How to Hire Employees in Mexico: Costs and Checklist

How to Hire Employees in Mexico: Costs and Checklist

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Marketing Team
Marketing Team Nov 17 2022 • 8 min read
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Mexico is a country placed in the southern portion of North America. It is bordered to the north by the United States; to the south and west by the Pacific Ocean; to the southeast by Guatemala, Belize, and the Caribbean Sea; and to the east by the Gulf of Mexico. Mexico is organized as a federal republic comprising 31 states and Mexico City, its capital.

Other major urban areas include Monterrey, Guadalajara, Puebla, Toluca, Tijuana, Ciudad Juárez, and León. Mexico is now firmly established as an upper middle-income country. After the slowdown of 2001 the country has recovered and has grown 4.2%, 3.0% and 4.8%  in 2004, 2005 and 2006, even though it is considered to be well below Mexico's potential growth.

The International Monetary Fund predicts growth rates of 2.3% and 2.7% for 2018 and 2019, respectively. By 2050, Mexico could potentially become the world's fifth or seventh-largest economy.

Although multiple international organizations coincide and classify Mexico as an upper middle income country, or a middle class country Mexico's National Council for the Evaluation of Social Development Policy (CONEVAL), which is the organization in charge to measure the country's poverty reports that a huge percentage of Mexico's population lives in poverty. According to said council, from 2006 to 2010 (year in which the CONEVAL published its first nationwide report of poverty) the portion of Mexicans who live in poverty rose from 18%–19% to 46% (52 million people).

Mexico covers 1,972,550 square kilometers, making it the world's 13th-largest country by area; with approximately 126,014,024 inhabitants, it is the 10th-most-populous country and has the most Spanish-speakers.

Remote Work in Mexico

The federal government has published a decree in the Official Gazette of the Federation, amending the Federal Labor Law (FLL) to regulate the terms and conditions, employer and employee obligations, and safety and health measures related to telework. Telework is regulated by a special chapter of FLL and the telework designation is applicable whenever work is performed more than 40 percent of the time at an employee’s home or at a domicile that the employee has chosen and on which the employee has agreed.

The Ministry of Labor and Social Welfare (Secretaría del Trabajo y Previsión Social or STPS) published the project of the Official Mexican Standard (Normas Oficiales Mexicanas or NOM), NOM-037, which established the workplace safety and health obligations for teleworkers and employers as follows:

-Employers’ Obligations

  • Maintain, and keep updating, a list of all teleworkers containing the requirements set forth in the telework standard.
  • Ensure that the teleworker’s remote workplace has high-speed internet access and complies with occupational health and safety requirements, such as those regarding electrical installations, lighting, ventilation, and ergonomic conditions.
  • Employers may comply with these obligations by visiting the workplace or, alternatively, by implementing a verification checklist to ensure that the remote workplace meets the relevant health and safety requirements. Unless an employer complies with one of these obligations, the telework arrangement will not be lawful.
  • Establish a telework policy that details the specifics, among others, of:
  • The preventive actions the employer is taking with regard to safety and health issues;
  • The mechanisms the employer is instituting to prevent teleworking employees from experiencing social isolation;
  • Contact rules and procedures, as well as a description of how telework will be supervised;
  • Work shift distribution, including the employee’s right to disconnect from work at the end of a work shift.
  • Establish and document the differences between on-site work and telework, in addition to process changes and requirements.
  • Provide the teleworkers with ergonomic chairs and other equipment and accessories that will support employees’ performance.

-Teleworkers’ Obligations

  • Facilitate the conditions for an employer to visit the domicile in which telework is performed in order to verify compliance with all relevant safety and health requirements. Alternatively, teleworkers can personally apply the verification checklist mentioned among employer´s obligations.
  • Comply with the employer’s telework policy.
  • Provide written notice to the employer of any change of address or workplace.
  • Inform the employer of any occupational hazards (both inside and outside the workplace).
  • Comply with employer´s provisions regarding the protection of data and information in the performance of the employee’s activities, as well with the provisions on occupational health and safety.
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Hire and pay employees or contractors in Mexico via 4Geeks, even if don't have a legal local entity. Learn more.

Hiring Employees Legally In Mexico

If you want to hire mexicans, first you need to create a business account and a company in Mexico.

How to create a company in Mexico?

The official website of the National Government indicates the following requirements for opening a company in Mexico:

  1. Receive authorization from the Ministry of Economy to use the name. For this, the Secretariat will verify that there is no other business with the same name. If you want to do this process online, you need to have your e.firm.
  2. Prepare the constitutive act of the company with the help of a notary. This document establishes general and particular legal aspects of the company (such as corporate purpose, share capital and operating rules). All partners must sign it.
  3. Make the notice of use of denomination. The official who has carried out the constitution of the company informs the Ministry of Economy of the information of the people who have associated to create the new company and the name they will use so that other people do not use it.
  4. Register in the Public Registry of Commerce. This institution in charge of the Ministry of Economy is in charge of monitoring and protecting companies. It is necessary to pay registration fees and the price varies depending on each state.
  5. Register in the Federal Taxpayers Registry. This procedure is carried out before the Tax Administration Service and identifies the company as a moral person.
  6. Register with the IMSS. Although at the beginning, the only workers in the company are the founding partners, it is necessary to register with the Mexican Institute of Social Security to report on the hiring of personnel. Failure to do so may result in fines before this institution.
  7. Register with the other required agencies. The additional institutions with which you must register the company change depending on the type of activity, the municipality and state in which it is located. An important part of knowing how to create a company in Mexico is to review which bodies regulate issues related to your company's sector, (for example, the Ministry of Ecology and Environment or the Mexican Institute of Intellectual Property).

How do I hire a foreigner?

The main entity in charge of the entry and hiring of foreigners in Mexico is the National Institute of Migration. Before hiring a worker from another nation, Mexican law, as an employer and owner of a company, obliges you to comply with certain requirements, arranged for a better operation of your company.

In the first place, you must have a thorough knowledge of the requirements and specificities of labor relations, contracts, labor benefits, social security, termination of contracts, and other concepts of this type. If you have already contracted with Mexican personnel, you can consider this step completed and verify the following ones.

According to the Federal Labor Law, the company must have 90% Mexican staff, that is, there is only 10% space for foreign workers. Likewise, once hired, immigrant employees must be obliged to teach and instruct the Mexicans belonging to the company in the area performed by them.

🇲🇽
Hire and pay employees or contractors in Mexico via 4Geeks, even if don't have a legal local entity. Learn more.

Regarding social charges:

Social Security Rate in Mexico averaged 10.52 percent from 1981 until 2022, reaching an all time high of 17.63 percent in 2000 and a record low of 0 percent in 1981. This page provides - Mexico Social Security Rate - actual values, historical data, forecast, chart, statistics, economic calendar and news.

Regarding the employment contract:

  • Contract by Work or by Determined Time Period

Article thirty-seven of the FLL states that a specific time period for labor contracts in Mexico can be stipulated only when required by the nature of the work provided. This stipulated time can also be defined when the contract with an individual is for the purpose of temporarily replacing another worker.

  • Mexican Labor Contracts for Indeterminate Amounts of Time

This type of agreement includes those for undetermined work relationship or those that are longer than one hundred and eighty days.  In this instance, a trial period that does not go beyond 30 days may be established. This trial period can be employed for the sole purpose of ensuring that the employee meets the requirements and knowledge that is necessary to perform the work that has been defined.

  • Contract for a Trial Period

The inclusion of Article 39-A of the Federal Labor Law provides that in the case of trial periods, (which will be between 30 and 100 days for technical and administrative work), if the employer decides not to continue the work relationship, he or she must then go to Mexico’s Training and Productivity Commission to let the worker go. To avoid the abuse Mexican labor contracts for a trial period, the law stipulates that back to back contracts for training will not be used.

  • Training Contracts

Training Mexican labor contracts have been enacted so that individuals who do not have experience are able to acquire it by engaging in their personal subordinate services. According to Article Thirty-Nine-A of the FLT, it is considered that there is a work relationship for initial training when a worker is obliged to provide subordinate services under the management and command under an employing entity.

Training contracts are of a maximum period of 3 months unless the training is for managerial positions.  Positions in management have a maximum training period of up to six months.  When the trial or initial training period ends, and the work relationship continues, it should be considered employment for an indefinite time period.

  • Seasonal Mexican Labor Contracts

Under article 39-F of the FTL, there is the specific provision that employment relationships for an indefinite period in Mexican labor contracts will, generally speaking, be continuous.  However, there may be agreements that are not for a specific time frame but are for seasonal work.  Under these types of Mexican labor contracts, workers have the same rights as those workers that are employed under a contract that is indefinite.

Termination process

Dismissal and termination are distinguished in the Federal Labor Law. While termination may be due to economic considerations, an employee's disability, a force majeure event, the employee's demise, or the conclusion of the work, dismissal may be justified based on the employee's behaviour.The two articles of Federal Labor Law of relevance are art. 47 on dismissal and art. 52 on termination.

Notice period

Notice duties for employees are neither recognized or enforceable under Mexican law, and neither employers nor employees are required to warn the other party in advance of a dismissal or resignation. Employer notice responsibilities may be enforced if they have been agreed upon, however Mexican employers rarely do.

Probation periods

The employer may impose a probationary period of up to 30 days if the employment contract is for a term longer than 180 days or for an indeterminate amount of time. The probationary period for managerial, technical, or professional positions may be extended by up to 180 days.


Holidays (non laboral days)

Saturday, January 1, 2022

New Year's Day (Año Nuevo)

Monday, February 7, 2022

Constitution Day (Día de la Constitución)

Monday, March 14, 2022

Benito Juarez Day (Día del natalicio de Benito Juarez)

Sunday, May 1, 2022

Labor Day (Día Internacional del trabajo)

Friday, September 16, 2022

Independence Day (Día de la independencia)

Sunday, November 20, 2022

Revolution Day (Día de la Revolución Mexicana)

Sunday, December 25, 2022

Christmas Day (Navidad)

Taxes in Mexico

Employer

  • 20.40% - Maternity & Illness (fixed quota)
  • 5% - Housing Fund
  • 3.15% - Seniority Insurance
  • 3% - State Payroll Tax maximum (depends on employee state and gross salary)
  • 2% - Retirement
  • 1.75% - Disability & Life Insurance
  • 1.10% - Maternity & Illness (extra quota)
  • 1.05% - Maternity & Illness - retired medical expenses quota
  • 1% - Daycare Insurance
  • 0.7% - Maternity & Illness - cash benefits quota
  • 0.54355% - Labor risk insurance
🇲🇽
Hire and pay employees or contractors in Mexico via 4Geeks, even if don't have a legal local entity. Learn more.

Employee

  • 1.13% - Seniority Insurance
  • 0.63% - Disability & Life Insurance
  • 0.40% - Maternity & Illness (extra quota)
  • 0.38% - Maternity & Illness - retired medical expenses quota
  • 0.25% - Maternity & Illness - Cash benefits quota
  • 1.92% - up to 6,942.35
  • 6.40% - 6,942.36 - 58,922.27
  • 10.88% - 58,922.28 - 103,550.51
  • 16.00% - 103,550.51 - 120,372.95
  • 17.92% - 120,372.96 - 144,119.39
  • 21.36% - 144,119,40 - 290,667.83
  • 23.52% - 290,667.84 - 458,132.39
  • 30.00% - 458,132.40 - 874,650.11
  • 32.00% - 874,650.12 - 1,166,200.07
  • 34.00% - 1,166,200.08 - 3,498,600.11
  • 35.00% - 3,498,600.12 and above

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