Employment contracts in Mexico may be fixed term, seasonal or for an indefinite period.

The national minimum wage in Mexico is 248.93 MXN per day; however, this can differ by job role and category.

The Northern Border Zone has a different minimum wage of 374.89 MXN per day; the Border Zone is a defined set of municipalities in Mexican states bordering the United States.

Common Benefits

Private Health Insurance up to 7,100 MXN per month depending on age, gender, scope of cover

Internet Allowance, approx. 1500 MXN per month

Cell phone allowance, approx. 1500 MXN per month

Meals voucher/card, approx. 2600 MXN per month, Wellness/Fitness Allowance, approx. 2,000 MXN per month

Computer allowance, approx. 4,000 MXN per month

The standard working hours in Mexico are 48 hours per week, 8 hours per day. However, there are three work shifts stated in Mexico federal labor law:

• Day shifts comprise 48 hours per week (between 6 am to 8 pm)

• Night shifts comprise 42 hours per week (between 8 pm to 6 am)

• Mixed shifts comprise 45 hours per week

• The maximum weekly and daily working hours can differ as stipulated in employment contract/collective bargaining agreements

Overtime

All work above the standard mandated shift is paid as overtime and regulated by the employment contract/collective agreements. 3 overtime hours a day can be worked providing it is not done for more than 3 consecutive days. Managers might be exempt from overtime pay and limitations.

The payment of overtime is based on two considerations which determine whether overtime hours need to be paid at double or triple paid hours. These considerations are the total number of overtime hours worked during the working week and the number of hours worked during a single day after a regular shift.

The first nine overtime hours during the week are to be paid at 200% of the regular salary rate; every hour after that is to be paid at 300% of the regular salary rate. The first three hours after a normal shift are considered double hours; every hour after that is deemed to be triple regardless of the number of overtime hours worked during the week.

Remote Work

The Mexican Government passed federal labor laws on teleworking, which applies to any worker who performs paid work activities at least 40% of the time outside the employer’s workplace, either at home or another location chosen by the employee.

The contract should state if the employee is performing work outside the employer’s workplace in order to be eligible for teleworking benefit.

Employers must provide, install, and maintain the necessary working equipment and training needed by the employee to perform the work and, Pay for any appropriate telework-related cost, and record teleworking arrangements in a written agreement.

Paid by Social Security (IMSS). Eligible employees are entitled to up to 52 weeks of paid sick leave at 60% of the regular salary when verified by IMSS affiliated medical authorities. If it is a work-related injury, the employee is entitled to 100% of the regular salary.

Maternity Leave

All female employees are entitled to 12 weeks of paid maternity leave, which the employee must take six weeks before the birth and six weeks after that. The maternity pay is calculated at full pay, capped at 25 times daily UMA, and covered by the IMSS. The application for maternity leave must be supported by a medical certification issued by an IMSS approved clinic or a private medical institution.

Female employees are also entitled to six weeks of paid adoption leave after the child (a minor) is handed to them.

Paternity Leave

The father is entitled to mandatory paid paternity leave of 5 days.

Parental Leave

There is no additional parental leave in Mexico.

Paid leave in Mexico is outlined in the employment contract as a minimum of 12 days paid holiday per year, plus an additional two days per year of service, following completion of 1-year service. Following the completion of 5 years of service, two additional days are added every five years as detailed in the table below. Unused leave can carry over for 6 months.

A vacation premium must be given at an extra 25% pay for each day of leave.

Service Length, Annual Leave Entitlement (working days)

1 year, 12 days
2 years, 14 days
3 years, 16 days
4 years, 18 days
5 years, 20 days

6+ years, 22 days, increasing by 2 days for every 5 years of service, capped at 32 days.

There is no statutory additional leave in Mexico.

Date Day Holiday

01 Jan 24 - Monday - New Year’s Day

05 Feb 24 - Monday - Constitution Day

21 Mar 24 - Monday - Birth of Benito Juarez

01 May 24 - Wednesday - Labor Day

16 Sep 24 - Monday - Independence Day

20 Nov 24 - Monday - Revolution Day

1 Dec 24 - Sunday - Inauguration of the New President

25 Dec 24 - Wednesday - Christmas Day

Basic healthcare coverage is provided through Mexico’s social security system.

At-will employment does not exist in Mexico, and termination at-will clauses are only applicable to the employee. Therefore, employers may not terminate employment relationships without just cause. The Mexican Federal Labor Law stipulates a closed list of reasons and sets the procedure to terminate an employee at any time without incurring liability. The list of reasons can be found below:

• False statements about work qualifications

• Breach to the disobedience or honesty principles

• Vandalism

• Sexual harassment

• Alcoholism in the workplace

• Revealing company secrets

• Refusing to comply with safety procedures

• Four unexcused absences in 30 days

Notice Period

There are no statutory minimum notice periods in Mexico; however, federal labor law states that should the circumstance dictate, the company must provide the employee with notice in writing within 30 days of knowing about the misconduct. The written notice must explain the grounds for dismissal, or the labor board must issue a termination notice. Two weeks notice is commonly be given as courtesy where there is ‘termination without cause’ or resignation.

Severance Pay

In Mexico, any contract that last more than 3 months becomes an indefinite contract per law.  To compliantly terminate an indefinite contract without cause, workers must be paid full severance. Full severance consists of the following:

• 3 months’ salary.

• 20 days for each year worked,

• Seniority premium equal to 12-days of wages for each year of service rendered.

Workers who voluntarily  resign with 15 plus years of service and workers who are terminated for cause receive a seniority premium of 12 days of pay for each year of service. Please note termination for cause is an extremely high threshold and most terminations are without cause.

Probation Period

The probation period in Mexico is optional but it is common to include a trial period between 30 to 90 days.

Employer Payroll Contributions
24.00%-38.00% - Social Security contributions (IMSS), this includes Retirement and National Housing Fund(maximum annual contribution 188,657 MXN)

up to 3.00% - State Payroll Tax

27.00%-41.00% Total Employment Cost

Employee Payroll Contributions
10.00-30.00% - IMSS (Social Security) are influenced by various factors, such as minimum wage, UMA,  the worker’s age, industry, number of working days per month, fringe benefits, and the location of the employer or the worker’s residence. Typically, the deduction range varies between 10% to 30%.

1.125% - Retirement/Old age insurance

10.00%-31.125% Total Employee Cost

Employee Income Tax
1.92% - Up to 8,952.49

6.40% - 8,592.50 – 75,984.55

10.88% - 75,984.56 – 133,536.07

16.00% - 133,536.08 – 155,229.81

17.92% - 155,229.81 – 185,852.57

21.36% - 185,852.58 – 374,837.88

23.52% - 374,837.89 – 590,795.99

30.00% - 590,796.00 – 1,127,926.84

32.00% - 1,127,926.85 – 1,503,902.46

34.00% - 1,503,902.47 – 4,511,707.37

35.00% - Over 4,511,707.38

* Most Mexican states levy a relatively low tax on salaries and other income earned by employees, which is payable by the employer. For example, Mexico City imposes a 3% payroll tax.

Profit Sharing

Companies must divide 10% of profits equally amongst all employees as profit sharing.

However, in order to be eligible, an employee must have worked for the business for at least 60 days during the preceding fiscal year.

For active employees, the profit sharing is paid every year in May.

Payroll Cycle

The payroll cycle is semi-monthly, and employees are generally paid on the 15th and the last day of each month.

13th Salary

A 13th-month salary payment is mandatory in Mexico; this is a bonus payment paid by December 20th (Aguinaldo). The Aguinaldo is calculated as 15 working days of salary, plus an allowance, based on a 365-day year. The 13th salary is accrued as of the first day of employment.

Authority Payments

Authority Payment Paid To Due Date Method

Social Security - Instituto Mexicano del Seguro Social (IMSS) - 17th of the following month - Local account owned by client & overseas account under the Mexican entity name

Housing - Instituto del Fondo Nacional de la Vivienda para los Trabajadores (INFONAVIT) - 17th of the following each two months - Local account owned by client & overseas account under the Mexican entity name

State tax - Gobierno del estado - 17th of the following month - Local account owned by client & overseas account under the Mexican entity name

Any foreigners coming to work in Mexico will need to apply for a work permit and resident visa. The National Institute of Immigration oversees all immigration in Mexico and issues work visas.

Mexico has a temporary and permanent visa; the employee should apply for both jointly with the prospective employer. A temporary resident visa is for foreign nationals who want to live in Mexico for more than 180 days. In addition to the Mexico work permit, people with a temporary resident visa can live and work in the country for up to four years with a Mexico work visa.

After completing four years of service (with the same company), a foreigner may apply for a permanent resident visa.

The standard rate of VAT in Mexico is 16%.

Setting up a legal entity

1. Choose the location of the companyIdentify the aspects that make a location the ideal place for the operation to run smoothly and the flow of customers, suppliers and employees to be optimal.

2. Open company bank accountRecognize the types of bank accounts and follow the step by step to sign, according to the needs and goals of your business, a contract with the bank of your choice.

3. Obtain operating permitsDetermine, according to the line of business, the environmental impact of your business and other factors- what are the permits that you must manage with the municipal, state and federal authorities before operating.

4. Register the company in the IMSSKnow in a few steps the complete process and the cost to grant social security to your employees.

5. Register trademarks and patents at the IMPIRegister the commercial name of the company, trademarks and inventions before the IMPI and protect the intellectual property of your company with the legal support of the authorities.

Registration as an Employer

Registration with the following authorities is essential to commence business activities:

• Tax Registry Number (Registro Federal de Contribuyentes – RFC)

• Tax Authorities (Sistema de Administración Tributaria – SAT)

• Mexican Social Security Institute (IMSS)

• National Worker’s Housing Fund Institute (INFONAVIT)

• Individual retirement savings accounts for the employees (Afore)

• National Business Information Registry (Sistema de Información Empresarial – SIEM)

New Employee Registration

New resident employees must apply to the Mexican Tax Administration Service for a tax identification number (RFC). New employees must also lodge their details with the Unique Population Registry

Code (CURP) to obtain an associated unique ID.

The employer must register new employees with the IMSS within 5 days of the employment start date, and once the employer has registered the employee with the IMSS, the employee must submit this confirmation to a corresponding health clinic (for medical care purposes).