How to hire employees in Mexico

Mexico's strategic location and economic vitality position it as an alluring hub for tapping into a diverse and hardworking talent pool. Our guide navigates through Mexico's unique hiring landscape, addressing critical aspects from understanding local employment laws to embracing the cultural nuances that influence the workforce. 

It offers a seamless roadmap for businesses looking to integrate into Mexico's economy, focusing on leveraging opportunities while ensuring legal compliance. 

What you need to know before hiring employees in Mexico

Job market in Mexico

In 2022, Mexico's evolving job market became an enticing canvas for employers worldwide, spotlighting a significant decline in youth unemployment and showcasing a talent pool ripe for the picking. The economic landscape, diverse across agriculture, industry, and services, reveals a workforce brimming with potential and versatility. Despite facing challenges like the lowest average wage since 2009 and the living costs outpacing salary increases, the resilience and spirit of the Mexican workforce shine through.

The introduction of a higher minimum wage in 2023, though a step in the right direction, still underscores the acute need for well-paying opportunities. This scenario is especially pronounced in the face of gender wage disparities and the high cost of essentials, which disproportionately affect the workforce.

For employers, Mexico represents a golden opportunity to tap into a young, optimistic talent pool eager to make their mark. The country's job market, characterized by its dynamic and hardworking population, invites businesses to leverage this human capital, promising not just growth but a partnership in shaping a prosperous future. Engaging with Mexico now means accessing a workforce ready to contribute to innovation, drive technological advancement, and embrace global business challenges.

Mexico hiring trends

Amid Mexico's evolving economic landscape, the manufacturing sector shines, particularly as labor and transportation costs rise globally, making it a more competitive option than traditional powerhouses like China, especially for industries targeting the U.S. market. 

The energy sector, led by Pemex despite challenges such as oil theft causing daily losses of nearly 10.5 million pesos, is ripe for talent in petroleum engineering and cybersecurity, thanks to reforms inviting private competition. 

The digital transformation is accelerating, with a notable 7% of global respondents recognizing the high quality of Mexican products, fueling demand for IT and digital marketing professionals. For employers, Mexico's hiring trends signal a growing need for skills spanning technical expertise to adaptability, set against a backdrop of a workforce eager to drive innovation and growth in a market poised for transformation.

How to hire employees from Mexico

1. Set up an entity in the country

Embarking on setting up a local entity in Mexico represents a commitment to the market, offering you complete control over your hiring practices and operational directives. This route is particularly appealing for organizations equipped with the necessary resources and management depth to sustain a significant employee base within the country. It involves investing in local assets and adopting a multi-currency payment system to accommodate offshore employees, making it an ideal strategy for companies with a long-term vision and dedication to the Mexican landscape.

2. Hire independent contractors

For entities desiring agility and targeted expertise for project-focused endeavors, leveraging independent contractors in Mexico offers an effective and streamlined solution. This strategy facilitates a reduced legal and regulatory burden, as contractors function as independent entities within a precisely established contractual period. It emerges as a wise option for companies aiming to swiftly adjust to project requirements and shifts in the marketplace, providing specialized talents without necessitating enduring obligations.

3. Partner with an EOR in the country

Collaborating with an Employer of Record (EOR) in Mexico provides an effortless connection to the local workforce, eliminating the need for setting up a formal business entity. Serving as your legal representative in Mexico, an EOR navigates through the complexities of recruitment, payroll, and regulatory compliance, allowing you to concentrate on your team's strategic tasks. This approach is especially beneficial for companies seeking swift access or growth in the Mexican market, guaranteeing immediate compliance and operational effectiveness right from the start.

Compliance risk while hiring in Mexico

Adhering to employment laws in Mexico is essential for companies establishing remote teams. The complexity of Mexican labor legislation can be effectively addressed with the right knowledge and assistance. 

Gloroots, serving as a global employment and payroll platform, facilitates the compliant hiring, onboarding, and management of employees across over 160 countries. This partnership enables companies to access Mexico's rich tech talent pool while avoiding legal and administrative pitfalls. 

With Gloroots' deep understanding of international employment regulations, the risk of legal issues is minimized, ensuring smooth operations globally and allowing businesses to concentrate on their primary goals and expansion..

Key Aspects of Mexico Labor Law

Employment Contract:

Mexican labor legislation requires that all employment agreements are documented in writing. Each contract must at least include:

• The identification details of both the employer and employee.
• The nature of employment, such as permanent, temporary, and so on.
• Any probationary period.
• The location of the workplace.
• A detailed job description including tasks and responsibilities.
• Information on basic salary, additional compensations, benefits, and specifics on payments.
• Work schedule.
• The total number of vacation days.
• Details regarding any training provided.

In the absence of a specific designation, employment contracts in Mexico default to permanent status. It's also compulsory for the contract to be written in the local language.

Working Hours:

Mexican labor legislation restricts weekly working hours: 48 hours for day shifts, 45 hours for mixed shifts, and 42 hours for night shifts, promoting a healthy balance between employee productivity and welfare. This balance is crucial to prevent burnout, particularly in the tech industry, where extended work periods are common.

Overtime: 

For any overtime work performed, employers must compensate employees with an additional 100% on top of the regular wage rate for each overtime hour. When overtime extends beyond nine hours, the compensation rate must escalate to 200% above the normal rate for regular working hours. Employees assigned to work on Sundays are entitled to a 25% increase in their regular salary. As per Article 123 of the Mexican constitution, the legislation specifies that overtime should not exceed 3 hours per day, cannot occur for more than three consecutive days, and must not surpass 9 hours within a given week.

Minimum Wage: 

Heading into 2024, Mexico sets its minimum wage at MXN $248.93 daily. In the competitive tech sector, offering above-market rates and comprehensive benefits profit sharing, paid leave, social security, and housing contributions positions your firm as a top choice for elite talent, ensuring you attract and retain a dedicated, high achieving team in Mexico's cost-effective, talent-rich environment.

Payroll laws in Mexico

Employers are required to process payroll on a monthly basis, ensuring timely and regular payment to their employees.

Employment benefits in Mexico

Leave Policies in Mexico

1. Paid Time Off:

Upon completing one year of service, employees are entitled to 12 days of annual leave, with an increment of two days per year until reaching a 20-day cap. Post the fifth year, vacation time extends by two days every five years. An obligatory holiday bonus equals 25% of vacation earnings. Mexico celebrates at least seven national holidays, increasing during presidential elections and religious events, with work on these days compensated at double the usual rate.

2. Public Holidays:

Mexico recognizes 7 public holidays throughout the year.

3. Sick Days:

Under the Social Security umbrella (IMSS), qualified employees may access up to 52 weeks of compensated sick leave, receiving 60% of their usual salary, as verified by IMSS-affiliated medical experts. In cases where the leave stems from a work-related injury, individuals are entitled to their complete standard wage, ensuring support and security during their recovery period. This robust system underscores Mexico's commitment to employee welfare and workplace safety.

4. Maternity Leave:

Female employees are entitled to 12 weeks of maternity leave, divided into two segments: six weeks pre-delivery and six weeks post-delivery, receiving their entire salary during this period IMSS funds 60%, with the remaining 40% supplemented by the employer. A medical certificate from an IMSS-approved facility is necessary to qualify. Additionally, upon gaining custody of a minor, female employees benefit from six weeks of paid adoption leave, highlighting Mexico's support for family expansion and employee well-being.

5. Paternity Leave:

Male employees are granted compulsory paid paternity leave lasting for 5 days..

Public Health Insurance 

In 2020, Mexico's public health insurance system, primarily through the Mexican Social Security Institute (IMSS), covered 47 million individuals, accounting for over 37% of the populace. The Instituto de Salud para el Bienestar followed, reaching 32.8 million. Despite improvements, 2020 saw around 35 million Mexicans, or 28.2% of the population, still vulnerable due to lack of healthcare access, a slight increase from 2018. Overall, the majority of Mexicans benefited from public health insurance, highlighting ongoing efforts to expand healthcare access across the nation.

Filing tax in Mexico

Income Tax:

Mexico's income tax rates illustrate a dedication to equitable financial governance, with a tiered structure that escalates from 1.92% to 35% based on income levels. This progressive system ensures that contributions are aligned with individual earnings, promoting a fair distribution of fiscal responsibility. Employees and employers alike contribute to a comprehensive social security system that supports healthcare, pension, and other essential services. Such mutual contributions lay the groundwork for a stable future, enhancing the relationship between businesses and their workforce. Our guide delves into managing these financial obligations, thereby strengthening the employer-employee partnership in Mexico's economic framework.

Other Tax and Social Security Contributions:

In Mexico, the payroll contribution framework demonstrates a commitment to social welfare, with employer and employee contributions supporting vital social security networks. Employers contribute between 24.95% and 44.73%, covering social security (IMSS), retirement, and the National Housing Fund (INFONAVIT), ensuring a comprehensive support system for employees' health, retirement, and housing needs. Employees, on the other hand, contribute a total of 2.775% towards social security and retirement/old age insurance, establishing a shared responsibility for societal welfare. This collaborative investment in social services fosters a secure and supportive environment, promoting trust and solidarity within the workforce. Our guide explores these contribution strategies, aiming to fortify the employer-employee relationship within Mexico's supportive economic environment.

Business culture in Mexico

Understanding the landscape of business culture in Mexico is critical for international firms considering this dynamic market. The business norms in Mexico encompass:

• Building trust-based relationships is crucial, with a preference for face-to-face meetings.
• Decision-making is often centralized, highlighting the importance of engaging with senior executives.
• A relaxed approach to schedules and deadlines, embodying the "mañana" attitude.
• A significant emphasis on negotiation, expecting a give-and-take process.
• Dress codes and communication are formal; using titles and surnames is common until a closer relationship develops.
• Social occasions and meals play a crucial role in business, reflecting Mexico's rich cultural heritage.
• Understanding and respecting these cultural nuances are key to successful business interactions in Mexico.

Top sectors to hire from in Mexico

Software and Data: 

This sector, dominates more than half of the new business landscape, indicating a robust pool of tech-savvy talent and innovators.

Fintech:

Sharing the lead with software and data, fintech is a key player, showcasing Mexico's growing prowess in financial technology and services.

E-commerce and Retail: 

Accounting for nearly 23% of the market, this sector is ripe for talent in digital commerce and traditional retail, reflecting diverse consumer engagement strategies.

Top cities to hire from Mexico

Mexico stands out as an ideal destination for expatriates and immigrants, offering a high quality of life and affordable living costs, alongside vibrant job prospects.

Monterrey:

Dubbed the country's industrial hub, Monterrey boasts opportunities in automotive, cement, and electronics, attracting multinational corporations and startups, marking it as a city poised for future growth.

Guadalajara:

Celebrated as Mexico's tech heartland, Guadalajara offers lucrative careers in IT and manufacturing, fostering a thriving environment for startups and corporate roles alike.

Mexico City:

As the economic powerhouse, Mexico City hosts major banks and financial institutions, offering abundant high-paying opportunities in the finance sector.

Hire in Mexico compliantly with Gloroots

Hire in Mexico compliantly with Gloroots. Acting as an Employer of Record (EOR) in Mexico, Gloroots streamlines the candidate onboarding process, enabling quick start-up of operations in compliance with local and international laws. Tailored for businesses of all sizes, Gloroots provides a comprehensive solution for payroll management, benefits administration, and tax compliance, all without the necessity of creating a local presence. This service allows businesses to concentrate on building a proficient remote team within Mexico. For more details on how Gloroots can facilitate your hiring endeavors in Mexico, please reach out to us.

Frequently Asked Questions 

1. How can Gloroots assist in navigating employment contracts and benefits in Mexico?

Gloroots, acting as an Employer of Record (EOR) in Mexico, offers expert assistance in navigating the complexities of employment contracts and benefits, ensuring full compliance with Mexican labor laws. 

By managing contractual details, from defining job roles to outlining compensation and benefits, Gloroots ensures that all agreements meet Mexico's legal requirements. 

This includes facilitating a comprehensive benefits package that aligns with local norms, such as annual profit sharing, paid vacations, and contributions to social security and housing funds. With Gloroots, companies can confidently extend their operations into Mexico, supported by a thorough understanding and implementation of local employment standards.

2. What makes Gloroots the preferred partner for US companies hiring in Mexico?

Gloroots stands out as the preferred partner for US companies looking to hire in Mexico due to its comprehensive approach to employment compliance and strategic workforce management. By serving as an Employer of Record, Gloroots eliminates the complexities of navigating Mexico's employment landscape, from legal and tax obligations to HR management. 

This allows US companies to expand their team in Mexico efficiently, without establishing a local entity or compromising on compliance with Mexican and US regulations. Gloroots' tailored solutions, which include payroll management, tax compliance, and employee benefits administration, make it an invaluable asset for businesses aiming to leverage Mexico's talent pool while maintaining operational integrity.