Planning to hire employees in Mexico? Here’s a quick guide

International hiring is on the rise, and U.S. companies are increasingly sourcing talent from Mexico. With highly educated and competent workers available for remote work, Mexico has a lot to offer American companies.

The time zones are similar, and, without the high cost of living in the U.S., it’s much easier to offer a competitive salary. However, if you want to hire in Mexico, you need to understand and comply with local employment laws to operate your business lawfully.

Here, we’ll cover hiring methods, onboarding, employee benefits, and other legal considerations for hiring in Mexico. We’ll also cover the methods to hire employees in Mexico, like working with an Employer of Record (EOR) like Payoneer Work Force Management.

How to hire in Mexico

For American companies looking to hire in Mexico, compliance is the top concern. There are three main ways to lawfully employ workers in a foreign country, and each has its own benefits.

1) Set up a legal entity in Mexico

This is the most robust method and involves officially expanding your business into Mexico. If you’re a large company planning to hire many workers and establish an office, setting up a local entity is a good option. You’ll be able to hire employees in Mexico and interact with government services directly, which reduces the risk of non-compliance.

However, for smaller businesses that want the flexibility to hire all over the world, it’s not feasible to set up a legal entity in every single country. The time-consuming and expensive nature of the process also makes it less than ideal for fast-growing companies.

2) Hire contractors in Mexico

Hiring contractors or freelancers is by far the quickest and easiest option for businesses. However, there are significant downsides. First, it affects how you can manage your workers. For example, contractors are in charge of their own schedule, their own taxes, and their own rates, and they cannot be subject to disciplinary action.

If the government decides you’re misclassifying employees as contractors, you could face significant government penalties and fines. Your misclassified employees can also argue for back pay and benefits, or even take legal action to pursue damages or bring criminal charges.

Contractors also aren’t entitled to benefits like holidays, sick pay, or bonuses, so it makes it much harder to offer competitive compensation and working conditions to skilled workers.

3) Use an Employer of Record (EOR)

The option that offers a good balance of compliance and ease is working with an Employer of Record (EOR). This is a third-party company with a local legal entity that can hire employees in Mexico on your behalf. The EOR acts as the legal employer and assists with employment contracts, payroll, taxes, benefits, and leave policies.

EORs help streamline hiring employees in Mexico according to local laws and regulations, by helping handle onboarding, HR admin etc., 

Plus, an EOR like Payoneer Workforce Management can help you hire in 160+ countries, allowing you to onboard talent globally.

Learn more about working with an EOR in Mexico.

Where to find employees in Mexico

Hiring in Mexico starts with finding candidates. That means advertising your job openings on Mexican job boards and offering Spanish language support. Here are some of the ways you handle recruitment in Mexico.

Popular job boards in Mexico

The first option is to post your job openings on sites where Mexican candidates will see them. Popular Mexican job boards include:

• OCCMundial
• Computrabajo Mexico
• Bumeran Mexico
• Snaphunt
• LinkedIn
• Talenteca
• Indeed Mexico
• Portal de Empleo (Government Job Portal)

Work with local recruitment agencies

Even if you intend your Mexican employees to work in English, providing Spanish language support during the recruitment process will make things a lot easier for you and your applicants. Clarity is essential when negotiating salaries or signing employment contracts, and one way to achieve this is by working with a local recruitment agency.

This does involve additional costs, however, and the agency will take control of various aspects of the recruitment and selection process.

Recruit through an EOR

An EOR can take care of more than just payroll; it can also support your hiring efforts, employment contracts, and onboarding. This gives you the freedom to conduct resume screenings and interviews as you wish, and get expert assistance with the legal tasks.

Onboarding employees in Mexico

For the most part, you can mimic your U.S. onboarding process when you hire a team in Mexico, or you can hand over the process to an EOR. 

Here is a checklist of the main steps:

• Conduct a background check for the new employee
• Send an offer of employment
• Enroll your employee in benefits and payroll
• Enroll your employee for social security with the Mexican Social Security Institute (IMSS)
• Add your employee to payroll
• Set up work accounts and configure any devices
• Schedule an orientation call for their first day

An EOR can help you streamline this process by taking care of benefits, social security, and payroll.

Key employment laws and requirements in Mexico

When hiring employees in Mexico, it’s essential to understand the benefits they’re entitled to and the regulations you must follow. Here are some of the most important requirements to keep in mind.

Employment contracts

In Mexico, employment contracts are always in writing, and both the employer and the employee must keep copies. 

The most common points to include in a contract include:

• The employee’s personal information
• The type of employment
• Job description
• Hours and schedule
• Salary information, benefits, pay cycle, and payment method
• Rest days and vacation days
• The location (e.g., office or working location)

Employment benefits

Workers in Mexico are entitled to a range of benefits that often work very differently from those in the U.S. 

Here are key employee benefits you’ll need to know when you hire in Mexico:

• Vacation allowances increase every year, starting with 12 paid days of vacation after 1 year of service.
• Workers receive a holiday bonus equal to 25% of their daily wages for each vacation day.
• Sick pay is a social security benefit in Mexico and is not paid by the employer.
• Pregnant workers are entitled to at least 12 weeks of maternity leave with pay, and partners are entitled to 5 days of parental leave with pay.
• Workers receive a bonus in December equal to 15 days’ pay. (The Mexican government is considering a proposal to increase this bonus to be equal to 30 days’ pay.)
• Both employers and employees must make social security contributions every month. Employer contributions range from 24% to 38% of the employee’s monthly wages.

Working hours and holidays

The maximum hours an employee can work are laid out in the Federal Labor Law (FLL). This law applies to all workers in Mexico.

Key points of the FLL include:

• A maximum workday of 8 hours with at least 30 minutes of rest
• A maximum work week of 48 hours (which will be reduced to 40 hours by 2030)
• A maximum of 3 hours overtime per day, 3 times per week (with double rates)
• 1 fully paid rest day for every 6 days of work (usually Sundays)
• Salary payment 2 times per month, on the 15th and the last day of each month

Mexico also has 7 public holidays designated as mandatory rest days:

Holiday	Date
New Year’s Day	January 1st
Constitution Day	1st Monday of February
Benito Juárez’s Birthday Memorial	3rd Monday of March
Labor Day	May 1st
Independence Day	September 16th
Revolution Day	3rd Monday of November
Christmas Day	December 25th

An additional rest day is given on election days.

These rest days are separate from the 12 (or more) paid vacation days that workers are entitled to.

Tax obligations

When hiring in Mexico, employers need to know which taxes and contributions they’re responsible for. Every month, employers must withhold income tax from their employees’ salaries and remit it to the Mexican tax authorities. 

Mexico applies a progressive income tax system ranging from 1% to 35%.

Employers must also make social security contributions to the IMSS every month. The amount varies according to the employee’s salary, but will be somewhere between 24% and 38%. These contributions fund benefits for workers, such as healthcare, disability, and pensions.

Termination and severance

In Mexico, employers must have legally valid grounds to terminate an employee, as outlined in Article 47 of the FLL.

The employer can legally terminate the employee if:

• The employee doesn’t have the skills or abilities they claimed to have during the application process (this reason is only valid for the first 30 days of employment).
• The employee commits acts of violence, threats, insults, or bad treatment against the employer, colleagues, or clients.
• The employee intentionally causes material damage to the company’s possessions.
• The employee reveals trade secrets or discloses matters detrimental to the company.
• The employee has more than 3 unjustified absences within 30 days.
• The employee attends work under the influence of alcohol or drugs.

To terminate an employee with just cause, you have to provide written notice of termination and clearly state why you’re ending the contract. If there is no just cause, you have to pay your employee a severance package. This includes 90 days’ worth of wages as standard, plus additional compensation based on seniority, benefits, unused holiday, and other entitlements.

Payoneer Workforce Management helps hire employees in Mexico

Hiring employees in Mexico can be complex, with local laws and regulations affecting everything from recruitment and salaries to tax responsibilities and benefits. It’s essential to do things by the book to avoid fines and legal complications, but that’s a lot of work for most companies, especially if you want to hire in multiple foreign countries.

Payoneer Workforce Management can help simplify the difficult parts of hiring workers in Mexico and 160+ other countries without the need to set up a local entity. 

Payoneer Workforce Management can help you with:

• Onboarding international talent
• Running a global payroll
• Staying compliant with local laws
• Managing taxes, benefits, timesheets, and more

Speak with an expert today to learn how Payoneer Workforce Management can help.

FAQs

1) Can a U.S. company hire an employee in Mexico?

Yes, U.S. companies can hire workers in Mexico, and there are 3 main ways to do it. The first is by setting up a legal entity in Mexico, allowing you to hire employees directly. This method takes a lot of time and can be quite expensive, however.

You can also hire independent contractors, but you need to be careful not to treat them as employees, or you could incur fines. 

A better alternative is to work with an EOR that can hire workers on your behalf and take care of the day-to-day HR responsibilities, such as payroll, taxes, and benefits.

2) Do you have to hire union employees in Mexico?

Employers are not legally required to hire union members in Mexico. 

However, if there’s a collective bargaining agreement (CBA) in place that includes a clause requiring union membership for new hires, employers must follow it. Once hired, workers can choose to change unions or leave the union altogether.

3) Does Mexico allow foreign workers?

Foreign workers looking for employment in Mexico will need a valid work permit. The temporary resident visa with a work permit is the most common option, and employers can request these for potential employees.