Employer of Record in Mexico: how to hire compliantly without an entity.
Employ full-time employees in Mexico without setting up an entity. Locally compliant contracts, monthly payroll, statutory benefits, taxes. Below: what the law actually requires, in plain English.
- Country
- Mexico
- Local name
- México
- ISO code
- MX
- Region
- North America
- Phone code
- +52
- Employ Latam coverage
- Full EOR + contractor payments
Last updated July 2026
Overview
Overview of hiring in Mexico
Mexico is one of the most active hiring markets in Latin America. A large, Spanish-speaking workforce, a time zone that overlaps with US business hours, and strong technical talent in cities like Guadalajara, Monterrey, and Mexico City make it a practical first stop for companies expanding in the region.
Employment in Mexico is governed by the Federal Labor Law (FLL). The law defaults to indefinite employment. That means if you hire someone and the contract type is unclear, or a fixed-term contract runs past its end date, the relationship converts automatically to permanent status. You inherit full severance exposure from that point forward. Getting the contract right from day one matters.
There is no at-will employment in Mexico. Terminating without justified cause triggers statutory severance. Employers also handle mandatory social security contributions through IMSS and housing fund contributions through INFONAVIT, on top of income tax withholding through SAT.
Mexico at a glance
| Detail | Mexico |
|---|---|
| Currency | Mexican peso (MXN) |
| Working week | Monday to Friday |
| Standard workday | 8 hours (48-hour week maximum) |
| Probation period | Up to 30 days; up to 180 days for managerial roles |
| Notice period | Varies by cause; no statutory minimum for employer-initiated termination with cause |
| 13th-month salary (Aguinaldo) | Mandatory; minimum 15 days of salary, paid before December 20 |
| Payroll cycle | Weekly or bi-weekly in practice; monthly is less common |
A few things worth knowing before you hire:
- Written contracts are required under Article 25 of the FLL. Verbal agreements are not enforceable.
- Fixed-term contracts are only valid for specific, documented reasons (temporary replacement, defined project, seasonal work). Weak justification converts the contract to indefinite.
- The Aguinaldo is not optional. Every employee covered by an indefinite or qualifying fixed-term contract receives it.
- Profit sharing (PTU) is also a statutory obligation. Employees are entitled to 10% of the company's taxable income, distributed annually.
Employ Latam handles the locally compliant employment contract, statutory contributions, and payroll in Mexican pesos. You focus on finding the right person and managing their work.
Onboarding is live in 72 hours. Pricing starts from $349 per employee per month, depending on country and team size.
Employment contracts and worker types
Mexico's Federal Labor Law (FLL) presumes all employment is indefinite. If you don't specify a valid reason for a fixed-term arrangement, a court will treat the relationship as permanent. That presumption carries real cost implications, so getting the contract type right from day one matters.
Contract types at a glance
| Contract type | Typical use | Max duration | Probation allowed |
|---|---|---|---|
| Indefinite-term | Standard ongoing hire | No end date | 30 days (up to 180 days for managerial or executive roles) |
| Fixed-term | Temp replacement, seasonal spike, defined project | Until the stated end date or project completion | 30 days (up to 180 days for managerial or executive roles) |
| Seasonal | Recurring seasonal work (same worker, year to year) | No end date; work is cyclical | 30 days |
| Initial training | New hire whose competency needs to be verified | 3 months (6 months for managers, directors, specialists) | Not applicable; the training period itself serves this function |
A few things worth knowing before you choose:
- Indefinite contracts are the default and carry the full benefit stack: IMSS enrollment, INFONAVIT eligibility, paid vacation, vacation premium, aguinaldo, and profit sharing.
- Fixed-term contracts require a documented, legitimate reason. If the worker is still on the job after the contract expires, or if the justification was weak, the FLL converts the relationship to indefinite status automatically. That conversion brings full severance exposure.
- Initial training contracts expire on their own terms. After expiration the relationship becomes indefinite unless the employer documents a competency failure before the period ends.
- Probation periods only apply to contracts longer than 180 days. For standard roles the cap is 30 days; for managerial, administrative, or executive positions it extends to 180 days. Document the probation clause in the written contract or it has no legal standing.
Written contracts are not optional
Every employment relationship in Mexico must be documented in writing. Verbal agreements do not satisfy the FLL. The contract must cover job duties, work location, salary and payment frequency, working hours, benefits, and duration (if applicable). You need at least two signed copies, one for each party.
Employ Latam issues a locally compliant employment contract for every hire, drafted to match the correct contract type and role classification. Statutory contributions are handled, payroll runs in Mexican pesos, and onboarding goes live in 72 hours.
Payroll, taxes, and the 13th-month salary
Mexico runs payroll in Mexican pesos (MXN). Most employees are paid weekly or biweekly, though monthly payroll is permitted. Employers must withhold income tax (ISR) at progressive rates set by SAT, the Mexican tax authority, and remit contributions to IMSS (social security) and INFONAVIT (housing fund) on a monthly basis.
Employer and employee contributions
| Contribution | Employer rate | Employee rate |
|---|---|---|
| IMSS (social security, total) | ~28.0% | ~3.0% |
| INFONAVIT (housing fund) | 5.0% | 0% |
| SAR (retirement savings, via IMSS/Afore) | 2.0% | 1.125% |
| State payroll tax (nomina) | 1.0% to 3.0% (varies by state) | 0% |
| Income tax (ISR) withholding | 0% | Progressive, up to 35% |
Rates above are approximate. IMSS contributions are calculated on the integrated daily wage (salario diario integrado), which includes the base salary plus proportional values of bonuses, vacation premium, and other regular payments. This means the real employer cost is higher than base salary alone.
Total employer burden typically lands between 30% and 35% on top of gross base salary, depending on the state and the employee's integrated wage.
Aguinaldo (13th-month salary)
The aguinaldo is a statutory cash bonus required under the Federal Labor Law. Key rules:
- Amount: At minimum 15 days of salary.
- Payment deadline: Must be paid before December 20 each year.
- Proration: Employees who have not completed a full year receive a prorated amount based on days worked.
- Taxability: Aguinaldo up to 30 days of the minimum wage is exempt from ISR; the excess is taxable income.
Missing the December 20 deadline creates a labor liability. Employees can file a complaint with STPS (the labor ministry) and claim the unpaid amount plus interest.
Profit sharing (PTU)
Separate from aguinaldo, Mexican law requires employers to distribute 10% of taxable profits to employees annually. PTU payments are due by May 31 for most companies. Each employee's share is calculated based on days worked and salary earned during the year. New businesses are exempt in their first year.
What Employ Latam handles
When you hire through Employ Latam, we:
- Run payroll in MXN on your chosen cycle
- Calculate and remit IMSS, INFONAVIT, and SAR contributions each month
- Withhold and remit ISR on behalf of each employee
- Apply the correct state payroll tax for the employee's work location
- Pay aguinaldo before the statutory deadline
- Track PTU obligations and flag them ahead of the May deadline
You approve payroll. We handle the filings. Pricing starts from $349 per employee per month.
Mandatory benefits, vacation, and parental leave
Mexico's Federal Labor Law (FLL) sets a clear floor for employee entitlements. Every worker you hire must receive these benefits from day one. There is no opt-out, and collective agreements or company policy can only improve on the statutory minimums, never reduce them.
Leave entitlements
| Leave type | Entitlement | Paid by |
|---|---|---|
| Annual leave | 12 days in year 1, increasing by 2 days per year up to year 4, then 2 additional days every 5 years after that | Employer |
| Vacation premium | 25% premium on top of base salary during vacation | Employer |
| Sick leave | Covered after a waiting period; IMSS pays 60% of registered salary from day 4 onward | IMSS (social security) |
| Maternity leave | 12 weeks (6 pre-birth, 6 post-birth); extendable if complications arise | IMSS |
| Paternity leave | 5 working days | Employer |
| Public holidays | 8 mandatory days per year (plus one presidential election day every 6 years) | Employer |
Aguinaldo (annual bonus)
Every employee receives an aguinaldo by December 20 each year. The statutory minimum is 15 days of salary. Workers who have not completed a full year receive a proportional amount. This is not discretionary. It is a statutory obligation regardless of performance or company results.
Profit sharing (PTU)
Employers must distribute 10% of pre-tax profits to employees each year, paid by May 31. Each employee's share is calculated based on days worked and salary earned during the prior year. New companies are exempt for their first year of operation.
IMSS and INFONAVIT contributions
Every employee must be registered with IMSS (Mexican Social Security Institute) from their first day. IMSS covers medical care, disability, and maternity benefits. Employers also contribute to INFONAVIT, the national housing fund, which builds a credit balance workers can use toward home loans. Both contributions are calculated on the employee's integrated daily salary and run as a percentage split between employer and employee. Employ Latam handles registration, monthly filings, and payment for every worker on your team.
What employers commonly miss
- Vacation premium is owed on top of vacation pay, not instead of it.
- Paternity leave is only 5 days, which is low by regional standards. Some companies offer more as a retention tool.
- Sick leave from day 1 to day 3 is not covered by IMSS. Employers typically pay it voluntarily to avoid disputes, but it is not legally required.
- Aguinaldo accrues from the first day of employment. A worker who resigns in October is still owed a proportional payment.
Employ Latam runs payroll in Mexican pesos, calculates and remits all statutory contributions, and ensures aguinaldo and PTU are paid on time. From $349 per employee per month.
Severance, termination, and notice periods
Mexico has no at-will employment. Every termination without justified cause triggers mandatory severance payments under the Federal Labor Law (FLL). Getting this wrong is expensive, so understand the rules before you hire.
Justified vs. unjustified termination
The FLL lists specific grounds for termination with cause: serious misconduct, dishonesty, repeated insubordination, and similar defined offenses. If you cannot demonstrate one of those grounds, the dismissal is unjustified and full severance applies. "Poor performance" alone rarely qualifies unless it is documented as a material breach.
Employees can also resign for cause (constructive dismissal) if the employer changes working conditions without consent. That triggers the same severance as an unjustified termination.
Notice periods
Mexico does not mandate a statutory notice period for employers terminating without cause. Instead, the law requires immediate payment of severance on the date of separation. Employees resigning voluntarily are expected to give reasonable notice, but there is no fixed statutory minimum.
Severance owed without cause
Three components stack together for an unjustified termination:
- 1.Constitutional indemnity: 90 days of integrated daily salary.
- 2.Seniority premium: 12 days of integrated daily salary per year of service (capped at twice the minimum wage for the premium calculation).
- 3.Proportional accrued benefits: prorated Aguinaldo, vacation days, and vacation premium earned up to the termination date.
"Integrated daily salary" includes base pay plus the proportional value of bonuses, commissions, and other regular payments, not just base wage. This matters because it lifts the actual payout above what a base-salary calculation would show.
| Tenure | Notice period (employer) | Severance owed (without cause) |
|---|---|---|
| Under 1 year | None statutory | 90 days salary + seniority premium pro-rated + accrued benefits |
| 1 to 3 years | None statutory | 90 days salary + 12 days per year (seniority premium) + accrued benefits |
| 3 to 5 years | None statutory | 90 days salary + 12 days per year (seniority premium) + accrued benefits |
| 5 or more years | None statutory | 90 days salary + 12 days per year (seniority premium) + accrued benefits |
The 90-day constitutional indemnity is flat regardless of tenure. Seniority premium scales linearly with years worked, so longer-tenured employees cost more to separate.
Termination during trial or training periods
If a trial period (up to 30 days, or up to 180 days for executive roles) or initial training contract is properly documented, the employer can end the relationship at expiration without severance liability. Documentation is the key word: verbal agreements do not hold up.
What Employ Latam handles
We issue a locally compliant employment contract that reflects Mexico's FLL requirements from day one. When a separation occurs, we calculate the full integrated daily salary, apply the correct seniority premium, and process final payment including prorated Aguinaldo and vacation premium. Plans start from $349 per employee per month.
Recent regulatory changes
Mexico's labor framework has shifted meaningfully over the past two years. If you're hiring in Mexico now, these changes affect payroll costs, union obligations, and how disputes get resolved.
Key changes: May 2023 to May 2025
| Date | Change | Impact on employers |
|---|---|---|
| Jan 2024 | Minimum wage increased to MXN 248.93/day (general zones); MXN 374.89/day in the Northern Border Zone | Raises the floor for all fixed and variable compensation calculations, including overtime and proportional benefits |
| Jan 2025 | Minimum wage increased to MXN 278.80/day (general zones); MXN 419.88/day in the Northern Border Zone | Further compresses salary bands at the lower end; statutory benefits tied to the minimum wage rise proportionally |
| Aug 2024 | Reform to the Federal Labor Law extending paid maternity leave protections and clarifying employer obligations during pregnancy-related absences | Employers must ensure fixed-term and indefinite contracts both reflect updated leave entitlements; replacing a worker on leave requires a properly documented fixed-term contract |
| Feb 2024 | IMSS contribution base updated; integrated daily salary (salario diario integrado) calculations subject to renewed IMSS audit focus | Errors in SDI calculation are a top compliance trigger; EOR providers handle this calculation as part of standard payroll runs |
| Oct 2023 | Judiciary reform passed, restructuring federal labor courts and the JFCA (Conciliation and Arbitration Board) transition to TEFCA (Federal Labor Tribunal) | Dispute resolution timelines and venue procedures changed; employers need current contracts that reference the correct tribunal |
| Jun 2023 | Mandatory pre-conciliation center (CFCRL) process fully enforced nationwide | Individual labor claims must pass through conciliation before reaching tribunal; adds a procedural step but can reduce litigation costs if resolved early |
What this means for new hires
Minimum wage increases in Mexico are not just a floor adjustment. Aguinaldo, vacation premium, and profit sharing (PTU) all use salary as their base. A January wage increase flows through to every statutory benefit calculation for that year.
The IMSS audit focus on integrated daily salary is worth flagging. The SDI must include not just base pay but also proportional values of Aguinaldo, vacation premium, and any other regular benefits. Getting this wrong creates back-contribution liability.
The court transition from JFCA to TEFCA is still settling. Employment contracts written before 2023 may reference outdated tribunal names. Locally compliant contracts issued today reflect the current structure.
Frequently asked questions
- Do I need a local entity to hire in Mexico?
- No. Through an employer of record, you can hire in Mexico without incorporating a local company. Employ Latam acts as the legal employer on record, handling the contract, payroll, IMSS contributions, and statutory benefits. You direct the work and manage the employee day to day.
- What happens if I use a fixed-term contract but the work continues past the end date?
- The FLL treats the continued relationship as indefinite from the original start date, not the date the contract expired. That means the worker gains full permanent employee rights retroactively, including severance protection calculated from day one. To avoid this, either renew with a documented justification before expiry or convert the contract to indefinite-term intentionally.
- What is the total employer cost on top of gross salary in Mexico?
- Expect to add roughly 30% to 35% on top of gross base salary when you account for IMSS contributions, INFONAVIT, SAR, and state payroll tax. The exact figure depends on the employee's integrated daily wage and the state where they work. States like Nuevo León and Mexico City sit at different ends of the payroll tax range, so location matters when budgeting headcount.
- How many vacation days are employees in Mexico entitled to in their first year?
- Employees in Mexico are entitled to 12 paid vacation days after completing their first year of service. Before the 2023 reform, the minimum was 6 days. The entitlement increases by 2 days for each subsequent year up to year 4, and then by 2 days for every 5 additional years worked. Employees also receive a vacation premium of at least 25% of their base salary on top of the vacation pay itself.
- How much severance is owed for terminating an employee without cause in Mexico?
- At minimum, you owe 90 days of integrated daily salary (the constitutional indemnity), plus 12 days of integrated daily salary per year of service as a seniority premium, plus any prorated Aguinaldo, unused vacation, and vacation premium accrued to the separation date. Integrated daily salary includes base pay and the proportional value of regular bonuses and commissions, so the real payout is typically higher than a base-wage estimate. There is no statutory cap on the 90-day indemnity, only on the daily wage used for the seniority premium calculation.
- What are the most recent labor law changes in Mexico that affect payroll costs?
- The two most direct cost drivers are the January 2024 and January 2025 minimum wage increases, which raised the general daily minimum to MXN 278.80 and the Northern Border Zone rate to MXN 419.88. Because statutory benefits like Aguinaldo and vacation premium are calculated as a proportion of salary, these increases raise the total cost of any role paid at or near the minimum. The renewed IMSS audit focus on integrated daily salary calculations also creates exposure if proportional benefits are not correctly factored into the contribution base.
We handle the contract, payroll, taxes, and benefits in Mexico so you can hire that person this month.
Found someone in Mexico? Let's employ them.
We'll send a fully-loaded cost breakdown for the role within a few hours, then draft a locally compliant employment contract. Most Mexico hires can start within 1 to 3 business days once docs are in.
Other countries we cover
Compare Employ Latam with other providers
Deciding how to hire in Mexico? See how our employer of record service stacks up against the global platforms, then pick the fit for where your hiring actually happens.
The talent is in Latin America. The hiring is on us.
Set up an account in three minutes. No credit card. No sales call. Hire one person, hire fifty. Pay only when they're on payroll.