Hire employees in Mexico: A guide to recruitment in Mexico
Mexico is currently one of the most popular economies to expand into in Latin America, and possibly the world, and read on to find out why.
As one of the top 15 largest economies in the world, Mexico’s evolving business environment offers valuable opportunities. Mexico City is a hotspot for most, many of whom use an outsourcing company to hire employees.
Please do not hesitate to contact one of our experts. They will be happy to explain how our global staffing solutions can help. Our solutions can help you hire the best talent available for the roles you need to fill while minimizing the cost of failure.
Are you looking for a high quality partner to drive hiring in key geographies for your business?
Book a meeting with our global expansion expert for Mexico to discuss your expansion strategy today
Can I Hire in Mexico?
Foreign companies can successfully hire employees in Mexico. However, understanding the local labor laws and regulations will be critical to your expansion. To hire and pay employees, the company must have a legal entity registered in Mexico with the IMSS and the SAT. The IMSS is the Mexican Social Security Institute and the SAT is the equivalent of the IRS in the United States.
Working Hours
Working hours in Mexico vary by industry and occupation. The average work week is typically 6 days, Monday through Saturday. This equates to a 48-hour work week. However, some industries have different work schedules. For example, the agricultural sector may have longer workdays during the harvest season.
In addition, many companies close early on Fridays, with work ending at 2 p.m. Overall, working hours in Mexico are influenced by factors such as industry norms, laws, collective bargaining agreements, and legislation. It is important for employees to understand their employment contracts. Likewise, it is important for employers to comply with labor laws to ensure a fair and safe work environment.
Employees who work beyond an eight-hour day are entitled to double time for up to nine hours. If employees work overtime beyond nine hours, the employer must pay triple their hourly rate of pay.
Salary
In Mexico, the minimum wage varies by region and is set by local governments. The average salary in Mexico is based on the daily minimum wage, which was increased in January 2023 to 207.44 pesos or approximately $11 USD per workday in Mexico City. The rate for 2023 along the “Northern Border Zone” was increased to 312.41 pesos ($16.59 USD) per workday. However, most companies pay their employees higher wages, usually above the minimum wage.
Mexican companies are required to comply with several wage laws set forth in the labor contract. These include paying employees at least the minimum wage, providing overtime pay for work in excess of 8 hours per day or 48 hours per week, and giving employees an annual bonus equal to at least 15 days’ salary. Employers must also deduct taxes, social security contributions and benefits from employees’ wages and make regular contributions to Mexico’s social security system. Violation of these laws may result in fines and legal action.
Mexico has established the 13th month, or aguinaldo, which is a mandatory bonus payment in the employment contract in addition to the salary. The 13th month payment is equal to at least 15 days’ salary and is usually paid in December.
The 13th-month rule is established in Mexican labor law and is intended to provide employees with an additional payment to cover holiday expenses. The payment is also intended to provide workers with a financial safety net, along with social programs, in case they lose their jobs in the following year. While the minimum payment is 15 days’ pay, many employers choose to pay a higher amount, especially in industries with strong unions. Failure to comply with the 13th month rule can result in legal action against the employer and can also damage the employer’s reputation in the eyes of current and potential employees.
Taxes
Mexico has a tax system that is overseen by the federal government’s tax agency, the Servicio de Administración Tributaria (SAT). The tax system in Mexico is made up of various taxes, including VAT, corporate income tax, personal income tax, and social security contributions.
VAT in Mexico is currently 16% and applies to most goods and services, although there are some exceptions. Corporate income tax is currently set at 30% of taxable income, while personal income tax rates range from 1.92% to 35% depending on income level. Employers are also required to contribute to the Mexican social security system. This maintains benefits, pensions, disability, health care and paid leave entitlements that workers have access to.
It is divided into 8 sections:
● Sickness & Maternity – 5.25%
● Disability & Death – 1.75%
● Retirement – 2.00%
● Layoff and Retirement Benefits – 1.75%
● Child Care – 1.00%
● Work Related Accidents – 0.50% – 3.00%
● Housing Tax – 5.00%
● State Tax – 0.50% – 3.00%
The Mexican tax system is complex. As a result, compliance can be challenging for individuals and businesses alike. The SAT has implemented several initiatives to improve tax collection. One such initiative is the mandatory use of electronic invoicing.
Removal Process
In Mexico, employers must follow specific legal procedures when terminating an employee. Failure to follow these procedures may result in legal consequences, such as fines or lawsuits. Therefore, it is important to consult with a legal professional to ensure that you are following the proper procedures.
Once you understand the legal requirements, it is time to prepare the necessary paperwork. This includes drafting a written notice of termination, calculating any severance or compensation payments, and filing the notice of termination. You may need to provide additional documentation, such as employment contracts, payroll records, and proof of compliance with labor laws.
In Mexico, there is no requirement for an employer or employee to provide notice prior to termination or resignation. Notice periods can only be enforced if the employer and employee agree in advance in their employment contract.
Authorized Leave
Mexican employees are entitled to leave for many reasons. The most common types of authorized leave include paid vacation and paid time off for certain national holidays, such as Christmas Day and Independence Day.
Other types of authorized leave in Mexico include sick leave and maternity or paternity leave. An employee may also be entitled to leave for personal or family reasons, such as the illness or death of a family member.
Employers are required to follow the approved leave policies outlined in Mexican labor law. Employees may be entitled to additional leave depending on the terms of their employment contract or collective bargaining agreements:
- Holidays – The minimum number of paid holidays required by law depends on the employee’s length of service and starts at 12 days.
- Sick leave – Employees are entitled to a maximum of 52 weeks of paid sick leave if their illness or disability is supported by a medical certificate.
- Maternity Leave – Pregnant employees are offered a range of support and benefits, including the opportunity to take up to 12 weeks of paid maternity leave. Mothers are also entitled to additional breaks during the breastfeeding period, which lasts for six months after the birth of their child.
In conclusion, expanding into Mexico can be a daunting challenge if you go it alone. The cost of failing to expand your business can be enormous, so partner with us to minimize the risk of failure and take your business to the next level.
Cost of Hiring in Mexico?
Labor Costs
One of the main reasons why many companies choose to hire in Mexico is due to the country’s competitive labor costs. However, it is important to note that these wages can vary depending on the region, industry, and level of experience. Employers in Mexico must pay various taxes. These include social security, housing and severance pay.
Hiring and Recruitment Costs
When it comes to recruitment in Mexico, there are several costs that companies in Mexico may need to consider. These costs can include job postings, background checks, interviews, and pre-employment testing. Many companies in Mexico choose to work with recruitment agencies, which can also add to the overall cost of hiring.
Training and Development Costs
Once a new employee is onboarded, companies may need to invest in training and development programs. This ensures that they have the skills to perform their job duties. This can include classroom training, on-the-job training, and mentoring programs. While this can be a significant expense for companies, it can also help improve employee retention and productivity in the long run.
Employee Benefits and Perks
In addition to wages and salaries, companies in Mexico may need to provide various benefits and perks to their employees. These may include health insurance, vacation and sick leave, and retirement benefits. While providing these benefits can help attract and retain top talent, they can also add to the overall cost of hiring in Mexico.
Language Barrier
When it comes to starting a business in Mexico, language can be a huge barrier. Mexico is a country with a diverse culture and language is one of the key factors that can make or break a business. Miscommunication can lead to misunderstandings, which can lead to mistakes that can negatively impact the business.
To overcome this barrier, it is essential to hire a professional translator or interpreter who can help you communicate effectively with your business partners, customers and suppliers. You can also consider learning Spanish or hiring a bilingual employee to help you communicate with the locals.
Legal and Administrative Costs
Finally, companies in Mexico may also need to consider various legal and administrative costs when hiring new employees. These may include visa and work permit applications, background checks, and compliance with local labor and employment laws and regulations.
The cost of hiring in Mexico can vary depending on several factors, including labor costs, recruitment costs, etc. While hiring in Mexico can be a cost-effective option for many companies, it is important to fully understand and consider these costs before making any hiring decisions.
Work Alongside a Global Expansion Expert to Effortlessly Move into the Mexican Market
Many companies have been successful in their efforts to expand from the U.S. into the Latin American market. However, more than half of them partner with a team of professionals who specialize in global recruitment and expansion. With regional experts by your side every step of the way, our team of professionals can help you successfully expand across borders. From hiring top talent and managing payroll to opening bank accounts, maintaining regulatory compliance and understanding cultural values.
To support and advance your expansion strategy, talk to one of our experts today.
Are you looking for a high quality partner to drive hiring in key geographies for your business?
Book a meeting with our global expansion expert for Mexico to discuss your expansion strategy today