Hire employees in Mexico

Although not always completely transparent, Mexico’s regulations on employee benefits generally play in the employer’s favour: Statutory leave entitlements are quite minimal – especially for newly hired employees – and the local workforce is available at very cheap rates in terms of salary and bonuses.

Also, Mexico’s workforce is constantly gaining in qualifications and skills: As a recent OECD report shows, graduate rates in the country have been constantly increasing over the last ten years.

Mexican labour law mandates employment contracts to be in writing. Every employment agreement should contain at least the following basic information:

• Identification of both parties

• Type of employment, i.e. permanent, fixed-term etc.

• Probation period

• Workplace

• Job description, duties and responsibilities

• Basic salary as well as other compensation or benefits and payment details

• Working hours

• Total number of holidays

• Information on provided training

Unless specified otherwise, employment contracts in Mexico are considered to be permanent. It is mandatory to compose the contract in the local language.

Probation Period

In Mexico, probation periods are generally interpreted as training periods during which the employee is prepared for the role he or she is supposed to fulfill in the future. Usually these periods should not be longer than 30 days – extendable to 180 days for executive positions.

Working Hours and Breaks

An employee’s workweek should not exceed 48 hours – in some sectors such as banking, weekly working time is generally limited to 40 hours. Regardless of his or her weekly working time, an employee must be given a rest break of at least 30 minutes per day as well as one day of rest per week which should ideally be Sunday.

Overtime

Overtime work in Mexico is limited to three hours per day over three consecutive days – or nine hours per week. It must be paid at double rates for the first nine hours per week. Any additional hours must be compensated at triple rates.

While workers performing manual labor have to get paid at least once a week, most employees are paid every two weeks. It is also possible to pay employees on a monthly basis, as long as the pay period is stipulated in the individual employment agreement.

Minimum Wage

In early 2023, the minimum wage rose to MXN 207.44 per day - up by 20% compared to 2022. The current minimum wage rate along the Northern Border Zone (i.e. along the border with the US) is MXN 312.41 per day. 

Sick Pay

During sick leave, employees in Mexico do not receive payment from their employer but are compensated by Social Security at a rate of 60% of their normal salary, starting with the fourth day of sickness-related absence from work – 100% if the employee suffers from work-related sickness or injury. However, employees must provide their employer with a medical certificate justifying their absence from work. Sick leave is usually limited to 52 weeks.

Bonuses

It is mandatory to pay a Christmas bonus equal to at least 15 days’ wages. In practice employers usually pay up to four or six weeks of salary as a bonus. The payment must be issued before 20 December. Furthermore, it is common practice in some industry sectors to offer performance-based bonuses.

Employees and employers in Mexico are subject to the following tax and social security contribution rates (last review February 2023):

Taxes

Employers

30%

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• 30% corporate tax rate

• 16% VAT (standard rate)

• 1% – 3% payroll tax (rates vary between states)

Employees

up to 35%

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Individual income tax rates:

up to 35% *

Social security

Employers

up to 25%

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15% to 25% of employee’s salary including contributions to:

• pension and unemployment funds

• maternity and health insurance fund

• occupational insurance

• housing fund

• disability and survivor benefit fund

Employees

around 5%

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around 5% of employee’s salary including contributions to various social security funds such as:

• pension fund 

• unemployment fund

• maternity fund

• health insurance

• disability and survivor benefit fund

Please note that the social security contributions indicated above do not necessarily reflect the actual employment costs. These may differ depending on the employment contract and due to other factors (e.g. 13th and 14th salary, health insurance allowances, accrual for severance pay, etc.).

Annual Leave

Employees who have completed one year of service start off with 12 days of annual leave. With every additional year or service, the annual leave entitlement increases by another two days until it reaches 20 days.

From the sixth year of service onwards, annual leave increases by two days every five years. Employers must pay their employees an annual holiday bonus equal to 25% of what the employee earns during his or her vacation days.

In addition, the country observes at least seven national holidays each year – eight in years where the presidential election takes place plus several religious celebrations where most businesses are closed. Employees who are required to work on these days must be remunerated at a rate of 200% of their usual wages.

Maternity Leave and Paternity Leave

Female employees are entitled to 42 days of maternity leave before and 42 days of maternity leave after giving birth. During this time, they receive maternity benefits from the IMSS (Mexican Social Security Institute) corresponding to 100% of their normal salary.

After the end of maternity leave, employers must allow their employees to reduce daily working time by one hour, split into two intervals of 30 minutes. Fathers can take five days of paid paternity leave.

Parental Leave

Apart from breastfeeding leave, Mexican labour law does not provide for any further parental leave.

Additional Leave and Benefits

Additional contributions to pension funds or life insurance are subject to negotiation.

In addition to employment termination by default – i.e. in case of a fixed-term contract – resignation and mutual agreement, employees in Mexico may be dismissed due to the following reasons (non-exhaustive list):

• staff reduction or other economic reasons resulting in the employee’s redundancy

• summary dismissal due to gross misconduct including dishonesty, negligence, unexcused absence from work etc.

Mexican labour law does not define any notice periods employers or employees have to respect when terminating the employment. However, employers must justify the dismissal by indicating a just cause.

In most cases, employees are entitled to severance payment. However, the exact amount depends on the reason for dismissal.

• employee resignation and dismissal due to employee’s own fault: all outstanding payments – wages, unused vacation, prorated bonuses etc. – as well as a s****eniority premium equal to twelve days’ wages for each completed year of service for employees whose length of service exceeds fifteen years

• dismissal due to objective reasons: all outstanding payments as well as a seniority premium plus three months’ salary plus twenty days’ salary for each year of service