Official Name:
Estados Unidos Mexicanos
Short from: México
Imports – Partners:
- USA 45.28%
- China 18.2%
- Japan 3.94%
Time:
Time Zone: Central Daylight Time (CDT) Daylight saving time (DST): beginning April end of October (UTC -6)
VAT – Standard Rate:
- 16%
- The 0% VAT rate, which generally means no VAT is payable, is applicable to a substantial number of transactions.
Country Calling Code: +52
Capital City: México CDMX Pop. 22,1 Million
Population size: 131,825,491
Subcontracting:
VAT paid for subcontracted labor will be creditable to the extent the service is considered a specialized service for purposes of the outsourcing reform
Payroll Frequency:
Semi-monthly and monthly
Currency:
Mexican peso ($, MXN)
VAT Digital Services
Based on the 2020 Tax Reforms, es of June 2020, foreign residents, regardless of whether they have a PE, that are providers of digital services to recipients located in Mexico must register with the Mexican tax authorities to calculate and collect the VAT associated with those digital services from the Mexican users and remit it on monthly basis to the Mexican tax authorities.
Facts & Stats
Mexico is one of the most competitive countries for productive investments worldwide due to many factors, such as:
- A strategic geographical position.
- Competitive costs, with a young and talented population.
- Size and strength of its internal market.
- Macroeconomic and political stability.
- Economic growth.
- Ability to manufacture high technology products.
- Open economy that ensures access to the most important markets worldwide through a network of free trade agreements.
According to the World Investment Report 2022 published by the United Nations Conference on Trade and Development (UNCTAD), in 2021, Mexico ranked 10th place as foreign direct investment recipient, and 5th among developing economies.
Grow your team with us
Embracing change and transforming ourselves, People Co. continues to pursue timely Talent Management strategies by being part of our clients Stakeholders;
We believe that HR requires being in sync with the marketing vision, strategies, and agenda through: Innovation Partnerships, Technology Partnerships, Local Community Partnerships.
The complexity and intricacies of employment regulations in Mexico makes full compliance with employment laws a burdensome process. Through People Co. solution, your team is employed by our local legal entities, and we take care of payroll, tax, benefits, working environment and compliance so you can focus on what matters most
What you should know about employing in Mexico
When hiring in Mexico you can employ the workers yourself or through an outsourcing firm.
- In the first scenario, you will spend a significant amount of time searching for the right talent. This process requires the employers to own a legal entity in the country and manage payroll, tax, benefits, and compliance through their in-country resources.
- For the second scenario, you can also work with a Mexican hiring outsourcing company such as a recruiting expert or a PEO. As an International PEO, People Co. can help you find the talent you need to grow your business. We hire employees on your behalf, so you don’t need to spend months setting up a subsidiary before officially hiring.
Employment rights in Mexico are inalienable, meaning that they apply to everyone deemed to carry out subordinated work, regardless of the jurisdiction chosen in employment agreements.
Federal Labor Law and Mexican Labor courts are very employee-protective and favors the employee. As such, Mexican employment law provides strong labor conditions and protections for employees, so employing people will generally be an important investment and commitment.
Differentiation Employees from Independent Contractors RISK of misclassification
The main characteristic of any employment relationship is subordination, which the Fourth (currently Second) Chamber of Mexico’s Supreme Court of Justice has defined as the employer’s legal right to control and direct the employee and the employee’s corresponding duty to obey the employer. Once an employment relationship exists, all the rights and obligations under the Labor Law automatically apply, regardless of how the agreement is characterized by the parties
The differences between a labor relationship and an agreement with an independent contractor are:
- An independent contractor could be an individual or a legal person (such as company), whereas an employee can only be an individual, who receives wages;
- When an independent contractor renders his or its services, this will not be subject to the authority of the beneficiary of said services (i.e. does not have a work schedule) and, in some cases, an independent contractor may own a company or establishment; and
- Labor relationships are regulated by the FLL, while independent services are regulated under the civil or commercial codes, in which consideration is not construed as salary.
- An employee’s salary is subject to income tax (“ISR”, is the acronym in Spanish), and an employer is obligated to withhold and pay this tax on the employee’s behalf. Social security dues are considered taxes for legal purposes. As in the case of ISR, an employer is responsible for withholding and paying the employee’s dues, as well as for the payment of its own ; An independent contractor is responsible for paying ISR, however the beneficiary of the services may have to make provisional withholdings from the independent contractor’s revenue. Furthermore, independent services are subject to Value Added Tax (VAT) payment.
Other Ramifications of Classification
The FLL provides that an intermediary is an independent contractor (an individual or a legal person) that hires or intervenes in the hiring of other individual or individuals to render their services to an employer. In this case, the intermediary would not be considered an employer.
Subcontracting or seconded employees have an entitlement to legal treatment.
Onboarding time
The minimum onboarding time we need is only 2 working days.
Our team ensures your employees are onboarded and paid as quickly as possible while keeping your business compliant with all local employment legislation. The minimum onboarding time begins after the employee submits all required information. The onboarding timeline is also dependent upon registration with local authorities.
For all non-nationals of the country of employment, the Right to Work assessment (if applicable) will add three extra days to the total time to onboard.
People Co. also offers you financial solutions to any complication that may occur in the process so your team always has the certainty that their payroll will be paid in time and form.
Unique benefits
for unique people
We’re obsessed with making every member of your team feel unique, special, and happy working on your project, offering customized benefits to choose from every lifestyle, giving as a result the attraction of the best local talent for your company.
These benefits are included in the service as a thank-you gift for believing in us.
Working with us is an easy way to stay compliant, hire your team quickly, and efficiently use your company’s time and money. You will not need to travel to Mexico as often, also as a Benefit, we can help you to establish a subsidiary and avoid costly fines.
Life Insurance
Health Insurance
Meditation App Subscription
Excercise App Subscription
Nutrition Project
Spotify Subscription
Netflix Subscription
Amazon Subscription
Taxes in Mexico
We know payroll taxes in Mexico is one of the hardest things to understand when establishing your nearshore operation, good news ¡We’re here to help you!
We can divide it into two parts; the taxes that the employee has to pay and the taxes that the company has to pay.
Social Security: A Part Of Payroll Taxes In Mexico
The institution in charge of Social Security in Mexico is the Mexican Social Security Institute or IMSS (Instituto Mexicano del Seguro Social in Spanish). Its mission is to provide medical attention as social security to all workers or employees in Mexico.
Therefore, every employee in the private sector is entitled to these benefits.
Both workers and companies need to make contributions to social security. However, it is the company’s responsibility to withhold this contribution and pay them to the IMSS.
Minimum Wage 2022
There are two types of minimum wage: a general minimum wage that applies to everyone regardless of age, industry, and experience, and a “professional” minimum wage that applies to certain employees depending on their profession, craft, or activity. For the general minimum wage, there are two categories:
- MXN 260.34 for the 432 municipalities that integrate the “Free zone of the Northern Frontier”; and
- MXN 172.87for the rest of the country.
Employer-Employee Fees Table
Mexican Withholding Tax
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Employer-Employee Fees Table
Mexican Withholding Tax
Mandatory holidays in Mexico
- New Year’s Day (Jan 1)
- Constitution Day (Feb 1)
- Benito Juarez Day (Mar 15)
- International Labor Day (May 1)
- Independence Day (Sep 16)
- The day of the Dead (Nov 1 and 2)
- Revolution Day (Third Monday in November)
- Presidential Inauguration Day (every six years)
- Christmas Day (Dec 25)
Mandatory holidays in Mexico
- New Year’s Day (Jan 1)
- Constitution Day (Feb 1)
- Benito Juarez Day (Mar 15)
- International Labor Day (May 1)
- Independence Day (Sep 16)
- The day of the Dead (Nov 1 and 2)
- Revolution Day (Third Monday in November)
- Presidential Inauguration Day (every six years)
- Christmas Day (Dec 25)
Employment Termination
In Mexico the Labor termination payment is calculated depending upon the cause of termination:
Voluntary Resignation
The employer must pay all benefits due, including sales incentives, on a prorated basis up to the termination date. If the employee has at least 15 years of seniority, he is also entitled to a seniority premium of twelve days’ salary for each year of service, capped at twice the minimum daily salary in force.
Termination with a cause
The employer must pay all benefits due, including commissions, on a prorated basis until the date of termination, and the seniority premium of twelve days of salary for each year of service (but with a cap of twice the minimum daily salary).
Separation Agreements
Employees are entitled to the following lump sum severance:
(1) three months of the employee’s daily aggregate salary, plus:
(2) twenty days of the employee’s daily aggregate salary for each year of service;
(3) a seniority premium of twelve days’ salary for each year of service (but with a cap of twice the minimum daily salary);
(4) benefits due.
Notice Period
Employers and employees have no obligation to notify the other party in advance of a dismissal or resignation and notice obligations for employees are not recognized or enforceable under Mexican law. Notice obligations for employers can be enforced if they have been agreed to, but it is uncommon for Mexican employers to do so.
Probation Period
If the employment contract is for more than 180 days or for an indefinite period, the employer may put in place a probationary period of up to 30 days. It is possible to extend the probationary period by up to 180 days for managerial, technical or professional positions.
Separation Agreements
For any agreement or settlement to be valid, it must be entered into in writing and contain a detailed description of the facts that motivated it and the rights therein contained. It must be ratified before the competent Conciliation and Arbitration Labour Board, which will approve it as far as it does not contain a waiver of the employee’s rights. By the above mentioned, a separation agreement may be considered best practice.
Types of leave
Sick Leave
During their leave, employees may receive up to 60% of their regular salary from the fourth day of their illness and up to one year. If their illness or injury happened at work, then federal labor law requires that employers pay 100% of the employee’s regular wage.
Paternity Leave
A new father is entitled to five days of paid paternity leave after the birth of their child. If there are complications with the birth, or if the mother of the child dies during labor, the father is entitled to more leave. In the case of adoption, he is also allowed five days’ paid leave after the child is adopted.
Maternity Leave
Pregnant employees are entitled to six weeks of paid leave before the birth of a child and six weeks of paid leave after the birth of a child, during which the new mother receives her regular salary. Statutory maternity leave can be extended if there are complications in the birth or pregnancy, provided that the mother provides a corresponding medical certificate. In the case of adoption, a new mother can take six weeks’ paid leave after a child is adopted.
Vacation Days
- After one year of employment: 6 paid vacation days
- After two years of employment: 8 paid vacation days
- After three years of employment: 10 paid vacation days
- After four years of employment: 12 paid vacation days
We are particularly
valuable to companies that...
- Are unsure if they will be in the market for five or more years;
- Have international headcounts between 1 and 20 supported employees;
- Cannot delay their hiring timelines and need to be operational in new markets quickly;
- Do not have the extensive financial and internal resources required for global expansion;
- Require a bridged solution between an acquisition close date and entity readiness.
WE'RE DIFFERENT, WE CARE
Business proposal in 24 hrs
Compliant global worforce
Onboard supported employees in less than 48 hrs
One monthly invoice, for better control
We're here for you! Our team offers you support 24/7
Defense and legal assistance at your service
Unique and Personalized Benefits
Be flexible with no long term commitments
Contact us, we want to hear from you
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