Hire employees in Mexico
Everything a foreign company needs to know before employing people in Mexico: whether you need an entity, what an employee really costs once IMSS, INFONAVIT and aguinaldo are added, how payroll works, what leave is mandatory, and why termination without cause is expensive by design. Written for CHROs, CFOs, General Counsel and founders.
Quick answers
The questions leadership teams ask first, answered directly. Detail follows further down the page.
Do I need a local Mexican entity to hire?
No. Foreign companies can engage talent in Mexico through three routes:
- Employer of Record. Dryft Global employs the person through registered Mexican corporate infrastructure with its own employer tax ID (RFC) and social security registration (Registro Patronal). Dryft runs payroll, stamps every pay slip with the SAT, remits IMSS and INFONAVIT and withholds income tax. You direct the day to day work.
- Direct local entity (S. de R.L. de C.V., S.A. de C.V. or branch). You incorporate before a notary, register with the commercial and foreign investment registries, the SAT, IMSS, INFONAVIT and the state tax authority, then run payroll yourself.
- Independent contractor. Lawful only for genuinely independent professionals with several clients. The 2021 subcontracting reform makes this the riskiest route. See below.
When should I use an EOR instead of incorporating?
An EOR makes commercial sense when you are:
- Launching a nearshore engineering, customer success, design or finance team in days rather than the 8 to 20 weeks incorporation takes.
- Testing the market with 1 to 50 remote professionals before committing to a subsidiary.
- Avoiding IMSS and INFONAVIT remittances, CFDI stamping and severance administration without a local team to run them.
Your own entity becomes the right answer when headcount scales substantially, when you need manufacturing or customer-facing premises, when you need import licences such as IMMEX, or when you generate Mexican revenue that must be contracted locally.
What does an employee actually cost beyond salary?
Plan for roughly 30% to 45% or more on top of gross salary. IMSS social security, the 5% INFONAVIT housing contribution and the 2% retirement contribution do most of the work. Then add the year-end bonus (aguinaldo, minimum 15 days), the 25% vacation premium, profit sharing (PTU, 10% of taxable profit), state payroll tax of 1% to 4% and the private medical and food voucher benefits professional candidates expect. Full breakdown below.
How difficult is termination in Mexico?
Difficult, and expensive when it is not for cause. There is no at-will employment. You can dismiss without severance only for a just cause listed in Article 47 of the Federal Labor Law, with a written notice of rescission handed over at dismissal. Any other exit, including redundancy, triggers constitutional severance: 3 months of integrated salary, 20 days per year of service, a seniority premium of 12 days per year (capped at twice the minimum wage) and accrued benefits. Most professional exits are settled by mutual agreement ratified before the conciliation centre.
Can Dryft Global legally employ my team in Mexico?
Yes, where Dryft's local structures and operational scope match the role and industry. We handle the Spanish-language contract, CFDI payroll stamping, ISR withholding, IMSS and INFONAVIT remittance, aguinaldo, vacation premium and PTU administration and the statutory filings, while you direct the work. Confirm role eligibility, lead times and terms with your Dryft representative before you make offers.
Hiring routes compared
Foreign companies have to weigh corporate presence, the subcontracting rules, speed and permanent establishment risk. Here is how the three routes stack up.
| Factor | Direct entity (S. de R.L. / S.A.) | Dryft Global EOR | Independent contractor |
|---|---|---|---|
| Speed to onboard | 8 to 20 weeks (notary, RFC, e.firma, bank, IMSS) | Days to 2 weeks once the agreement is signed | Immediate, with extreme regulatory risk |
| Local entity required | Yes, S. de R.L., S.A. or registered branch | No, employed through Dryft's registered structure | No, direct B2B contract |
| Compliance responsibility | Full liability on local legal representatives | Managed through Dryft's registered employer accounts | Principal carries joint reclassification liability |
| Permanent establishment risk | PE by definition, full corporate tax filing | Mitigated for technical, support and operational roles | High if the contractor negotiates or binds you |
| Termination exposure | Direct exposure to labor courts | Handled through statutory due process by the EOR | Easily challenged as disguised employment |
| Best fit | 50+ staff, capital assets, IMMEX manufacturing | 1 to 50 remote professionals, rapid market entry | Genuine consultancies with multiple clients |
What an employee costs in Mexico
Mexico funds its social system through the Social Security Institute (IMSS), the housing fund (INFONAVIT) and the retirement system (SAR). Contributions are calculated on the integrated daily salary (Salario Base de Cotización, SBC), which adds aguinaldo and vacation premium to the base wage, capped at 25 times the daily UMA.
| Component | Employer share | Notes |
|---|---|---|
| IMSS social security (five branches) | ~15% to 25%+ | Sickness and maternity, disability and life, retirement, daycare (1.0%), work risk |
| Of which: work risk insurance | Varies by risk class | 100% employer-funded; class I (offices, tech) to class V; adjusted every February |
| INFONAVIT housing fund | 5.0% | Of SBC, fully employer-funded |
| SAR / AFORE retirement | 2.0% plus progressive increases | Employer retirement share rises annually under pension reform |
| State payroll tax (ISN) | 1.0% to 4.0% | Set by the state where work is performed; CDMX, Nuevo León and Jalisco around 3% |
| Statutory subtotal | ~23% to 36% | Of gross pay, before accruals and benefits |
| Aguinaldo accrual | 4.11% minimum | 15 days of salary, paid by December 20 |
| Vacation premium accrual | 0.82% minimum | 25% premium on statutory vacation days |
| Profit sharing (PTU) | Varies | 10% of the entity's taxable profit, capped at 3 months' salary per employee |
| Market-standard benefits | 3% to 8% | Major medical (SGMM), food vouchers, savings fund, NOM-037 stipends |
| Total employer on-cost | ~30% to 45%+ | Above base salary |
For an employee on MXN 600,000 gross, budget roughly MXN 780,000 to 870,000 all-in. Ask us for a cost model with the current UMA cap, risk class and state tax applied.
Payroll and tax
Mexican payroll is usually semi-monthly (quincenal), paid on the 15th and the last day of the month. Weekly pay is standard in manufacturing; monthly is allowed for managers if the contract says so. Wages must be set and paid in pesos into a Mexican bank account. Every payment needs an electronic tax receipt (CFDI de Nómina), validated by an authorised certification provider (PAC) and stamped by the tax authority (SAT). The XML file is the legal proof of payment. New hires must be registered with IMSS and INFONAVIT within 5 business days.
Income tax withholding (ISR)
Monthly income tax brackets run from 1.92% to 35%. Aguinaldo is exempt up to 30 UMA and the vacation premium up to 15 UMA, and food vouchers within statutory limits. Each December the employer runs an annual reconciliation. IMSS is paid monthly, INFONAVIT and retirement bi-monthly, state payroll tax monthly.
Statutory minimum wage
Mexico's minimum wage is set by the National Minimum Wage Commission (CONASAMI), a tripartite body of government, labor and employers. There are two zones: the Northern Border Free Zone of 43 municipalities along the US border, with a higher daily rate, and the general zone for the rest of the country. CONASAMI also sets professional minimums for 61 trades. Tech and professional salaries sit far above these floors, but the minimum wage still caps the seniority premium in severance.
Leave and mandatory benefits
- Paid vacation. Under the Vacaciones Dignas reform, 12 working days in year 1, rising 2 days a year to 20 in year 5, then 2 days for every 5 years of service (22 days in years 6 to 10, 28 in years 21 to 25). Vacation cannot be cashed out during employment, and each day taken carries a 25% premium (prima vacacional).
- Public holidays. 7 fixed statutory holidays under Article 74 of the Federal Labor Law, three of them (Constitution Day, Benito Juárez's birthday, Revolution Day) moved to Mondays, plus Presidential Transition Day every six years and electoral rest days when elections fall. Working a holiday pays triple (regular wage plus a 200% premium).
- Aguinaldo. At least 15 days of salary, prorated, paid by December 20. Competitive packages often pay 30 days.
- Profit sharing (PTU). 10% of the entity's taxable profit shared with non-director employees by May 30, capped at 3 months' salary or the 3-year average.
- Sick pay. IMSS pays cash subsidies for illness; work injuries fall under the employer-funded work risk branch.
- Maternity. 84 calendar days (12 weeks), usually 6 before and 6 after birth, paid 100% by IMSS if the employee has 30 contribution weeks in the prior 12 months; otherwise the employer pays. Adoption leave is 6 paid weeks.
- Paternity. 5 paid working days after birth or adoption, paid by the employer. Parents of children under 16 with cancer can take up to 364 days of IMSS leave.
- Working time. 48 hours a week on a day shift (8 a day), 42 on nights, 45 mixed. Overtime is capped at 3 hours a day, 3 times a week, at double time; hours above 9 a week pay triple. One paid rest day per 6 worked; working it pays triple, and a regular Sunday shift carries a 25% premium. A 40-hour week is under debate in Congress but is not law until published in the Official Gazette.
- Remote work. Above 40% of time worked from home, NOM-037 applies: you provide equipment, pay a share of internet and electricity and respect the right to disconnect.
Termination and notice periods
Mexico protects security of tenure and has no statutory notice period in the European sense. You either dismiss for a proven just cause under Article 47 and pay only accrued entitlements (finiquito), or you dismiss without cause and pay constitutional severance (liquidación) in full. Probation is capped at 30 calendar days, or 180 for managerial and specialised roles, and even then dismissal needs the opinion of the joint training committee. The severance below is the operative cost.
| Severance component (dismissal without cause) | Statutory amount |
|---|---|
| Constitutional indemnity | 3 months (90 days) of integrated daily salary (SDI) |
| Twenty days per year | 20 days of SDI for each year of service |
| Seniority premium (prima de antigüedad, Art. 162) | 12 days of salary per year, capped at 2x the daily minimum wage |
| Accrued benefits (finiquito) | Unpaid salary, prorated aguinaldo, vacation, vacation premium, pending PTU |
- Just cause is a short list. Article 47 covers dishonesty, violence, intentional damage, disclosure of trade secrets, intoxication, insubordination and more than 3 unexcused absences in 30 days. Redundancy and ordinary underperformance are not on it.
- The written notice of rescission is mandatory. Hand it to the worker at dismissal, stating conduct, dates and legal grounds. If they refuse to sign, file it with the labor court or conciliation centre within 5 business days. Miss this and the dismissal is unlawful whatever the facts.
- Conciliation first. Every dispute goes through mandatory conciliation at the Federal Center for Conciliation and Labor Registration (CFCRL) or a local centre before a labor court.
- Settle by convenio. Offboard professionals with a mutual termination agreement (convenio) ratified before the conciliation authority. Ratification blocks a later lawsuit.
Can I use independent contractors?
Only for genuinely independent professionals, and Mexico polices this on two fronts. First, the subordination test in Article 20 of the Federal Labor Law: if you control the manner, time and place of the work, an employment relationship exists automatically, whatever the contract says. Fixed schedules, managerial supervision, a company laptop, dependence on one client and work that mirrors your core business are all red flags. Second, the 2021 subcontracting reform: outsourcing people to do work within your registered corporate purpose is prohibited outright, and only REPSE-registered providers may supply specialised services outside it. Get it wrong and you owe retroactive IMSS and INFONAVIT contributions plus surcharges, full constitutional severance if the reclassified contractor is let go, loss of tax deductions and VAT credits, fines of 2,000 to 50,000 times the UMA and possible prosecution for tax fraud under Article 108 of the Federal Fiscal Code. Anyone who works like an employee should be employed, and an EOR is the compliant way to do that without an entity.
The legal framework in brief
Mexican employment law is constitutional in origin and enforced through mandatory conciliation and specialised labor courts. The instruments you will hear referenced most:
- Article 123 of the Constitution. Non-waivable minimum rights: hours, minimum wage, overtime, profit sharing and protection against unjust dismissal.
- Federal Labor Law (Ley Federal del Trabajo, LFT). The primary statute. Articles 12 to 15 house the subcontracting rules, Article 47 the just causes, Article 162 the seniority premium.
- Ministry of Labor and Social Welfare (STPS). Labor inspections, official safety standards (NOMs) and the REPSE registry.
- Federal Center for Conciliation and Labor Registration (CFCRL). Mandatory conciliation, the union registry and legitimation of collective agreements.
- Social Security Law and INFONAVIT Law. Employer registration within 5 business days, the five IMSS insurance branches and the 5% housing contribution.
- Income Tax Law (LISR). ISR withholding and, in Article 183, the permanent establishment test.
- Federal Data Protection Law (LFPDPPP). Privacy notices, consent for sensitive data, ARCO rights and limits on monitoring.
- NOM-035 and NOM-037. Psychosocial risk prevention, and the telework standard above 40% remote work.
Where the talent is
Mexico is Latin America's second-largest economy and the primary nearshore gateway for North American companies. Its time zones overlap with the US, it trades under the USMCA, and its universities add hundreds of thousands of graduates a year to a labor force of over 60 million. Bilingual professionals are common in tech, customer experience and finance. Spanish remains the legal language for contracts and statutory notices.
| Region | Talent and industry concentration |
|---|---|
| Mexico City (CDMX) | Corporate headquarters, fintech, legal, professional services, finance, software engineering, marketing |
| Monterrey | Industrial tech, advanced engineering, supply chain, shared services, executive leadership |
| Guadalajara | Embedded systems, cloud, full-stack software, semiconductor R&D, tech support |
| Querétaro and the Bajío | Aerospace engineering, automotive R&D, logistics, data centre operations, precision manufacturing |
| Tijuana, Ciudad Juárez and the border zone | Cross-border BPO, bilingual customer experience, medical device manufacturing, nearshore operations |
Mexico Implementation Kit
This page tells you the rules. The kit tells you what to do, in what order, and what goes wrong when you skip a step. Built from Dryft's onboarding checklist for Mexico.
- Step-by-step implementation checklist, from hiring route selection to first stamped payroll
- Subcontracting and REPSE compliance check against Articles 12 to 15 LFT
- Spanish-language contract terms, probation clauses and wage zone selection
- IMSS and INFONAVIT registration, CURP, RFC and CFDI setup
- Aguinaldo, vacation premium, PTU accruals and the NOM-037 telework addendum
- Severance math, notice of rescission procedure and convenio ratification steps
- Every official Mexican authority with direct links
This guide is general information, not legal, tax or immigration advice. Mexican labor, tax and social security rules change regularly through legislation, CONASAMI and IMSS resolutions, SAT circulars and court interpretation. Confirm current figures with a qualified adviser or with Dryft before acting. Last reviewed September 2026.
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