Mexico PEO Employment Services

Velocity Global’s Mexico PEO (Professional Employer Organization) solution simplifies and accelerates your company’s expansion into Mexico through international employment regulation expertise and employee onboarding—all without an entity. Our global expansion solution expedites your market entry 90% faster than traditional entity establishment.

Through our International PEO solution, Velocity Global becomes your Employer of Record (EOR). As your EOR, we use our global infrastructure to quickly and compliantly hire and onboard your global employees on your behalf—while you maintain management of your entire team. Velocity Global’s experts manage all payroll, compliance, and risk mitigation to provide a seamless expansion experience.

Table of Contents

Mexico Fast Facts

Currency: Mexican Peso (MXN)
Capital: Mexico City
Population: 128 million
Economy: $1.2 trillion
Top Sectors: Services, industrial manufacturing, agriculture
National Holidays:

  • New Year’s Day
  • Constitution Day
  • Benito Juarez Day
  • Labor Day
  • Independence Day
  • Revolution Day
  • Change of Federal Power Day
  • Christmas Day

Hiring Considerations in Mexico

Expanding into any foreign market requires research and due diligence to understand the country’s economic, social, and political climate. Mexico is no different. As the world’s 15th-largest economy, the United States’ top trade partner, and a talent resource for U.S. tech companies, Mexico offers a unique global expansion environment.

Benefits of hiring in Mexico:

  • Mexico is the second-most competitive country in Latin America after Chile, with a 10-year average annual GDP growth of 2.6%. In the long-term, the World Economic Forum projects Mexico will be the world’s seventh-largest economy by 2050.
  • The country’s manufacturing generates $175 billion annually, with automotive, medical devices, aeronautics, and electronics leading other sectors in terms of output.
  • With the passage of its Financial Technology Institutions Law in 2018, Mexico offers a promising market for future-looking legislation regarding fintech and cryptocurrency. The law brings together private businesses, regulators, and legislators to generate technological innovation and financial inclusivity and create a more accommodating environment for companies. It issued its first license in January 2020, which allows the business to operate as a financial technology institution. Analysts predict other organizations will receive the same status, paving the way for innovative financial businesses.
  • Similarly, Mexico is the second-largest market for tech startups and scaleups. By 2025, Mexicans will have 3.5 connected devices per person, creating a huge opportunity for new digital companies and their products and services.

Challenges when expanding into Mexico:

  • Some companies must construct new offices or warehouses before operations begin. These businesses face sticker shock , as Mexico recently made obtaining construction permits more difficult.
  • Companies expect an arduous tax-paying process, with over 240 hours required to complete taxes on average per year. To file correctly, firms must explore regulatory and reporting requirements for their specific industry.
  • Based on the World Bank’s measurements of a country’s judicial practices promoting quality and efficiency, Mexico ranks relatively low in terms of contract enforcement. Depending on the location, companies wait between 160 and 455 days from the time a plaintiff files the lawsuit until payment.

Cultural nuances and must-knows for doing business in Mexico:

  • Greet with a handshake and address all meeting members by their first surname (as many Mexicans have two surnames), until invited to address them differently. If speaking Spanish, use the formal “usted” and greet with a handshake.
  • Dress in formal business attire. For men, a suit and tie are standard. Women wear conservative dresses or suits.
  • Receive and give business cards at the meeting’s start. Passing out English language cards is common.
  • Be patient during the negotiation process; finalizing a deal may take many meetings. Expect flexible deadlines, and leave room for further bargaining. To streamline the conversation, it helps to include an executive in the process, as Mexican culture values seniority.

Employment Contracts in Mexico

Minimum wages and salaries:

  • Mexico’s National Minimum Wage Commission recently increased the country’s minimum wage to 123.22 pesos (~$5.13), a 20% increase from the previous 102.68.

Probation periods:

  • Hiring in Mexico does not require a probation period. However, probation periods must not exceed 180 days for those in leadership and management positions, or beyond 30 days for employees. A probation period must not exceed 180 days for those in leadership and management roles or beyond 90 days for employees.

Bonuses:

  • Mexican federal law requires all businesses pay Aguinaldo, or annual Christmas bonus, by December 20th each year. Failure to pay the bonus may result in a fine up to 315 times the national daily minimum wage.
  • Aguinaldo must be equal to at least 15 days’ pay, but can be prorated for employees with less than one year of employment. Employees do not pay income tax on Aguinaldo payments equal to 30 days’ minimum wage.

Termination and severance considerations:

Employee termination in Mexico does not require a notice period. However, employers must provide just cause, which includes:

  • Vandalism
  • Sexual harassment
  • Inaccurate statements concerning work qualifications
  • Revealing company secrets
  • Refusing compliance with safety standards and protocols
  • Four unexcused absences within 30 days

Employers can terminate employees without evidence of just cause. However, employment contract termination requires a voluntary agreement between the employer and employee that grants statutory benefits and possibly compensation.

Paid Time Off & Benefits

Maternity leave:

  • Expectant mothers may take up to 84 days’ maternity leave, paid by the Mexican Social Security Institute. Mothers take six weeks paid leave before their child’s birth, and six weeks after.
  • Extensions take place when complications occur with the pregnancy. In these cases, mothers receive only half their salary or wage for up to 60 additional days of leave.
  • Adopting mothers may take up to six weeks’ paid leave following adoption.

Paternity leave:

  • Paternity leave grants fathers five days’ paid leave for either birth or adoption.

Vacation and annual leave:

  • Employees receive six days’ paid vacation after one year of employment.
  • Between the first and fourth years, employees receive two additional days per year.
  • In their fourth year, employees earn two additional days every five years. For example, an employee with two years of service with their current employer receives eight days of paid vacation.
  • An employee with three years of service earns 10 days of paid vacation.

Sick leave:

  • Mexico’s Federal Labor Court (FLC) entitles employees up to 52 weeks’ leave, with the possibility of an additional 52 weeks. However, there is no annual entitlement pay.
  • Employers must register the employee with the Mexican Social Security Institute (IMSS), and the employee must obtain an IMSS-granted certificate describing the sickness or injury. IMSS determines eligibility and pay during leave, and pays the employee directly. Employers do not pay employees’ salaries during leave.

Payroll

Average workweek hours:

  • Mexican employees work 40 hours per week, per five-day workweek.

Overtime considerations:

  • Overtime in Mexico means nine hours per week, per five-day workweek. However, employment contracts may cover additional overtime.

Taxes

  • Employer contributions include 18.34% to Social Security, 7.00% to Food Coupons, 0.42% to Vacation Accrual, 3.00% to Payroll Taxes, and 4.17% to Aguinaldo, totaling 32.93% total employer burden.

Employee taxes:

Taxable Income Range

(pesos)

Tax on Column 1 (pesos) Tax on Excess

(%)

 
0.01 – 6,942.35 0 1.92%
6,942.36 – 58,922.27 133.28 6.40%
58,922.28 – 103,550.51 3,460.01 10.88%
103,550.52 – 120,372.95 8,315.57 16.00%
120,372.96 – 144,119.39 11,007.14 17.92%
144,119.40 – 290,667.83 15,262.49 21.36%
290,667.84 – 458,132.39 46,565.26 23.52%
458,132.40 – 874,650.11 85,952.92 30.00%
874,650.11 – 1,166,200.07 210,908.23 32.00%
1,166,200.08 – 3,498,600.11 304,204.21 34.00%
3,498,600.12 and above 1,097,220.21 35.00%

Choose Velocity Global

Establishing your business presence in Mexico is a significant step. Aligning with an experienced global expansion partner helps you take full advantage of business opportunities in the country. Rely on Velocity Global’s International PEO solution to handle all risk mitigation, payroll, and compliance, so you can quickly and compliantly expand into your new market.

Whether your Mexico expansion requires a single hire or building a brand new team, International PEO provides essential flexibility to grow your global brand on your timeline. We help you get there faster, and up to 60% more cost-effectively than with entity establishment.

Ready to take your first step towards growing your presence abroad? Learn how Velocity Global’s Mexico PEO solution makes it happen.