Everything You Need to Know to Easily Begin Hiring in Mexico

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Last updated at December 02, 2022
beautiful scenery in the country of mexico

Mexican Currency

Mexican Peso (MXN)

The Capital of Mexico

Mexico City

Time Zone in Mexico

GMT-6

Important Facts About the Country of Mexico

Introduction to Mexico

Mexico, officially known as the United Mexican States (‘Estados Unidos Mexicanos’) or the Mexican Republic (‘República Mexicana’), is located in North America. It is a federal republic composed of 32 states with a population of approximately 126 million people. With the world’s 12th largest nominal GDP, Mexico’s economy is the largest in Latin America (LATAM).

What to Know about Mexico's Geography

Mexico shares land borders with the United States to the north and with Guatemala and Belize to the south. It is bordered to the west by the Pacific Ocean and to the east by the Gulf of Mexico and the Caribbean Sea. With a land mass of 1.97 million square kilometers, Mexico is the world’s 13th largest country by area.

Climate in Mexico

Mexico experiences a wide array of climates. Much of the country lies to the south of the Tropic of Cancer, with year-round high temperatures. To the north, temperatures are typically cooler in winter months. Many larger cities are at a relatively high altitude, which lends to a more temperate climate.

The Culture of Mexico

Mexican culture predominantly reflects a mixture of indigenous and Spanish cultures. Indeed, there is a great unifying pride in the indigenous heritage.

Religions Observed in Mexico

According to a 2020 census, just under 80% of Mexicans identify as Roman Catholic. A further 12% belong to other Christian denominations while around 5% declare no religious affinity.

Languages Spoken in Mexico

Although not officially recognized by law, Spanish is the national language of Mexico. This makes it the world’s most populous Spanish speaking country. Over 50 indigenous languages are spoken by over 100,000 people. English is widely taught as a second language in Mexico but few show a high level of proficiency.

Mexican Human Resources at a Glance

Employment Law Protections in Mexico

Employment relationships in Mexico are regulated primarily by the Mexican Constitution of 1917, in which the guidelines for employment are established. Article 123 of the Federal Constitution, entitled “Labor and Social Welfare,” expressly recognizes and protects the basic inalienable rights of employees. Within this scope, the Federal Labor Law (FLL) and its subsequent amendments were enacted to regulate all aspects of employer-employee relations. Labor relations are highly regulated in Mexico, with employees generally enjoying far greater rights than their American neighbors.

Mandatory Employment Contracts in Mexico

A written employment agreement is mandatory in Mexico. Every employee in the country must enter into an individual employment agreement with the employer and establish the terms and conditions of the employment relationship. Importantly, it should be noted employees cannot waive their right to receive mandatory benefits or rights.

Article 25 of the FLL outlines the statutory content required for every employment contract:

  • name, nationality, age, gender, marital status, personal identity number, taxpayer registration number and addresses of both the employee and the employer
  • whether the employment relationship is seasonal, or for a specific task, for a fixed term, for initial training or for an indefinite term
  • whether the employment contract is subject to a trial period
  • the service or services to be provided, which should be stated in as detailed a manner as possible
  • the place or places where the work will be performed
  • the duration of the work shift
  • the form and amount of the salary
  • the day and place of salary payment
  • indication the employee will be trained or instructed in terms of the plans and programs established by the company (pursuant to provisions of the FLL)
  • any other terms and work conditions (such as days of rest, holiday and any additional agreements reached between employee and employer)

Fixed Term Contracts in Mexico

Contracts for a fixed term or for a specific task can be entered into when the needs of the employer require such an engagement. To enter into such an agreement legally, the employer must justify the reason for hiring an employee for a fixed term or for a certain undertaking. Hence, the contract will automatically terminate upon the completion of its term (fixed-term employment) or at the completion of the specified undertaking (employment for a specific task). If the activities under which the employee was originally hired continue following the end of the contract, the employment relationship will be automatically extended and accordingly deemed an indefinite term contract.

Rules Regarding Probation Period/Trial Period in Mexico

Employees hired pursuant to an indefinite employment agreement or a fixed-term agreement of at least 180 days can be subject to a probationary period of up to 30 days. This is extendable by up to 180 days if the employee is hired as an executive, manager or director or fills an administrative position.

Working Hours & Work Shifts in Mexico

The FLL states for every six days worked, employees are entitled to one day of rest. It also recognizes three types of work shifts:

  • eight hours a day for daytime work (48 hours a week)
  • seven hours for night-time work (42 hours a week)
  • 7.5 hours for a mixed work shift (45 hours a week).

The principle of a 48-hour workweek is officially the law of the land. However, a 40-hour workweek has been established in many employment relationships throughout much of the private sector in Mexico. 

The FLL also specifies employees are entitled to at least 30 minutes of rest or to have a meal during their shift. This time will be considered as part of the employee’s working day.

Mexican Laws Regarding Overtime

An employee must not be required to work more than three hours beyond the number of hours in the statutory workday during a given shift (or more than nine hours in each week). An employee working overtime on a given day is entitled to double compensation for each hour of overtime. In the event the employee works more than nine hours overtime in each week, the employee is entitled to triple compensation for each hour of overtime.

However, as a matter of law, all employees are entitled to overtime pay. It has become common practice for employees holding managerial positions not to claim any overtime pay because it is implied their salary already includes and covers the extra time they need to work in view of their role. Nevertheless, this should not be assumed to mean they are not entitled to overtime pay because, under the FLL, it is possible to claim overtime pay.

Health and Safety in the Workplace

As per the provisions of the FLL, employers must establish work environments in accordance with the principles of worker safety and health. All employers have an obligation to prevent work-related stress by constantly evaluating the organizational environment and applying any necessary control measures.

Information Regarding Bonuses in Mexico

Employees have the right to a Christmas bonus (‘Aguinaldo’) of at least fifteen days of their daily base salary. This must be paid by no later than December 20 each year.

Conditions & Rules Regarding Termination

Grounds

An employer can terminate an employment relationship without incurring any liability only under one of the justified causes established by law, as follows: 

  • use of false documentation to gain employment
  • dishonest or violent behavior against the employer or the employer’s family
  • dishonest or violent behavior against co-workers that disrupts work discipline 
  • acts of harassment or sexual harassment directed toward any person in the workplace 
  • sabotage of the workplace
  • negligence
  • carelessness that threatens the safety of the workplace and of other workers 
  • immoral acts in the workplace
  • disclosure of trade secrets
  • more than three unexcused absences in a 30-day period
  • insubordination
  • failure to adopt preventive measures or to follow procedures to avoid accidents or illnesses
  • reporting to work under the influence of alcohol or narcotic drugs
  • incarceration

Strictly, the employer cannot otherwise terminate the employment without cause. However, under Mexican labor law, “integrity at work” is mandatory behavior for the employee. An employee is deemed to act with integrity where work is carried out with intense effort, care and attention. It must be performed in the agreed-upon time, place and manner. “Lack of integrity” is a generic cause for dismissal in Mexico. 

In practice, however, exposure under an unlawful termination lawsuit is mostly limited to the statutory termination payments. Therefore, most terminations can be implemented either through employee resignations or through a mutual termination (with severance).

Restricted or prohibited terminations 

If the employment relationship is at that time suspended (e.g., an employee on maternity leave), the termination will be considered a restricted or prohibited termination.

Notice Period Guidelines for Terminating Employment

There is no statutory minimum notice period for terminating an employment relationship in Mexico. If the employer dismisses the employee, the employment termination will be effective immediately. However, the employer must notify the employee in writing of the cause or causes for the dismissal. If an employer terminates an employee under the justified causes established in article 47 of the FLL, the employer must notify the employee within 30 days of the cause or causes of the termination.

Garden leave is not a common practice in Mexico as the employer can terminate the employment relationship immediately.

Calculating Redundancy/Severance Pay in Mexico

The severance payment is calculated depending upon the cause of termination:

Voluntary resignation: The employer must pay the employee all benefits due (including sales incentives) on a prorated basis through the date of termination. If the employee has at least fifteen years of seniority, he or she is also entitled to a seniority premium of twelve days’ salary for each year of service. This is capped at twice the minimum daily salary in force.

Termination with cause: The employer must pay all benefits due (including commissions) on a prorated basis until the date of termination, as well as the seniority premium of twelve days of salary for each year of service. This has a cap of twice the minimum daily salary.

Termination without cause: Employees who are terminated without cause are legally entitled to a lump sum severance, as follows:
(1) three months of the employee’s daily aggregate salary, plus (2) 20 days of the employee’s daily aggregate salary for each year of service, plus (3) a seniority premium of twelve days’ salary for each year of service, with a cap of twice the minimum daily salary and (4) any benefits due.

Information About Post Termination Restraints/Restrictive Covenants

The Mexican Constitution includes the general principle of “freedom of work,” whereby an individual cannot be prevented from working or performing a lawful activity unless there is a judgment stating otherwise issued by a competent court. Based on this, the generally accepted interpretation is that post termination non-compete obligations and in general restrictive covenants are not enforceable in Mexico. This interpretation does not change even if the obligation is limited to a certain period, territory, product or to identified competitors.

Post-termination non-compete, customer non-solicit and employee non-solicit clauses are therefore not enforceable. However, such provisions are often included in employment agreements because they can have a deterrent effect and even create a sense of moral obligation on the part of an employee.

Trade Unions/Collective Agreements in Mexico

Trade unions are prevalent in certain sectors, such as the sugar, railway, automotive and mining industries, as well as the public sector (especially education and energy). A union can be formed by at least 20 employees in a workplace. However, employees affiliated with an existing union can request, through that union, to sign a collective bargaining agreement with their employer. There are no works councils or other employee representatives in Mexico.

Understanding Taxes and Social Security in Mexico

Calculating Personal Income Tax for Residents & Non-Residents

Individual residents in Mexico are subject to income tax on their worldwide income, regardless of their nationality. Non-residents, including Mexican citizens who can prove residence for tax purposes in a foreign country, are taxed only on their Mexican sourced income.

Income BrandIncome Band From (MXN) Income Band Up to (MXN) Basic Tax on Column 1 (MXN) Basic Tax on Excess (%)
0.01 7,735.00 0 1.92
7,735.01 65,651.07 148.51 6.40
65,651.08 115,375.90 3,855.14 10.88
115,375.91 134,119.41 9,265.20 16.00
134,119.42 160,577.65 12,264.16 17.92
160,577.66 323,862.00 17,005.47 21.36
323,862.01 510,451.00 51,883.01 23.52
510,451.01 974,535.03 95,768.74 30.00
974,535.04 1,299,380.04 234,993.95 32.00
1,299,380.05 3,898,140.12 338,944.34 34.00
3,898,140.13 and above 1,222,522.76 35.00

How Social Security Contributions Work

The contributions employees make to the Mexican Social Security Institute are withheld at source. The employer also makes contributions. Both contributions are calculated at varying rates and subject to various caps.

Employer Contributions – up to 22.75%

Employee Contributions – up to 10.15%

*The above rates serve as a broad guideline. Actual rates charged by GoGlobal will differ.

Important Information for Employees Working in Mexico

Rules Regarding Salary Payments to Employees

An employer must make all salary and statutory payments from an in-country bank account.

Requirements for Payroll Documents & Payslips

The process of issuing payslips to employees in Mexico is fully electronic. All payroll documents must go through a process before it can be issued to the employee. Namely, the electronic payslips must initially be submitted, validated and e-signed by the Mexican Tax Authority.
The payslip must contain personal and job information of the employee, the bank account number, tax ID (RFC), citizen ID (CURP), social security number, position, cost center, etc. It must also outline each wage type paid to the employee, including in the payment, perception, taxes withheld, other deductions and net to be paid. The amount must also match the amount sent from the employer’s account to the employee’s bank account.

Calculating Annual Leave for Employees

All employees must enjoy vacation periods which cannot be less than six days per year for the first year. This will increase by two working days for each following year until the allowance reaches 12 vacation days. Thereafter, the vacation period increases by two days for every five years of service.

Years of Employment Vacation Days
1 6
2 8
3 10
4 12
5-9 14
10-14 16
15-19 18
20-24 20

This will continue to increase two days every five years.

In addition to this vacation, employees in many states are entitled to a minimum of 25% of the salary earned during their holidays as a vacation bonus.

Rules About Sick Leave & Unpaid Medical Leave of Absence

An employee has a statutory right to sick leave depending on the type of illness and degree of disability. In the case of illness or injury, an employee must obtain a doctor’s certificate. The Mexican Social Security Institute (IMSS), not the employer, pays the employee’s income during the leave.

Mexico legislation does not provide for a mandatory unpaid medical leave of absence. If the employee needs an unpaid medical leave of absence due to a condition not recognized by the IMSS, then the employer has the discretion to grant the leave.

The economic benefits paid by the IMSS due to illness are based on 60% of the employee’s registered salary. They are paid as of the fourth day of absence and up to 52 weeks.

Answers Regarding Compassionate & Bereavement Leave in Mexico

There is no statutory regulation regulating leave in the event of a bereavement, although such a policy may be included in the individual contract.

Maternity, Paternity & Adoption Leave Rights in Mexico

Maternity Leave

Women have the right to six weeks of paid leave prior to the birth of a child and six weeks following the birth of a child. Women can allocate up to four of the six weeks of the pre-birth leave to the post-birth leave period. The salary during this period is paid by the IMSS.

During the nursing period of six months, the new mother is entitled to two additional thirty-minute rest periods per day. 

Paternity Leave

A male employee is granted five business days of paid paternity leave when his spouse gives birth or if he adopts a child.

Adoption Leave

The FLL specifies women are entitled to a paid maternity leave of absence of six weeks after they gain custody of the adopted child. Fathers are entitled to a paid paternity leave of absence of five days following the adoption of a child.

Mexico's Mandated Public Holidays & Pay Rules

There are nine mandated national public holidays each year. These include December 1 every six years (on the day of the national presidential inauguration) as well as the election day scheduled by federal and local electoral laws.

If employees are required to work on a mandatory holiday, they are entitled to double pay.

Benefits to the Employee in Mexico

Administration of Statutory Benefits to Employees

The Mexican Social Security Institute (IMSS) is responsible for administering social security programs, which are governed by the Social Security Law (LSS) of 1997.

Mexico’s social security system is financed by contributions from workers, employers and the government. The contributions are based on salary levels. The system protects workers in the following matters: 

  • Occupational accidents and illnesses 
  • Old age
  • Retirement and survivor pensions 
  • Disability
  • Medical benefits
  • Maternity
  • Childcare
  • Social services

Profit Sharing: Employees are entitled to share in the employer’s profits, currently fixed at 10% of the company’s gross, pre-tax income. This should be paid between the months of May and June.

Common Optional Employee Benefits

All employees receive public healthcare coverage through the IMSS. However, many employers offer their workers options for supplementary health insurance. Other common optional benefits include:

  • Car allowance
  • House allowance
  • Grocery tickets
  • Gas coupons

Guidelines for Visa and Foreign Workers

General Information Regarding Immigrants, Visitors & Residents

Mexico’s Migration Law establishes the following types of immigration status for foreign nationals in the country: 

  • Visitors
  • Temporary residence
  • Temporary residence with work permission
  • Permanent residence. 

Visitors – Visitor visas are subdivided into a) tourists and other non-business-related visitors and b) businesspersons. The maximum length of stay for foreign nationals arriving in Mexico under this type of status is 180 continuous days. Employment in Mexico is not allowed. The status of a visitor tourist describes itself. The status of a visitor businessperson allows foreign nationals to engage in business-related activities. However, they may not be paid, neither in cash nor in kind, for these activities. 

Temporary Residence – This is granted to foreign nationals who have a family connection (either Mexican or foreigner) or otherwise in Mexico. They may not pursue employment. However, they may apply for work permission. The length of their stay is linked to the person to whom they are connected in Mexico. This will not exceed four years. 

Temporary residence with work permission – This is granted to foreign workers whose work visa is sponsored by a Mexican company. The maximum duration of a temporary residence card is four years. The Mexican company must begin the process and request the work permission on behalf of the employee before their entrance to Mexico. Once the maximum four-year period has elapsed, the foreign national can seek permanent-resident status. 

Permanent residence – Permanent residency is granted to those foreign nationals who meet the any of the following requirements: 

  • They have been married to a Mexican national for more than two years (and the marital bond still exists). 
  • They have Mexican children. 
  • Their temporary residency has reached the four-year period. 

Process

Generally, the employer must first issue a job offer. Then, the employer must submit an application for a work permit. The approval process for permanent residence usually takes 30 to 60 days. Once approved, the employee should submit their document to their local Mexican consulate and attend an appointment there for eventual complete approval of the visa.

Only once this process is complete may the employee travel to Mexico for the purpose of employment. Upon arrival, and within 30 days, the employee must register with the National Institute of Immigration (INM).

After arriving in Mexico, the employee must apply for both a Social Security Number (‘Clave Única de Registro de Población’ – CURP) from the local government office and a tax number (‘Registro Federal de Contribuyentes’ – RFC), which is issued by the Mexican Tax Administration Service (‘Servicio de Administración Tributaria’).

Public Holidays Observed in Mexico in 2022

S.No Occasion Date
1 New Year’s Day January 1st
2 Constitution Day February 7th
3 Benito Juarez Day March 21st
4 Labour Day May 1st
5 Independence Day September 16th
6 Revolution Day November 21st
7 Christmas Day December 25th

Several other days are widely recognized and celebrated but are not officially mandated public holidays. Additionally, certain election days and the presidential inauguration day (every 6 years) are considered public holidays.

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