MEXICO PEO &
EMPLOYER OF RECORD
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Create labor contract online in 10 minutes
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Hire & onboard employees in 12 hours without an entity
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Pay your team in Mexico compliantly
Nearshore
Nearshore is a term that refers to the business practice of outsourcing services or projects to countries that are geographically close, usually in the same region or time zone. Unlike offshoring, which involves outsourcing to distant countries, nearshore seeks to take advantage of geographic proximity to facilitate communication, reduce the language barrier, and maintain a certain cultural similarity, which can be beneficial for collaboration and coordination between contracting companies and external service providers.
Going nearshore in Mexico can be convenient for various reasons:
1. Geographical and cultural proximity: Mexico is close to the United States and Canada, which facilitates communication, on-site visits, and project coordination. Additionally, it shares many cultural similarities with these countries, which can lower barriers to collaboration.
2. Time zone: Mexico is in the same time zone or with a minimum time difference with respect to many states in the United States, which allows greater availability for coordination in real time.
3. Skilled labor: Mexico has a large population that is educated and skilled in various areas, including technology, software development, customer service, and more. This offers a competent and trained workforce.
4. Competitive Costs: Labor costs in Mexico can be lower compared to the United States or Canada, which can result in significant savings for companies that outsource their services.
5. Political and economic stability: Mexico has proven to be a stable country both politically and economically, which provides confidence to foreign companies that want to establish operations there.
6. Trade agreements: Mexico has a wide network of international trade agreements, including the Agreement between Mexico, the United States and Canada (T-MEC), which facilitates trade and investment between these countries.
Nearshore in Mexico can be an attractive option for companies looking to take advantage of the geographic proximity, skilled labor, and competitive costs that the country offers.
Hire in Mexico
DIFEMA GLOBAL provides compliance solutions to ensure your business in Mexico operates in line with Mexican labor laws and tax regulations. Businesses benefit from hiring in, investing in, or job outsourcing to, Mexico in a range of industries, from customer service, to accounting services, to software development.
We also process monthly payroll, and, as a Mexico Employer of Record, absorb all local employer liabilities.
Partnering with our Mexico PEO is the quickest and most cost-effective way to enter the Mexican market.
Facts & Stats
PEO PlatformHire
in Mexico, and pay employees through our platform or app.
Contracts
We draft labor contracts compliant with Mexican labor law.
PEO Cost
Our Mexico PEO solution is the most affordable on the market.
Time-to-hire
Fast onboarding in Mexico, hire in as little as 12 hours.
180+ Countries
It doesn’t stop with Mexico — we are an international PEO
Local Benefits
We administer all mandatory benefits and contributions in Mexico.
STAY COMPLIANT WITH MEXICO LABOR LAWS
Employment Laws
Employers in Mexico are legally required to provide formal written contracts of employment for all employees. Any contract should include all relevant details such as salary/wage, termination terms, job title, and so on. Contracts should also always be written in Spanish and use the Mexican peso currency (MXN).
By partnering with our Mexico Employer of Record & PEO, Difema Global team of local experts can provide assistance for drafting strong employment contracts that are compliant with local regulations.
Fixed-term
Probationary period
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30 days max. for regular employees
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Not possible if contract is for <180 days
Termination notice period
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Not legally required; 30 days is standard, according to the employment agreement
Severance
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Only in cases of termination without reason for employees with 15+ years’ experience: 12 days’ salary per year of service (max. 2 months’ salary)
Special note
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Contract type is not standard for PEO services due to requirement for fixed-term contracts to be justified by either (1) nature of the work or (2) for an employee replacement.
Undefined
Probationary period
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30 días máx. para empleados regulares
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180 days max. for management, administrators, or specialized employees.
Termination notice period
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Not legally required; 30 days is standard, according to the employment agreement
Severance
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Only in cases of termination without reason for employees with 15+ years’ experience: 12 days’ salary per year of service (max. 2 months’ salary)
Mexico working hours
The average Mexican office operates between 8 am-6 pm from Monday to Friday, although this can vary by industry and company. Some companies still offer extra-long lunch breaks (or ‘siestas’), but the normal length is around one hour.
Working hours are limited to 11 per day and 50 per week, with at least one 24-hour period off per week, and if limits are exceeded then overtime pay must be provided at 1.5 x normal pay.
Holiday Schedule in Mexico 2023
There are several nationally and regionally recognized public holidays in Mexico. Employees who have to work on these days are often entitled to overtime pay:
Mexico vacation leave
After one year of employment, workers in Mexico are entitled to six days of vacation leave. This entitlement increases by two days for every additional year up to four years of employment, then two days per five years of employment.
Many employers choose to offer more generous vacation allowances, with more senior employees regularly getting 15 or more days per year.
Mexico sick leave
Usually, employees can take sick leave upon agreement with their employer, and compensation will depend on the individual
agreement.
In cases of non-work-related sickness, employees can access a government-funded 60% of wages if they present a doctor’s note, and for work-related sickness, they can receive 100% of wages.
Maternity and paternity leave in Mexico
Mothers can take six weeks of paid maternity leave before and after their birth date (12 weeks in total), and fathers can take five days of paid leave.
The government covers these payments, and the limit is 2500% of the minimum wage.
It is common for employers to offer additional payments as part of benefits packages.
Employee severance and terminations in Mexico
Termination payments in Mexico are very complex and are made up of a variety of inputs:
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– Unpaid wages
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– Holiday bonuses
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– Outstanding vacation days
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– 13th month bonuses
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– Any other benefits or payments included in the contract of employment
If employees are terminated without proper cause, they may also be entitled to a severance payment. In these cases, the employee will receive three months of salary, an additional 20 days for every year of employment, and a seniority bonus of 12 days of salary for every year of employment (at a limit of 200% minimum wage).
In practice, many terminations will result in a severance payment as it is notoriously difficult to prove ‘proper cause’ to the authorities.
Navigating employee terminations and handling severance packages can be complicated for companies expanding overseas for the first time. Horizons’ Mexico PEO can mitigate risk for foreign companies and provide guidance through this process.
Taxation in Mexico
Mexico follows a progressive taxation system, with employees paying a higher percentage in tax at higher income levels, with a maximum rate of 35%.
Non-residents pay up to 30%.
The corporate tax rate in Mexico is 30%.
Contributions for retirement are unique and difficult to understand. The Mexican Administrator of Retirement Funds (AFOREs) handles retirement and housing accounts for employees, and workers can choose what they want to start funding, then employers will have to contribute a percentage of salary to these funds. The percentages can vary for the type of worker, and AFORE accounts will be automatically assigned by the government if an employee hasn’t chosen an account after one year of employment.
Health coverage in Mexico
The IMSS provides healthcare coverage for Mexicans, so health benefits are not strictly necessary through employers. However, the healthcare system is known for long wait times and shortages, so it’s fairly common for employers to offer private insurance.
HASSLE-FREE MEXICO COMPENSATION & BENEFITS
Compensation & Benefits
Compensation Laws in Mexico
As of 2020, the minimum wage in most of Mexico is 123.22 pesos per day. There is a higher rate in the northern border states of 185.56 pesos per day.
The aguinaldo (or Christmas Bonus) is a yearly bonus, which employees in Mexico are also entitled to at a rate of 0.5 months’ – 1 months’ salary, and sometimes more depending on the employer.
Employers are also required to pay a ‘Vacation Premium’ to employees taking annual leave. The vacation premium is a lump sum paid at a rate of 0.25 times the annual salary, to be paid on employees’ work anniversaries.
Benefit management in Mexico
Establishing a Mexican benefits package as a foreign employer can be a difficult process, and administrative procedures to follow, complex laws, and language barriers.
A simple solution is to outsourcing your Mexico benefits management to Difema Global. We can establish your benefits system quickly and effectively, offering expert guidance along the way so you can focus on a successful expansion operation.
Difema Global Mexico PEO can provide expert guidance to help simplify the process of expanding into Mexico.