As a country rich in diversity, the business scenario in Mexico is one of a kind. It is incredibly focused on building relationships based on trust and personal connections. Every business owner willing to expand here must know how to recruit employees in Mexico.
Lets discuss the details around the recruitment process in Mexican companies and the mandates you will need to follow as a hiring company or a foreign organization in Mexico.
Things to Know Before Hiring in Mexico
Employers must learn about the country’s work culture and its mandatory labor laws to hire staff in Mexico. A great thing about hiring Mexican employees is that you gain an in-depth knowledge of the local market. Hence, you can create relevant expansion and operational strategies to succeed here.
The crucial aspects all business owners must consider while hiring employees in Mexico are –
Language differences
This is one of the most common challenges you will face when you hire employees in Mexico. 93% of the Mexican population speaks their native language, Spanish. A small percentage of Mexicans speak English or indigenous languages.
You must remember that even the Spanish-speaking population across Mexico has different variations of Spanish. So, learning Spanish and hiring Spanish-speaking employees for your Mexican business establishment is recommended.
Cultural differences
Understanding certain aspects of Mexican culture will significantly impact the process of hiring Mexican workers and the work relationships in your organization. The cultural differences exclusive to your company will be based on the local culture of the region where you establish the office.
Typically, the work culture in Mexico is friendly and personal compared to other countries. It directly impacts the hiring practice. It is appropriate and more than welcome to ask the candidates about their personal lives, interests, families, and other aspects. Employers often hold business gatherings to foster transparent communication and encourage one-on-one conversations.
Employment contracts
Employment agreements in Mexico are mandatory as the country does not allow at-will employment. On hiring employees, a contract is formed between the employer and employee, irrespective of whether it’s written or oral. Therefore, it is best to draft a detailed employment contract, including the employee’s personal information (name, contact number, etc.), job details, the contract duration (if any), salary breakdown, and so on. You should note that contract durations are of three kinds: seasonal, project, and indefinite. Most job contracts are indefinite, meaning they don’t have an end date.
You should provide an offer letter and the employment contract that should consist of the salary and other compensations in Mexican pesos.
Mexico has four kids of labor contracts:
- Contract by work or stipulated time
- Mexican labor contracts for indefinite period
- Trial period contracts
- Training contracts
You should also be cautious before making an employment contract regarding the rights of the Mexican workers under the labor law of Mexico. Your contract should comply with the labor rights to stand valid. The biggest reason employers should offer employment contracts is that Mexico does not provide unemployment insurance and a written legal agreement gives a sense of stability to employees.
Minimum wage and work week: Mexico has three work shifts as per the Mexican labor law:-
Workday | Work Hours | Scheduled Range | Break duration |
Day Shift | 8 | 6:00 am-8:00 pm | 30 mins |
Night Shift | 7 | 8:00 pm-6:00 am | 30 mins |
Mixed Shift | 7.5 | Mixed Nightwork <= 3.5 hrs | 30 mins |
The day shift is mainly preferred. Employees should only work 48 hours a week and enjoy one rest day. Employees working for more than the stipulated 48 hours in the six work days must get overtime pay for the extra hours worked. Since January 2022, the daily minimum wage is 172.87 Mexican pesos, whereas the daily minimum wage in the Free Economic Zone (northern border region) is 260.34 pesos.
Paycheck withholdings: In Mexico, employers must withhold the income tax amount from their employees’ paychecks. The tax rate is variable from employee to employee and depends on the individual wage. For Mexican citizens, the individual income tax (ISR) is levied at progressive rates, between 0% – 35%. The higher end of the tax rate (35%) applies to individuals with annual income over MXN 3,000,000. Contrarily, foreigners are subject to ISR ranging from 0%, 15%, and up to 30% of their income.
Therefore, it is an employer’s responsibility to determine a reasonable amount for each employee and subtract a percentage from each paycheck to send it to the Tax Administration Service (SAT) every month.
Employers must also deduct a particular portion of social security from the employees’ wages. While the maximum annual contribution for employees is MXN 23,804, the contribution cap for employers is MXN 166,174.
Leave requirements: Employees in Mexico enjoy seven nationwide holidays and an eighth holiday every six years. Additionally, employers must provide all employees six days of paid leave after completing one year in the company. Employees who have served for longer durations in the company are entitled to more paid leaves.
According to Article 76 of the Federal Labor Law, from the second year on, the paid vacation days go up by two working days successively till it accumulates to 12 days. In the fifth year, the number of paid leaves increases by two days per five years of service in a company.
Employees should also receive a prima or a vacation bonus covering at least 25% of their standard salary. For sick leaves, employees receive only a portion of their stipulated wage.
Profit-sharing and annual bonus: All companies must give employees yearly bonuses for the Christmas holiday since it is a legal requirement. This bonus must usually cover 15 days of wages. It is known as an Aguinaldo, or the 13th-month salary, which employees receive every year by the 20th of December, failing which employers incur hefty fines.
Additionally, Mexican employees are entitled to another bonus known as profit sharing. After one year of operating in Mexico, a company should provide the employees with 10% of the pre-tax profits.
Labor laws: The labor laws in Mexico are stringent and greatly favor employees and labor unions. As an establishment in Mexico, you are legally required to write employment contracts that clearly state the employment terms, such as the compensation, termination requirements, and benefits, in the local language. A few essential tenets of the Mexican labor laws are –
- The maximum weekly working hours for Mexican employees is 48 hours.
- Employees must get a 30-minute break every work day.
- If employees work overtime, they must receive double pay for the extra hours worked. However, the pay should be tripled if the weekly overtime is over nine hours.
- All employees must get the national minimum wage of MXN 172.87.
- The maximum duration of paid sick leaves for employees is 52 weeks, provided Social Security covers it.
The Cost of Hiring an Employee in Mexico
Hiring employees in Mexico requires employers to consider numerous costs such as recruitment fees in Mexico, job adverts, and other factors involved in the hiring process.
One must be aware of the potential costs while hiring employees in Mexico:
Research
Employers must conduct in-depth research before launching their venture in Mexico. They must learn about the legal issues, official employment requirements, hiring practices, best business locations, etc. You can hire external professionals to help with the initial research.
Hiring agencies
Staffing services and recruiting agencies can help smoothen the hiring process in Mexico. However, you’ll have to bear their service charges.
Legal establishment
If your venture is not yet a legal entity in Mexico, you must pay the registration costs of the Mexican Institute of Social Security (IMSS) and SAT.
Legal checks
For conducting a thorough background check, you must avail the services of a private investigator, which inevitably adds to your costs. Going through each candidate’s application and running necessary background checks are also substantial costs.
Job advertisements
Employers must consider the charges of advertising job vacancies on public or industry-specific job platforms.
Hiring committees
Hiring internal committees to fulfill responsibilities regarding the hiring process can also add to the overall cost of hiring employees in Mexico.
Translator
Since the population of Mexico is mainly Spanish speaking, you might need to hire the services of a translator to interview Spanish-speaking candidates and evaluate applications.
What Does a Company Need to Hire Employees in Mexico?
A branch or subsidiary: For establishing a legal organization in Mexico, you must create a branch (an added extension of your organization) or a subsidiary that functions more like an independent organization under your company’s banner.
Legal documents
To establish your venture legally, all your required documents should be in Spanish, for which you might need to enlist the aid of a translator. In an ideal situation, you should hire a Mexican attorney to help you prepare and notarize the necessary documents like the deed of the corporation.
Registrations
Your business needs to be registered with many government agencies, such as the Ministry of External Affairs (SRE), the IMSS, National Business Information Registry, the National Workers Housing Fund (INFONAVIT), the SAT, and the Department of Trade Foreign Investment Register (for exceptional circumstances).
Permits
You might require specific legal and local permits depending on the location of your branch or subsidiary and the industry you operate in.
Various Options for Hiring Employees in Mexico
There are two ways you can opt for hiring employees and workers in Mexico –
- Hire a Global Professional Employer Organization (PEO) – Global PEOs can help you onboard full-time and freelance employees in Mexico without even establishing a subsidiary. They can take on responsibilities like payroll management, international team management, generating employment contracts, etc.
- Hire through an internal team – Companies can always create an internal hiring committee to recruit candidates. However, this may lead to additional costs of setting up teams, allocating resources, purchasing the necessary tools for hiring, etc.
The Steps to Hiring in Mexico
Post job ads
The first step to hiring is creating job ads outlining the positions’ details, necessary qualifications, skills, job location, language preferences, and responsibilities. It’s best to create/translate the job ads into Spanish. After the job ads are finalized, you can post them across online job boards and in classified printed media channels.
Evaluate applications
Once the job applications start coming, you can initiate the screening process to pick the final interviewees. Many Mexican workers submit long curriculum vitae (CV) instead of the short and crisp resumes you might be used to. You can take assistance from a third-party hiring agency or software to shortlist candidates quickly.
Interview shortlisted candidates
After the screening, you must schedule interviews with selected candidates. Be mindful of the Mexican work culture while conducting these interviews. Try to be more engaging, friendly, and personal in your conversation with the candidates. You can hold interviews in your office or online over a phone call or on a video call if employing remote candidates in Mexico. However, consider the time difference and the Mexican Standard Time for remote interviews and schedule the interview accordingly.
Offer letter and employment contract
After finalizing the candidates, you must formally send them the offer letter first. If they accept the offer letter, you can send the employment contract for them to sign. Creating a contract is a vital step of the employment process. Make it as detailed and informative as possible and include important information, like personal information, job role, expectations, compensation, benefits, etc.
Onboard new hires
This is the last step in the hiring process where hired personnel must fill out and submit the required paperwork, including company forms and government documents. This is critical to creating a payroll. Giving your employees prior training before they begin work will help you evaluate their performance during the probation period.
Let Multiplier be Your EOR Platform in Mexico
As a foreign entity, you can establish your company anywhere in the world to expand your global reach. However, establishing a business, hiring employees, and running the organization can be very challenging for foreign employees, particularly those who don’t understand Mexican tax and labor laws. This is where employers can partner with a global PEO like Multiplier.
Our trained experts can help streamline your onboarding process, payroll operations, and legal compliance matters smoothly. We are well-versed with the tax laws in over 150 countries.