Mexico boasts a large and diversified free-market economy that has made tremendous strides in international trade since the 1994 landmark implementation of the North American Free Trade Agreement (NAFTA), which has been replaced by the United States-Mexico-Canada Agreement. In particular, the country’s footprint has grown in manufacturing, consumer goods, technology, aerospace, auto and the food & beverage sector. With a population of nearly 130 million people, an abundance of natural resources, its strategic location and a productive workforce, Mexico is rising to the top of the list for global businesses looking to expand, invest and hire.
- Mexico is a leader in cross-border trade, being among countries with the largest number of international trade agreements in place. Currently, the country maintains 13 Free Trade Agreements (FTAs) with 50 countries, with its top trade partners accounting for 60% of the world’s GDP.
- Owing to its position in Latin America (LATAM), close proximity to the US, lower logistics costs and developed labor force, Mexico has become a leading manufacturing country.
- The World Bank most recently ranked Mexico 60 out of 190 economies for ease of doing business, with the country receiving high marks in enabling cross-border trade, enforcing contracts and building a credit profile.
- Mexico’s workforce is young and rising, with 45% of the population under the age of 25. According to the OECD, attainment of higher education in Mexico is growing with half a million university graduates entering the labor market each year. Looking ahead, 26% of young people today are expected to obtain a degree in their lifetime.
- The Global Innovation Index, developed by the World Intellectual Property Organization (WIPO), most recently ranked Mexico second in LATAM and identified the country as outperforming its upper-middle-income peers globally in human capital, research, infrastructure, market sophistication, technology application and creative outputs.
Q&A with Ana Vizzotto, Director of Operations for the Americas, GoGlobal
What do global businesses need to keep in mind when hiring in Mexico for the first time?
Before hiring team members in Mexico, businesses should be acutely aware of nuances in cultural norms, employment contracts, compensation and requirements for hiring.
Generally speaking, the business culture in Mexico tends to be more personal and friendly than in other countries, which can affect hiring practices. For example, it is appropriate and even encouraged to ask job candidates about their families, interests and other personal details of their lives.
Unlike in other markets, such as the United States, at-will employment does not exist in Mexico. Instead, it is mandatory for employers to observe an employment agreement. Notably, whether a formal contract is written or not, a legally-binding contract automatically forms when an employer hires an employee. With that being said, it is recommended companies furnish a written contract to establish parameters and protect all parties. There are three types of contract durations, including indefinite, project and season.
Because Mexico does not offer unemployment insurance, employment contracts are critical for providing some stability to the workforce. All employees have rights under the labor laws of Mexico, which override any terms in a contract. Effectively, if a contract term violates the rights outlined in Mexico’s labor laws, that term will be deemed invalid. If an employee starts a job and does not meet expectations, a limited probationary period makes it possible to terminate them without repercussions.
Mexico observes seven national holidays with an additional election day holiday every six years. Employees are entitled to have off these days and employers must also offer six days of vacation leave after one year of service. The longer an employee has worked, the more vacation days they are entitled to. In addition to being paid their regular salary while on leave, employees should also be compensated with a vacation bonus. This ‘prima’ bonus must account for at least 25% of their standard pay. For sick leave, employees only receive a portion of their regular salary.
Near Christmas time, employers must offer a 13th salary, also known as an Aguinaldo, equivalent to 15 days of pay. Mexican workers are also entitled to be compensated through a company profit sharing incentive. Once a company has a year of operations on the books, it must distribute 10% of its pre-tax profits to its workforce. Profit sharing can serve companies and employees alike, making the workforce feel more engaged and personally invested in the success of the company.
What makes GoGlobal’s Employer of Record (EOR) services in Mexico special?
Hiring new employees in Mexico entails fees, efforts and processes that contribute to the total hiring cost. As attractive as Mexico’s workforce is, these costs and parameters could make hiring a tricky and expensive endeavor. However, our local team has deep experience in successfully hiring and managing workforces in Mexico. We consult with clients throughout the employee life cycle. Additionally, clients have a designated account manager, who ensures a seamless onboarding for each team member.
What is fueling demand for GoGlobal’s EOR services in Mexico?
Notably, Mexico is home to the world’s largest Spanish-speaking population and is the world’s largest majority Spanish-speaking economy, making it an ideal launch point for MNCs looking to expand into LATAM. Moreover, Mexico is making a name for itself on the world stage by being one of the most competitive countries in terms of operating costs and tax liabilities.
By hiring Spanish-speaking employees in Mexico, companies are tapping into a young, talented workforce and unlocking new business opportunities throughout the LATAM region. However, there are some risks and challenges that could potentially stand in the way of success, including Mexico’s complex labor laws, costly benefits and ongoing tax reporting compliance requirements.
GoGlobal’s industry-leading EOR services allow companies to circumvent these roadblocks and ensure that their business is operating efficiently and compliantly. Essentially, we enable clients to tap into Mexico’s economic strengths – and focus on growing their core business.
For more information on GoGlobal’s EOR services in Mexico, or to talk with one of our experts, please fill out the following form.