Last reviewed: October 2026
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Companies that want to hire employees in Mexico can use an employer of record (EOR), their own local entity, or contractors. Only the first two are safe for staff who work under your direction. Mexico presumes employment is indefinite, protects workers from day one, and has policed disguised subcontracting since its 2021 reform.
This guide covers what it costs, what the law requires, and what is changing. The biggest change is the phase-down of the maximum workweek from 48 hours to 40 hours by 2030, starting January 1, 2027.
It is general information, not legal, tax, or payroll advice. SuiteScorecard is not a law firm or accounting firm, most figures here come from secondary sources, and Mexican contribution rates, minimum wages, and working-time rules are changing on legislated schedules. Have a Mexican labor lawyer and accountant confirm anything you plan to rely on before you hire, pay, or dismiss anyone.
Why companies hire employees in Mexico
Mexico offers time zones that overlap with U.S. teams and a formal labor market with detailed statutory rules. It is not a pure cost play, though. The general-zone minimum wage rose 13% on January 1, 2026, to MXN 315.04 per day, and the Northern Border Free Zone minimum is MXN 440.87 per day.
The real cost drivers sit on top of salary: social security, a housing fund contribution, a mandatory year-end bonus, profit sharing, and expensive dismissals. Budget for those layers before you compare Mexican salaries with other markets.
Your three options: EOR, local entity, or contractors
If you hire employees in Mexico, the structure you pick decides who carries the liability. The table summarizes the trade-offs.
| Option | Best for | Main risk |
|---|---|---|
| Employer of record (EOR) | First hires, small teams, testing the market | Choosing a provider that is not the true legal employer |
| Local entity | Larger teams with local finance and legal support | Full compliance burden and dismissal liability sit with you |
| Independent contractors | Project work by genuinely independent professionals | Reclassification as employees, with back contributions |
Employer of record
An EOR employs the worker in Mexico while you direct the day-to-day work. It is the fastest route and avoids entity setup. If the model is new to you, start with our plain-English guide to what an employer of record is, and see EOR vs PEO for why a PEO does not work for cross-border hiring. A compliant EOR acts as the direct legal employer and puts the worker on its own payroll, because leasing workers to perform another company’s core activities is prohibited.
Local entity
Your own entity gives you control and can lower the per-head cost at scale. You also take on registrations with the tax authority (SAT), IMSS and INFONAVIT, plus monthly payroll compliance and every liability described below. We could not source reliable setup cost or timing figures, so get quotes from local accounting and legal firms.
Contractors
Contractors suit independent project work. They do not suit full-time people who follow your schedule, use your tools, and report to your managers. See the misclassification section below.
Employment contracts and probation
Employment in Mexico is presumed to be indefinite, and there is no at-will employment. Rights cannot be waived, and settlements are ratified before the authorities. When you hire employees in Mexico, put every term in a written contract and keep payslips and records of hours and benefits.
Probationary periods are governed by specific limits in the Federal Labor Law (LFT). We could not confirm the current maximum periods from a primary source, so we do not state them here. Confirm with local counsel. Do not assume probation lowers your exposure: one 2026 employer guide notes that Mexico protects every employee from the first day, with no qualifying period for severance. Mexican contracts must be drafted to the LFT and in Spanish, and clauses copied from other jurisdictions can be void or create liability, so have local counsel draft or review every employment contract before signature.
Working hours, overtime, and public holidays
Daily limits are 8 hours for day shifts, 7 for night shifts, and 7.5 for mixed shifts. The weekly maximum is 48 hours in 2026. A constitutional reform published on March 3, 2026 lowers it in two-hour steps, and salary and benefits cannot be reduced as a result.
| Effective | Maximum weekly hours | Weekly overtime cap |
|---|---|---|
| 2026 | 48 | 9 hours |
| January 1, 2027 | 46 | 9 hours |
| January 1, 2028 | 44 | 10 hours |
| January 1, 2029 | 42 | 11 hours |
| January 1, 2030 | 40 | 12 hours |
Overtime is paid at double time for up to 9 hours a week and triple time beyond that. One law-firm summary says electronic time records become mandatory on January 1, 2027, so confirm the implementing rules with counsel.
Workers get one paid rest day for every six days worked, and Sunday work carries a 25% premium. One 2026 summary lists eight fixed mandatory rest dates a year, plus election days. Older sources list seven, so check the current LFT calendar before publishing your holiday schedule.
Minimum wage and typical salaries
The 2026 daily minimum is MXN 315.04 in most of the country and MXN 440.87 in the Northern Border Free Zone. The monthly equivalent in the general zone is MXN 9,582.47 using the official 365-day, 12-month method. The commission also set professional minimum wages for 61 occupations, raised by the same percentage as the general wage in their zone.
We did not find a reliable official source for typical salaries by role, so we do not quote ranges. Benchmark offers against current local salary surveys, and remember that the minimum is only a floor.
Mandatory benefits and employer costs
Social security is the largest statutory cost when you hire employees in Mexico. Most of it is paid by the employer. Contributions are calculated on the worker’s contribution salary (SBC), which integrates benefits such as vacation days, and a statutory ceiling applies.
| Contribution | Employer rate | Employee rate |
|---|---|---|
| Sickness and maternity: fixed quota (on the daily UMA) | 20.40% | None |
| Sickness and maternity: additional (wages above 3 UMA) | 1.10% | 0.40% |
| Sickness and maternity: cash benefits | 0.70% | 0.25% |
| Pensioners’ medical expenses | 1.05% | 0.375% |
| Disability and life | 1.75% | 0.625% |
| Occupational risk | 0.54% to 7.59%, by risk class | None |
| Childcare and social benefits | 1.00% | None |
| Retirement (SAR) | 2.00% | None |
| Old-age severance and old age (cesantia y vejez) | 3.150% to 7.513%, by wage level | 1.125% |
| INFONAVIT housing fund | 5.00% | None |
The old-age rate for higher earners is rising on a legislated schedule. The top bracket is scheduled to reach 11.875% by 2030.
Statutory costs beyond contributions:
- Aguinaldo: a year-end bonus of at least 15 days of salary, paid before December 20.
- Vacation premium: at least 25% on top of vacation pay.
- Profit sharing (PTU): 10% of taxable profit, distributed within 60 days of filing the annual tax return. A 2021 reform capped individual payouts but did not remove the obligation.
Vendor estimates put total employer burden at roughly 30% to 40% above gross salary once IMSS, INFONAVIT, aguinaldo, and PTU are counted. Treat that as a planning range, not a quote. The rates in the table were assembled from payroll calculators and advisory summaries, and our sources disagreed on a few of them. Several of these rates move each year on a legislated schedule. Compute actual contributions from the current IMSS tables or have your payroll provider do it; do not run payroll from this page.
Leave entitlements
The 2023 vacation reform raised first-year vacation from 6 to 12 days. Vacation cannot be paid out in cash while employment continues, and it must be granted within six months after each work anniversary.
| Leave type | Entitlement | Notes |
|---|---|---|
| Annual vacation | 12 days (year 1), 14 (year 2), 16 (year 3), 18 (year 4), 20 (year 5), 22 (years 6 to 10), 24 (years 11 to 15) | Plus a premium of at least 25% of vacation pay |
| Sick leave | Handled through IMSS | We could not source the day counts and payment rules; confirm with counsel |
| Maternity | 12 weeks | Paid through the social security system |
| Paternity | 5 days | Statutory minimum |
| Other | Aguinaldo, mandatory rest days, weekly rest day | See hours section |
Termination, notice, and severance
Mexico has a narrow list of justified causes for dismissal, and the employer must prove the cause. If it cannot, the dismissal is unjustified. Before you hire employees in Mexico, model the exit cost as well as the salary.
For an unjustified dismissal, expect these components:
- Constitutional indemnity of three months of integrated salary.
- 20 days of salary per year of service. Sources differ on when this applies, mainly where reinstatement is ordered and refused, but it is routinely included in settlement math.
- Seniority premium of 12 days per year of service, with the daily wage capped at twice the minimum wage (MXN 630.08 in 2026).
- Accrued items: pro-rated aguinaldo, vacation, vacation premium, and any PTU owed.
Procedure matters. The employer must deliver written notice stating the date and the grounds, in person, or file it with the labor board within 5 working days if delivery is not possible. Without proper notice, a dismissal is treated as unjustified.
If a case is litigated, back wages accrue. One summary says they are capped at 12 months, with 2% monthly interest after that. A claim for unjustified dismissal generally must be filed within two months. Resignation removes the severance obligation, but accrued finiquito items are owed in every separation.
Severance is where foreign employers in Mexico get hurt. The components above are the general framework; how they apply depends on the integrated salary, tenure, the cause alleged, and how the notice was delivered, and the labor boards decide on the facts. Do not dismiss a Mexican employee, or negotiate a separation, without a Mexican labor lawyer reviewing the cause, the notice, and the full calculation first.
Payroll, taxes, and currency
Pay employees in Mexican pesos (MXN). Employers withhold income tax from salaries, file IMSS and INFONAVIT contributions, and issue electronic payslips (CFDI). Some states also levy a payroll tax on employers. We could not source current state rates, so confirm the rate for the state where your employee works.
Two operational details trip up new employers. Benefits are integrated into the daily salary base, so each salary or seniority change can alter the SBC, and the employer must file a modification notice with IMSS within five business days. PTU is normally paid in May or June.
Contractor misclassification risk in Mexico
The April 2021 reform to the LFT banned subcontracting personnel for a company’s core activities. It permits only specialized services or works outside the client’s corporate purpose and main economic activity. Providers of those services must hold an active REPSE registration with the labor ministry (STPS).
The fiscal consequences are real. Payments for prohibited subcontracting can lose their tax deductibility. If you use a specialized provider without an active REPSE registration, your company can become jointly liable for that provider’s unpaid wages, IMSS contributions, and taxes.
Enforcement is data-driven. Audits can cross-check bank ledgers, electronic payslips, and REPSE registrations, and interview workers about what they actually do. Recent labor reforms also extended employment protections to digital platform workers, so assume regulators are looking at contractor models.
A foreign company directing Mexican workers through a payroll outsourcer, without a legal employer of record, creates exactly the exposure the reform targeted. Use contractors only for work that is genuinely independent, and read our guide to contractor misclassification risks and penalties before you rely on them for core roles. The subcontracting rules carry joint liability and tax consequences, and whether a given arrangement is permitted specialized services or prohibited personnel subcontracting is a legal determination on the facts. If you already have contractors or an outsourcing arrangement in Mexico, have local counsel review it before you restructure, since changing the arrangement does not by itself resolve prior periods.
Best employer of record platforms for Mexico
For a first Mexican hire, an EOR is usually the right start. We grade platforms on our Suite Score, but we have not published Mexico-specific scores. We also have not verified Mexico pricing or entity ownership for the vendors below, so treat both as undisclosed until you have a written quote.
- Deel is our default first shortlist pick for mid-size teams that want one platform for employees and contractors.
- Rippling is the stronger candidate if you want HR, IT, and payroll in one system alongside global hiring.
- Papaya Global is worth a quote if payroll consolidation across several countries matters more than a single hire.
The order reflects our default placement, not a Mexico-specific test. Whichever you shortlist, ask these questions in writing:
- Is the provider the direct legal employer through its own Mexican entity?
- Does it hold an active REPSE registration where one is required?
- Does the quote include IMSS, INFONAVIT, aguinaldo, vacation premium, and PTU?
- Who funds severance if you dismiss without cause, and is any reserve or insurance priced in?
- What happens to the contract if you later open your own entity?
Frequently asked questions
Can I hire employees in Mexico without a local entity?
Yes, through an EOR that acts as the legal employer. Using a payroll outsourcer while you direct the work, with no legal employer in Mexico, creates misclassification and subcontracting risk.
How much does it cost on top of salary?
Employer IMSS and INFONAVIT contributions are the largest piece, with aguinaldo, vacation premium, and PTU added. Vendor estimates put the total at roughly 30% to 40% above gross salary. Get a line-by-line quote.
What does it cost to dismiss someone in Mexico?
For an unjustified dismissal, expect three months of salary, 20 days per year of service in many cases, a 12-day-per-year seniority premium, and accrued benefits. Written notice is required, and skipping it can make the dismissal unjustified.
When must the year-end bonus be paid?
Aguinaldo of at least 15 days of salary is due before December 20. Employees with less than a full year receive a prorated amount.
Can we use this guide to set up employment in Mexico ourselves?
Use it to understand the structure and estimate the cost, not to draft contracts, run payroll, or handle a dismissal. Most figures come from secondary sources, several conflicted with each other, and the working-time and contribution rules are changing on fixed schedules through 2030. Have a Mexican labor lawyer and accountant, or your EOR, confirm every number before you act.