offboarding process by ensuring all termination activities comply with local regulations, facilitating a smooth transition for both the employer and the departing employee.
Visa and work permit assistance
Foreign workers in Mexico must obtain the appropriate visas and work permits. Here we look at the main visa categories for working professionals.
- Temporary Resident Visa with Work Authorization: For foreign workers employed by a Mexican company. It is generally issued for up to four years and requires a job offer from a local employer.
- Business Visa: For short-term business activities such as meetings, conferences, or temporary assignments in Mexico. It is typically valid for up to six months.
- Permanent Resident Visa: For long-term employees who have worked in Mexico for a certain period or have family connections, for indefinite stay and work in Mexico.
Navigating the visa and work permit process in Mexico can be complex, but expert assistance can help streamline the application and renewal processes. An EOR like Multiplier provides comprehensive visa and work permit support as part of its services.
Learn more on our Global Immigration services page.
Get started with Multiplier’s EOR services
Multiplier’s Employer of Record (EOR) services offer a comprehensive solution for expanding your workforce in Mexico without setting up a local entity.
Multiplier EOR ensures compliance with Mexican labor laws by generating locally compliant contracts, managing payroll and taxes, and providing a range of customizable benefits that meet local standards. By partnering with us, you can avoid compliance issues and operate your business confidently.
Book a demo to learn more.
