Mexico

Currency CurrencyMexican Peso (MXN) Working Time Work Weekup to 48 hours Employer Taxes Employer Taxes 15% - 25%

Hire in Mexico

Get the best talent in Mexico. Let Lano do the heavy lifting. We’ll help you hire the best full-time employees or contractors, saving you from the pain of establishing a legal entity. No need to worry about complex local laws or tax requirements. From compliant contracts to global payroll, we’ve got you covered.

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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.

Basic Facts about Mexico

  1. official state name United Mexican States (Estados Unidos Mexicanos)
  2. capital Mexico City
  3. population 128.93 billion
  4. languages Spanish
  5. currency Mexican Peso (MXN)
  6. time zone UTC -8 to UTC -5
  1. Show public holidays
    01 Jan New Year
    01 Feb Constitution Day
    15 Mar Benito Juarez Day
    01 May Labour Day
    16 Sep Independence Day
    15 Nov Revolution Day
    25 Dec Christmas Day
    Election Day*

    *First Sunday in July every six years.

Employment Contract

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 three months – six months for executive positions. 

Working time

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. For any work performed beyond usual working hours, employees must be paid at a double rate.

Payroll

While workers performing manual labour have to get paid at least once a week, most employees are paid every two weeks.

Minimum Wage

As of March 2021, the national minimum wage in Mexico is MXN 141.7 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.

Taxes and Social Security Contribution

Employees and employers in Mexico are subject to the following tax and social security contribution rates (as of 2021):

taxes
employers

30% corporate tax rate

16% VAT (standard rate)

0.5% – 3% payroll tax (rates vary between states)

employees

individual income tax rate:

up to 35% *

social security
employers

15% to 25% of employee’s salary including contributions to pension and unemployment funds, maternity and health insurance fund, occupational insurancehousing fund and disability and survivor benefit fund

employees

around 5% of employee’s salary including contributions to various social security funds such as pension, unemployment, maternity, health insurance, disability and survivor benefit fund

Read more

Individual income is taxed progressively based on the following tax brackets (percentage rates given only apply to income exceeding the respective tax bracket threshold):

– up to MXN 7,735.00: 1.92%

– MXN 7,735.00 to MXN 65,651.07: MXN 148.51 + 6.4% on excesses

– MXN 65,651.07 to MXN 115,375.90: MXN 3,855.14 + 10.88% on excesses

– MXN 115,375.90 to MXN 134,119.41: MXN 9,265.20 + 16% on excesses

– MXN 134,119.41 to MXN 160,577.65: MXN 12,264.16 + 17.92% on excesses

– MXN 160,577.65 to MXN 323,862.00: MXN 17,005.47 + 21.36% on excesses

– MXN 323,862.00 to MXN 510,451.00: MXN 51,883.01 + 23.52% on excesses

– MXN 510,451.00 to MXN 974,535.03: MXN 95,768.74 + 30% on excesses

– MXN 974,535.03 to MXN 1,299,380.04: MXN 234,993.95 + 32% on excesses

– MXN 1,299,380.04 to MXN 3,898,140.12: MXN 338,944.34 + 34% on excesses

– above MXN 3,898,140.12: MXN 1,222,522.76 + 35% on excesses

Employee Benefits

Annual Leave

Employees who have completed one year of service start off with six days of annual leave. With every additional year or service, annual leave increases by another two days until they reach an annual leave entitlement of 14 days after four years of service. 

From there on, 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. 

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Employment termination

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 seniority 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 

Hiring in Mexico?

Not sure if you should start with a contractor or go ahead and hire a full-time teammate in Mexico? The Lano platform makes it easy to go from freelance to full-time employee. Get expert guidance from the Lano team to compare your options and keep growing.