Explore our EOR&PEO services in MEXICO

As your EOR in Mexico, we’d help you expand by hiring employees and running their payroll without establishing a local branch office or subsidiary.


Your candidate is hired by a PEO in Mexico provider in accordance with local labor laws and can be onboarded in days instead of the months it typically takes. Shortly after, your new employee will be working for you, just like any other member of your team.

Mexico EOR and PEO
Mexico City
EOR in Mexico Acvian

Country Overview

Mexico is a country located in North America, bordered by the United States to the north and Belize and Guatemala to the south. With a population of over 130 million, it is the third-most populous country in Latin America, after Brazil and Colombia. The capital of Mexico is Mexico City, one of the most populous cities in the world, and its official language is Spanish.

General Information

  • Population: ~130.000.000


  • Capital City: Mexico City (population: ~10.000.000)


  • GDP: ~$3 trillions


  • GDP per capita: ~$23.000
  • Currency: Mexican Peso (MXN)


  • Unemployment: ~3.6%


  • Employer Taxes: 36.6% – 43.72%


  • Employee Taxes: 1.92% – 35%


Employment Contracts in Mexico

According to the Mexican Federal Labor Law (FLL), an employment contract must be in writing and include specific information, such as the employee’s job duties, salary, and the length of the contract.


In Mexico, employment contracts can be either for a fixed term or for an indefinite period. A fixed-term contract is one that has a specific end date, while an indefinite-term contract does not have a set end date. The FLL states that employees working under a fixed-term contract are entitled to the same rights and benefits as those working under an indefinite contract. Additionally, Mexico’s Ministry of Labor and Social Welfare (STPS) has a program of permanent contracts “Contratos de Trabajo Permanente” which seek to convert temporary contracts into permanent ones.

Probation Period in Mexico

FLL accepts a probation period of up to 90 calendar days for most types of employment contracts. This period can be extended up to 180 days in certain specific cases such as professional training or special work conditions.


During the probation period, both the employee and the employer have the right to terminate the employment relationship without notice or cause. However, employers must provide a written notification to the employee at least 3 business days before the termination of the contract. If the employee is being terminated for cause, the employer must specify the cause in the notification. On the other hand, if the probation period ends and both parties agree to continue the employment relationship, the employee’s employment contract becomes permanent.

Working Hours in Mexico

The government sets the maximum number of hours that an employee can work in a week. According to the FLL, the standard workweek in Mexico is 48 hours per week, which is equivalent to 8 hours per day for 6 days a week. However, the standard work week may be reduced to 44 hours per week, which is equivalent to 8 hours per day for 5 and a half days a week, when the nature of the work so requires or when the employee and the employer have agreed to this schedule through a collective agreement or a collective benefit.


Additionally, the FLL also requires employers to provide their employees with at least one day of rest per week. This day of rest must be consecutive and must not be divided into parts throughout the week. Employers also have to grant a 30-minute rest period for every 5 hours of consecutive work.

Vacation Days in Mexico

According to the FLL, every employee is entitled to a minimum of 6 working days of paid vacation per year, this increases with the time worked in the company, this is known as vacation days by seniority. Additionally, employers are required to pay a day of salary for each year of service and up to a maximum of 12 days, this is known as Vacation Bonus.


Employees in Mexico take their vacation days at a time of their choosing, as long as they provide reasonable notice to their employer and the dates do not cause undue inconvenience to the business. However, it is important to note that the law establishes that vacation days must be taken within the year they are earned, otherwise they will be lost, unless otherwise agreed upon by the employer and the employee.

Sick Leave in Mexico

Every employee is set to a minimum of 8 working days of paid sick leave per year, which can be accumulated year after year, up to a maximum of 240 days. Additionally, the FLL establishes that the employer must pay the worker 100% of their salary during the days of medical leave, but the worker may choose to use days of paid vacation instead of medical leave if they want.


In order to be eligible for paid sick leave, employees must provide their employer with a medical certificate issued by a licensed physician, indicating the employee is unable to work due to illness or injury. This certificate must be provided to the employer within 24 hours of the start of the sick leave. Also, employees must use the sick leave consecutively.


Additionally, the FLL also establishes employees to additional days of sick leave in certain situations, such as if an employee is suffering from a serious illness or injury, or if an employee is caring for a family member with a serious illness or injury. In these cases, the employee can be entitled to up to 180 additional days of paid sick leave.

Wages and Salary Payment in Mexico

The minimum wage is set by the Mexican government and varies depending on the region and the economic activity, as of 2021 the general minimum wage is $141.22 MXN per day. Employers must pay their employees at least twice a month, and provide payslips that show the employee’s salary and any deductions made, such as taxes or social security contributions.


The FLL also establishes that employers are required to make contributions to the employee’s social security and pension funds, which are typically around 25% of the employee’s salary. Additionally, Mexico’s Institute of Social Security (IMSS) makes a percentage of the worker’s salary, while the employer also contributes a percentage. Also, employers must also contribute to other benefits such as severance pay and paid holidays.


FLL prohibits employers from making salary deductions for items such as uniforms, tools, or equipment, except in specific cases agreed upon by the employee. Employers also may not dock an employee’s pay for things such as damage to company property unless the employee is responsible for that damage.

Public Holidays in Mexico

  • January 1: New Year’s Day
  • First Monday in February: Constitution Day
  • March 16: Benito Juárez’s Birthday. Observed third Monday in March.
  • May 1: Labor Day
  • September 16: Independence Day
  • November 20: Revolution Day. Observed third Monday in November.
  • December 1: Inauguration Day. This holiday occurs every six years with the swearing in of a new Mexican President. The last such day was in 2018.
  • December 25: Christmas

Employer Taxes in Mexico

Employers are required to make contributions to the Mexican Social Security Institute (IMSS) on behalf of their employees. The current contribution rate for employers is 3.1% of an employee’s salary and must be paid along with the employee’s contribution of 1.5%. Employers make additional contributions for certain benefits such as pensions, disability, and medical expenses.

Employee Taxes in Mexico

In Mexico, employee taxes are known as “Impuestos Sobre la Renta” (ISR) and are managed by the Servicio de Administración Tributaria (SAT). Employees in Mexico are required to file their taxes annually and the tax year runs from January 1st to December 31st.


The ISR rate is progressive, meaning that the more you earn, the higher percentage of your income will be taxed. Tax rates in Mexico vary from 1.92% to 35%. The lowest rate, 1.92%, applies to earnings up to $400,000 MXN (approximately $20,000 USD), while the highest rate of 35% applies to earnings over $8,000,000 MXN (approximately $400,000 USD). It’s important to note that there are several tax deductions and credits available to taxpayers in Mexico, such as those for mortgage interest, donations to certain approved organizations and retirement savings. Additionally, there are also different types of tax declarations, some are annual and others are monthly. It is important to consult with a tax professional to determine which one of those you need to file, as well as which deductions and credits you may qualify for.

Notice Period in Mexico

The notice period is determined by the length of time the employee has been with the company.


According to Mexican labor law, employees who have been with a company for more than one year but less than three years must be given a 30-day notice period before their employment is terminated. If the employee has been with the company for three or more years, the notice period increases to 60 days. However, if the termination is due to just cause, the employer can dismiss the worker without notice period.


In practice, many companies in Mexico have their own policies regarding notice periods and may require employees to give even more notice than the legal minimum. Additionally, some companies may offer severance pay or other benefits in lieu of the notice period.

Termination / Severance in Mexico

Termination of an employment contract can happen either by mutual agreement between the employer and the employee or by the employer’s decision. According to the Mexican Labor Law, the termination of a contract must be done in writing, and the employer must have a valid reason for the termination.


The most common reasons for termination in Mexico are the expiration of a fixed-term contract, completion of a specific project, or termination for cause such as poor performance, violation of company policies or committing a serious offense.


When the termination is due to the employer’s decision, the employee is entitled to receive a severance payment. This payment is calculated based on the length of the employment and the employee’s salary. According to the Mexican Social Security Institute, the severance payment can range from 15 to 45 days of salary for every year of service, depending on the length of service.


Additionally, when the termination is not due to just cause, the notice period must be respected, as explained before.

Contact Us

Need help navigating employment regulations in foreign countries? Contact us now to see how our PEO and EOR services can streamline the process and ensure compliance. Don't let employment issues hold you back from expanding your business globally - click the contact button below to get started!



Drop us a line
Accept *

Thank you! Our specialists will contact you shortly