Employer of record in Mexico: costs, rules and how to hire

Probation in Mexico is thirty days for most roles and up to 180 for senior or specialist ones, and ending it requires a formal assessment rather than a decision.

Write down the employment arrangement

Where no applicable collective contract supplies the terms, prepare at least two written copies, one for each party. Include identification and tax details, duties, location, contract type, any probation, hours, salary, payment day and place, training, rest, leave and designated beneficiaries. Missing paperwork does not remove the worker's rights, and the terms should be explained in a language the employee understands.

Employers must register themselves and their employees with IMSS and report entries, departures, salary changes and required details within no more than five working days. Arrange registration for the start and retain evidence, and keep the required payroll and attendance records for five years. A provider's company registration is separate from the individual employee's social-security record.

Mexican law recognises employment where a person provides personal, subordinated work for salary, whatever the contract is called, and employment is presumed between the person providing the work and the person receiving it. Use an independent contractor only where the real arrangement supports independence, and note that a payroll service can administer pay while your business remains the employer.

Contract duration, probation and training

A fixed term needs a permitted reason, such as the nature of the work or temporary replacement of another employee, and if the underlying work continues after the stated term the relationship continues while that circumstance lasts. Do not use successive fixed terms just to avoid indefinite-employment rights.

A written probation period can apply to an indefinite relationship or one longer than 180 days. The ordinary maximum is thirty days, with up to 180 days available for specified management, general administration and specialised technical or professional roles. Salary, social security and benefits apply during probation, and ending for an unsuccessful trial requires the statutory assessment, including the relevant joint commission's opinion.

An initial-training relationship normally lasts up to three months, or six for the specified management or specialised professional roles, and must be written and include pay, benefits and social security. Training and probation cannot be extended or applied successively or repeatedly to the same employee at the business, and if employment continues the period counts towards service.

Specialised services and collective terms

Subcontracted specialised services or works must fall outside both the recipient's corporate purpose and its main economic activity. The contractor must hold the relevant STPS registration, commonly called REPSE, renewed every three years, and the parties need a written services contract describing the work and approximate worker count. Registration alone does not make an otherwise prohibited staff-supply arrangement lawful.

A recipient of specialised services can be jointly liable for employment and social-security obligations if the contractor fails to meet them, and the contractor also has four-monthly IMSS contract reporting, due by 17 January, May and September. Ask for the employing entity, relevant registration and evidence of payroll and social-security compliance.

Employees have protected rights to form and join unions. Applicable collective agreements can affect pay, hours, leave and other terms, so obtain the actual registered agreement for the employing business rather than assuming all workers have the same coverage. Initial agreements and qualifying revisions require the prescribed personal, free, direct and secret employee vote, and the employer must not control the union.

Changes, confidentiality and ownership

Document changes to pay, duties, hours, benefits or employer before implementation and check the legal route, because employees cannot waive accrued salary or statutory benefits. A qualifying employer substitution preserves employment rights, requires transfer of the business assets under Article 41, and carries a six-month shared-liability rule after notification. Do not assume moving payroll to a new provider resets service.

Mexican labour law protects the freedom to carry out lawful work, so a broad restriction on working for competitors after employment needs a specific legal assessment rather than a standard one-year clause or invented compensation threshold. Protect legitimate confidential information and define intellectual-property rights in terms that fit Mexican law.

For ordinary copyrighted work created under a written employment contract, the default economic-rights split is equal employer and employee shares unless agreed otherwise, and without a written employment contract the employee owns those rights. Software created in assigned duties or under employer instructions generally belongs economically to the employer unless agreed otherwise, while employee inventions have separate rules. In a provider arrangement, document the appropriate transfer or licence through to your business.

Keep the duties, employer, work location, gross salary, benefits and schedule consistent across the offer, employment contract and provider agreement. Explain the documents to the employee and agree the equipment and working arrangements before their start.

Misclassification risk, and the presumption that runs against the client

Mexico is one of the most exposed places on this site to get this wrong, because the presumption is built in. Mexican law recognises employment where a person provides personal, subordinated work for salary, whatever the contract is called, and employment is presumed between the person providing the work and the person receiving it. Source: the approved Mexican contractor guidance, Federal Labour Law, checked 18 September 2026.

Read that presumption carefully, because it runs between the person doing the work and the person receiving it. In a three-party arrangement that is a question worth asking out loud: who is receiving the work, in substance? If your managers direct it and your business consumes it, the presumption is pointing at you.

Our own guidance adds the distinction that matters when comparing providers: a payroll service can administer pay while your business remains the employer. So use an independent contractor arrangement only where the real arrangement supports independence, and when you buy a provider, be clear which of the two products you are buying. Source: the approved Mexican contractor guidance, checked 18 September 2026.

The second row below trips up most first-time budgets, because a monthly salary figure does not mean a monthly payment.

Resolve these points before the offer

Ask the provider to answer each of these against the actual role and location.

Use the minimum wage to check the legal floor and the IMSS salary statistic as a dated formal-employment benchmark. Neither establishes the right market salary for a particular role, so confirm the occupation, municipality, collective terms and actual benefit package before comparing offers.

An approved change in a source may affect the employment contract, payroll or working schedule. Agree who monitors those changes and who implements them before they take effect.

Payroll timing and annual payments

Salary-payment intervals cannot exceed one week for manual work or fifteen days for other employees, so a monthly salary quote does not permit paying only once a month. Record the agreed pay dates and provide itemised payment information. Electronic tax payroll receipts and employee deductions need their own payroll checks.

The statutory aguinaldo is at least fifteen days of salary, payable before 20 December. Employees who have not worked the full year receive the proportional amount, whether or not they are still employed when it is paid. It is not automatically a full thirteenth month, and more generous contractual or collective terms still apply.

Eligible employees participate in the employer's distributable profits through PTU, generally 10% of the relevant taxable profit, with half the pool allocated by days worked and half by wages under the statutory calculation. The individual cap is three months of salary or the average PTU received in the previous three years, whichever is more favourable. PTU is separate from the aguinaldo and provider fee.

PTU excludes general directors, administrators and general managers, and temporary workers need at least sixty days of service in the relevant year. Exemptions include qualifying newly created businesses in their first year and other statutory cases. The usual payment deadline is 30 May for a company employer and 29 June for an individual employer. In a provider arrangement, establish the actual employer and the lawful calculation instead of assuming PTU is always zero.

Mexican employer charges use several different bases at once, so no single percentage of salary will reproduce a payslip.

Separate employer charges from employee deductions

Twelve lines make up the picture, and the first four use bases other than plain salary.

The salario base de cotización, or SBC, includes ordinary salary and relevant bonuses, premiums, commissions and benefits, with statutory exclusions and different rules for fixed, variable and mixed pay, so it is not automatically the cash salary. The ordinary ceiling is twenty-five daily UMA, MXN 2,932.75 from February 2026, and the applicable minimum wage remains relevant to the lower limit.

INEGI set the 2026 UMA at MXN 117.31 daily, MXN 3,566.22 monthly and MXN 42,794.64 annually, effective 1 February 2026. UMA is a reference used for specified obligations and limits and is different from the minimum wage. Apply each charge's own base and period rather than substituting one amount for the other.

For ordinary IMSS payroll, the employer's health-in-kind fixed charge is 20.40% of daily UMA for each contribution day. Above three UMA of daily SBC, an additional 1.10% employer and 0.40% employee charge applies to the excess. Cash sickness and maternity benefits add 0.70% employer and 0.25% employee of SBC, and pensioners' medical coverage adds 1.05% and 0.375%. These percentages use different bases and cannot be added into one flat salary rate.

Employer charges also include 2% of SBC for retirement, 1.75% for disability and life insurance, and 1% for childcare and social benefits, with an employee disability-and-life share of 0.625%. Work-risk insurance is employer-funded and depends on the registered activity and claims experience, with an initial Class I mean rate of 0.54355% and higher rates for other classes. Add the separate age-related pension contribution.

Employer cesantía en edad avanzada y vejez contributions rise gradually through 2030. In 2026, the statutory schedule runs from 3.150% to 7.513% of SBC by band, with the 4.01-UMA-and-above band at 7.513%, and the employee share is 1.125%. The top employer rate becomes 8.603% in 2027. Use the applicable year and salary band, because the 11.875% top rate printed in Article 168 is the 2030 endpoint.

The employer funds a 5% housing contribution on the applicable contribution base, separate from IMSS insurance and the employee's income tax. An employee's INFONAVIT loan repayment can require an additional payroll withholding under the relevant notice, and that withholding is different from the employer's own 5% contribution.

Where the employee receives the minimum wage as their daily wage, Article 36 requires the employer to pay the contribution otherwise allocated to the worker. Do not apply the usual employee-deduction illustration mechanically to minimum-wage payroll, and calculate the contribution base and statutory benefits correctly.

Income tax and local payroll tax

SAT's 2026 Annex 8 provides the payroll withholding tariffs for different payment periods, with marginal rates from 1.92% to 35% applied with the relevant fixed amount and band rather than as a flat tax on all pay. Payroll must account for taxable and exempt pay, any employment subsidy and the employee's circumstances. Income tax withheld from salary is not an extra employer contribution.

State or Mexico City payroll tax is an additional employer cost, with local bases, exemptions and relief. Mexico City's finance authority confirms a 4% rate in its 2026 announcement, which is not a nationwide rate. Ask the provider to identify the relevant state, taxable pay items and any relief in the quote.

SBC means the integrated salary base used for social-security contributions and UMA is the official reference unit. The fixed health charge, excess-base charge, salary-based contributions and local tax do not all use the same base, so request an employee-specific payroll calculation and a breakdown of the provider's employer-cost quote.

Mexican pay has two annual obligations beyond salary, the aguinaldo and PTU, and a working week that starts shrinking next year.

Minimum pay and salary comparisons

From 1 January 2026, the general minimum is MXN 315.04 per day and the Northern Border Free Zone minimum is MXN 440.87. CONASAMI expresses these as MXN 9,582.47 and MXN 13,409.80 monthly using daily pay × 365 ÷ 12. Check the job's professional minimum and the designated border municipalities, and note that the daily minimum cannot be reduced to an hourly fraction for a shorter working day.

At the end of August 2026, IMSS reported an average daily contribution-base salary of MXN 673.10 for its registered jobs. This is a formal-employment social-security measure that includes the contribution-base treatment of pay rather than a nationwide average cash salary, a role-specific offer or take-home pay. Keep OECD and other comparisons separate with their original periods, populations and currency definitions.

Working hours: the phased reduction

The ceiling falls one step a year from 2027, and the overtime band widens as it does.

The May 2026 reform phases the ordinary weekly ceiling down from forty-eight hours in 2026 to forty-six in 2027, forty-four in 2028, forty-two in 2029 and forty in 2030, each step from 1 January. Daily limits remain eight hours for day work, seven for night work and seven and a half for mixed shifts, and a shorter agreed schedule still applies. The reform does not permit cutting salary or benefits because hours fall.

A continuous shift includes at least a thirty-minute break, and if the employee cannot leave the workplace during rest or meal time it counts as working time. Give at least one fully paid rest day for each six days worked. The phased forty-hour reform does not itself create a general entitlement to two rest days every week.

Under the May 2026 amendments and transition, the ordinary overtime band is nine hours weekly in 2026 and 2027, ten in 2028, eleven in 2029 and twelve in 2030, paid at twice the ordinary hourly rate. Article 66 allows distribution over up to four hours daily on no more than four days weekly. Excess overtime is limited to four hours weekly and paid at three times the ordinary rate, and ordinary plus overtime work cannot exceed twelve hours daily. Workers cannot be compelled to exceed the lawful limits.

Night work is between 8 p.m. and 6 a.m., and a mixed shift with at least three and a half night hours counts as a night shift. The general law sets shorter night hours rather than a universal night-pay premium. Sunday work attracts at least a 25% premium, and work on a paid weekly rest day or statutory holiday attracts double pay for the work in addition to the normal paid day. Check combined entitlements and better contractual terms.

The May 2026 law adds electronic records of each employee's start and finish times, to be provided to the authority when requested. STPS is to define coverage and exceptions, with the general provisions taking effect from 1 January 2027. Review the implementing rules before that date and keep the attendance and payroll evidence already required.

The table does not replace the daily shift limits, rest rights or a shorter agreed schedule. Plan overtime around the actual hours and statutory limits, and check better terms in the applicable collective agreement.

Annual leave doubled in 2023 and now starts at twelve paid working days, and every leave day carries a premium of at least 25% of salary on top of normal pay.

Annual leave and public holidays

The ladder rises with completed service.

Entitlement rises by two days for each subsequent year up to twenty at year five, then by two days for every five years of service from year six, and there is no general thirty-two-day lifetime cap. Pay a vacation premium of at least 25% of salary for the leave days.

Employees are entitled to at least twelve continuous leave days, which they may choose to distribute differently. Grant annual leave within six months after the relevant service year and provide the yearly service and leave statement. Leave normally cannot be replaced with cash during employment, and proportional entitlement is payable when the relationship ends.

The annual statutory holidays are 1 January, the first Monday in February, the third Monday in March, 1 May, 16 September, the third Monday in November and 25 December. Add 1 October every six years for the presidential handover and any ordinary-election day required by the relevant election law. Cinco de Mayo is not a general statutory paid holiday, and additional company holidays can be agreed.

Sickness and family leave

Most paid absence in Mexico is funded by IMSS rather than the employer, which changes how the cost falls.

For certified non-work illness, eligible IMSS sickness benefit is 60% of the last daily SBC from day four, for up to fifty-two weeks, with a possible twenty-six-week extension after IMSS assessment. Qualification normally requires four immediately preceding contribution weeks, while temporary workers need six in the previous four months. The ordinary statutory scheme does not require employer-paid salary for the first three days, though contracts can provide it.

For a recognised occupational injury causing temporary incapacity, IMSS pays 100% of the contribution salary while the employee is unable to work, pending recovery or a permanent-incapacity determination within the statutory fifty-two-week period. Permanent incapacity has separate pension rules. Report and manage the incident through the occupational-risk process rather than the ordinary sickness waiting period.

The ordinary maternity entitlement is six weeks before and six after birth, and with the required medical authorisation and request up to four prenatal weeks can move after birth. Postnatal leave can extend to eight weeks where the child has a disability or needs hospital care, supported by the medical certificate. Adoption gives the mother six paid weeks after receiving the child.

Eligible IMSS maternity subsidy is 100% of the last daily SBC for the ordinary eighty-four-day period, requiring at least thirty contribution weeks in the preceding twelve months, pregnancy certification and no paid work during the subsidised period. Where the contribution condition is not met, the employer bears the full salary obligation. Leave rights and benefit eligibility are separate.

The Federal Labour Law provides five working days of employer-paid paternity leave for a child's birth or adoption, and a contract or collective agreement can provide additional days.

During the statutory breastfeeding period of up to six months, the employee receives two extra thirty-minute breaks daily in a suitable hygienic space, and where that is not possible the parties can agree a one-hour reduction in the working day for that period. Include the arrangement in the return-to-work plan.

Eligible insured parents caring for a child under sixteen with an IMSS-diagnosed cancer can receive licences of one to twenty-eight days, up to 364 days over three years. A 60% daily-SBC subsidy requires thirty contribution weeks in the preceding twelve months or fifty-two immediately before the licence. The law restricts concurrent leave for both parents and ends the licence in specified cases, including the child turning sixteen, and this is not general paid parental leave.

Additional benefits

The ordinary private-sector law does not create a general fixed allowance of paid marriage or bereavement leave, or a mandatory marriage salary gift, so check the collective agreement, contract and workplace policy for those benefits. Offer any extra family leave, private medical insurance or retirement benefits in clear written terms, alongside the statutory annual leave, social-security and family rights.

Put any benefits above the legal minimum in writing, stating who pays, the eligibility conditions and how the benefit works during leave or after employment ends. Private insurance and extra time off should sit alongside statutory rights.