Clients that want to recruit workers and process payroll in Mexico but do not wish to set up a foreign subsidiary or branch office may take advantage of Globalization Partners' employer of record services. With Globalization Partners' Mexico PEO, your applicant may be employed in compliance with Mexican labor rules and onboarded in days, rather than the months it would normally take. The person is tasked with fulfilling your in-country needs and will operate alongside your team as if they were an employee of your business.

By using our Global PEO service and Global Employer of Record approach, our clients can handle payroll in Mexico without having to worry about HR services, taxes, or compliance management. We oversee best practices in employment contracts, statutory and market norm benefits, employee costs, and severance and termination if necessary in our role as a Global PEO specialist. In addition, we update you on any changes to Mexico's domestic labor laws.

New hires have a shorter learning curve, more positive impressions of the recruiting process, and are more likely to commit fully to your team. You may relax knowing that skilled employment professionals are helping you with every hiring. With Globalization Partners, you can easily and rapidly tap into the expertise of the best and brightest from 187 different nations.
Work Opportunities in Mexico

Establishing reliable connections is valued more highly than expertise or experience in Mexico. Thus, recruiting, negotiating, and doing business in Mexico all need consideration of cultural variables. For instance, many workers may prefer to have a casual conversation before getting down to business, and being on time isn't a priority. Any official agreement should be put in writing and, ideally, negotiated face-to-face rather than over the phone. Perseverance is crucial, and might even signal that you mean business. Last but not least, deadlines are often seen as suggestions rather than absolute due dates.

The Federal Labor Law recognizes labor unions as a legitimate tool for workers to band together to secure their rights in the workplace. There are several labor unions in Mexico, each dedicated to defending the rights of its members and the interests of its members. In response to labor unions, representatives from both employers and unions negotiate and sign collective bargaining agreements. Every two years, unions and their employers get down for a review of collective bargaining agreements. If at least 20% of workers in an organization identify as union members, then the union may operate in that workplace.

The following are some of the most common advantages to consider when negotiating a salary and other conditions of employment with a Mexican worker:
Agreements Regarding Employment in Mexico

In Mexico, both the employer and the employee are obliged by law to have a formal, well-drafted employment contract in place. This contract must be written in the native language of the country and must include the remuneration, benefits, and termination provisions of the work relationship. Salary and other remuneration numbers in a Mexican offer letter or job contract should always be stated in Mexican pesos rather than a foreign currency like the US dollar. When you utilize Globalization Partners as your employer of record and PEO in Mexico, you'll also have access to our employment contract form, so you won't have to create one yourself.
Schedules for Mexican workplaces

Traditionally, office workers put in their time between the hours of 8 am and 6 pm, but these days it's not uncommon for them to stay at the office until 7 pm or later. It's important to understand that although regular employees in Mexico get one hour for lunch, CEOs get three. With the advent of the contemporary working age, the cultural practice of taking a "Siesta" has died out.

Overtime pay must be paid if scheduled work hours are exceeded. Pay for overtime is double the hourly rate. Sunday and holiday overtime must be paid at 200%. The maximum amount of time an employee may put in at work is 11 hours per day, or 50 hours per week. One 24-hour time of relaxation each week must be provided to each employee.
Vacation in Mexico

There are eight federal holidays that the people of Mexico observe each year.

Constitution Day, January 1st
Celebration of Benito Juárez's birth
Day of Labor/Labor Day/May Day
Revolution Day Independence Day
Day of the Elections (every 6 six years for election of the President)
Holiday Season

Several different holidays are observed in Mexico.

festivals (traditional holidays to celebrate religious events) (traditional holidays to honor religious events)
Federal Labor Law mandates the observance of some holidays, including the above-mentioned municipal holidays. Nevertheless, federal law does not guarantee workers a paid day off on these holidays.

Workers who are required to work on legal holidays are entitled to:

compensation equal to three times their regular rate and a mutually agreed upon schedule with their employer.

Days Off in Mexico

The number of vacation days an employee receives each year increases proportionally with his or her employment with the organization. As of the first day of 2023, the first year/anniversary of service minimum statutory yearly vacation days is 12 days. After the first year, workers get an extra day of vacation for every year that passes. Beginning with their fifth year of employment, workers will begin to receive an extra two weeks of paid vacation per five years of service. You may see an example of the statutory progressive vacation balance days chart down below:

Term of Employment 12 years of service = 1 > more vacation days Second > Additional Time Off After 14 Years of Service Three > More Vacation Days After Sixteen Years of Service Fourteenteen Years of Service > More Vacation Days 20 Years of Service > Extra Vacation Days 5* 6-10* > Increased PTO after 22 Years on the Job 11-15 * > More Vacation Days after 24 Years of Service 16-20 years of service = new vacation days 26 years 21-25 years of service = new vacation days 28 years New vacation days at year 30 for employees with 26-30 years of service, and new vacation days at year 32 for those with 31-35 years of service.

In the first two years of employment, most companies provide 15–18 days of paid vacation. This increases to the legally required number of days off each year after that.

Until the job connection terminates, vacation time is nonrefundable. Once 18 months have passed since the anniversary date, all unused vacation time will be forfeited. To save money, businesses should encourage workers to use up any vacation time that has been accrued but not used.

Public holidays are also considered paid time off for employees. There is no such thing as unlimited vacation or sick pay.
A Sick Day in Mexico

Illness leave, whether paid or unpaid, is often granted by employers at the discretion of the reporting manager or general manager, and is contingent on the employee providing a justifiable cause for the absence.

Generally, if an employee needs time off from work due to illness, he or she must provide either the IMSS Leave Certificate or a private doctor's note explaining the absence (the latter may be granted at the discretion of the Supervisor or General Manager). Only the Leave Certificate from IMSS will be recognized as legitimate excuse for absences due to Occupational Illness.

If an employee is qualified for a government subsidy equal to 60% of their income while off sick due to an ailment that is not work-related, they must present a medical certificate to prove their condition. When the disease is due to job conditions, this rises to a maximum of 100%. Some organizations compensate workers whose wages exceed the legal limit by making Social Security payments in lieu of the difference.
Leave for New Parents in Mexico

Employees who are mothers are entitled to 12 weeks of paid leave total, six weeks of which must be taken before the expected due date and the remaining six weeks after the delivery.

Five days of paid paternity leave will be given to all fathers.

Instead of the business footing the bill during maternity leave, Social Security will cover the expenses. Maximum compensation is set at 25 times the federal minimum wage. Some firms compensate workers whose wages exceed the legal limit by making up the difference in the form of a Social Security contribution.
Mexican Health Care Insurance

Every worker in Mexico is required to have public health insurance, as set down by the Mexican Social Security Institute (Instituto Mexicano del Seguro Social, IMSS). Nonetheless, many companies provide their workers supplementary private medical insurance to make up for the shortcomings of the public health care system, such as long wait times to visit a doctor or specialist, a lack of physicians, a lack of flexibility, etc.

As a kind of monetary compensation, several businesses provide their workers with access to private insurance plans. Since just 3% of Mexicans have private health insurance, 52% of all healthcare spending goes toward private care. Some people choose private insurance because it may pay for more extensive medical care.

Our Global Employer of Record may help clients in Mexico set up private medical insurance for their new hires. A third option is to provide the professional a sum of money each month to go toward the purchase of a private insurance policy. In most cases, we suggest that businesses provide a stipend to employees in place of health insurance. The normal monthly stipend for an insured employee is 2,000 MXN. In Mexico, an average monthly payout for a family of four with health insurance is between 4,000 and 6,000 MXN.
Payments to Mexico in Lieu of Taxes

Employers in Mexico often do not provide many perks beyond the minimum required by law. Job sharing, telecommuting, and other forms of work-life flexibility are typical perks. In certain cases, employers may provide perks above the minimum wage, such as reallocation allowances for employees working abroad or even life insurance.
Bonuses

Workers are eligible for an annual bonus paid out in the form of an Aguinaldo. The yearly Aguinaldo is equivalent to 15 days of wages at a minimum. The Aguinaldo is equivalent to four weeks' salary at most enterprises and six weeks' pay at the largest ones. Companies who pay for 6 weeks instead of 5 often distribute the Aguinaldo across 4 weeks in December and 2 weeks in the summer. The majority of salespeople in Mexico make their living off of commissions and quota incentives. Earnings for management roles are very variable and rely on achieving set goals.
Being Fired in Mexico

Businesses in Mexico may provide new hires a 30-day trial period or a longer 180-day period if they are in a management, technical, or professional role. Nonetheless, it should be highlighted that in Mexico, probationary periods are seen as particularly problematic since there is not enough case law to protect employees. Employers should be prepared to pay severance to any employee whose probation period is longer than 30 days since such agreements are often not enforceable in reality. We advise against any period of probation that is more than 30 days. Employees who are terminated during the first 30 days of employment are not entitled to severance compensation unless their termination is due to their inability to execute the essential functions of their position.

Fixed-term employment contracts are permitted only where such agreements are mandated by the duties of the position or when a temporary replacement is needed. In such case, the duration of employment is assumed to be infinite.

These are some of the grounds for terminating an employment contract:

Together, we've come to an understanding (including resignation)
Employee's death Employee's handicap or disability that prevents them from working
Because of this

Compensation upon termination may consist of:

salary arrears 13th month vacation bonus (Aguinaldo bonus)
Any additional commissions or bonuses
Other payments under the employment contract, such as gratuity, provident fund, etc., are payable if the employee is dismissed without reason, in addition to the Severance and Seniority bonus payments.

Employee is entitled to three months' compensation, plus 20 days' pay for every year of service, and a seniority premium if the company wishes to fire them without reason. The three months' worth of severance compensation would be calculated based on the employee's complete salary, including any bonuses, commissions, and perks. The maximum amount of a seniority bonus per year of service is 12 days' pay, or the equivalent of two times the state's minimum salary. Although the 90-day severance payment is standard, it may be highly expensive to show "cause" in Mexico. If we have any workers, Globalization Partners can provide an easy way forward for them.

It is our policy to pay out a resigning worker's prorated vacation, vacation bonus, and Aguinaldo holiday pay in the event that they are eligible for such benefits (Christmas Bonus).

Paying Taxes in Mexico If the company recognizes a trade union and wants to lay off union members or make changes to the relevant collective agreement, it must first negotiate with the union.

In Mexico, the tax rate for workers is progressive. As of 2016, the highest rate begins at a salary of MXN 3,000,001 and higher, which is almost 35%.

For the benefit of its employees, financial entities known as AFOREs (Administradora de Fondos para el Retiro in Spanish) manage retirement savings accounts. An AFORE account may be opened by any worker who is part of the IMSS, ISSTE (applies to government workers), or works independently. To break down what makes up an AFORE account, consider these three categories:

subcuenta de Retiro, Cesanta en edad avanzada y vejez (RCV): Retirement and Unemployment due to Old Age.
Retirement: Contribution from employers of 2%
Age-related joblessness: Benefits funding breakdown: 3.25% from employers, 1.125% from workers, and 0.25% from the government. The Mexican government also provides an additional daily contribution of 1.45 pesos.
AFORE just acts as a registrar and custodian of the monies for this program, which is managed by Infonavit, the Mexican federal institution for worker housing. The company will contribute 5%
Voluntary contributions are money put aside by an employee above what is required in order to fund their retirement.

Please note that the aforementioned contribution rates are not universally applicable to government employees.

The AFORE the worker has chosen to use to save for retirement must be specified. In the event that an employee has not chosen an AFORE after one year of employment, the Mexican Commission of Retirement Savings (CONSAR) will do so on their behalf, assigning their account to the AFORE with the lowest commissions, and transferring all contributions made during that time to the chosen AFORE. If the worker so chooses, they may alter their AFORE.
How Collaboration in Globalization Benefits Everyone

Historically, the first and most complicated element of recruiting an employee in Mexico was figuring out how to establish up a subsidiary or branch office in Mexico. The Global PEO and Global Employer of Record approach provided by Globalization Partners simplifies the process of hiring workers in Mexico while reducing associated costs. Your employee will be added to our locally compliant payroll and you will get a straightforward monthly invoice. You may avoid the hassle of setting up a Mexican subsidiary by having us handle things like processing expenditure reports, handling personal income tax concerns, and setting up the employee's statutory local benefits in Mexico.

To learn more about how Globalization Partners' employee leasing and PEO services may make the process of employing a Mexican worker easier, please get in touch with us.