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Payroll in Mexico

Introduction

Are you an SME or startup company that wants to expand your operations to Mexico? Are you confused and not sure how to do this without establishing an entity in Mexico? 

We have a solution! When you partner with us, we provide a global HR solution that will allow your company to hire new employees in minutes and run global payroll with a click of the mouse. Allow us to take the guesswork out of international payroll and compliance in 160+ countries, including Mexico! 

Keep reading to learn more about Mexico’s payroll processes and find out how Skuad can help.

What does the payroll process in Mexico involve? 

If you want to hire workers in Mexico, you have to follow the guidelines for payroll processing. Although not exactly the same, the payroll process in Mexico is similar to what you would do in most other countries. You’ll have to:

  1. Collect employee information: when you hire a new employee or contractor, you must collect the necessary information from them. This can include personal information, like the address and tax numbers, or additional information required by local laws. 
  2. Calculate gross pay: gross pay is what you owe workers for the hours worked at the hourly rate you said you’d pay. With salaried employees, this number is usually the same every time. 
  3. Calculate net pay: the net pay you owe workers is the gross pay minus any taxes or other deductions, such as benefits. This is the amount you will pay them. 
  4. Pay your workers: Once you have determined the net pay, you have to process payroll and pay your workers. Most payments are digital through direct deposit, but submitting checks may be a requirement in some locations. 
  5. File taxes with the proper agencies: businesses are responsible for filing taxes, social security, and other taxes withheld to the property authorities.

Did you know in Mexico, the payroll cycle is bi-monthly on the 15th and the last day of the month? Or that if an employer doesn’t follow federal tax and labor laws, there can be hefty fines and penalties? 

Running international payroll takes you and your team away from growing the business. Talk to one of Skuad’s experts today and learn how we can help.

What do you need to know about payroll in Mexico?

Businesses must meet regulatory and labor requirements when submitting payroll in Mexico. There are costly fines for businesses that do not comply. 

There are also a few other aspects of working in Mexico that businesses must consider before hiring globally. Businesses must understand: 

  • Payroll basics
  • The working hours
  • Overtime rules
  • Severance pay rules
  • Payroll taxes and deductions
  • Leaves and paid time off
  • Payroll compliance requirements 

You may be able to rhyme off the above for your country of residence, but can you say the same for Mexico? Let’s take a look.

Payroll basics in Mexico 

The currency in Mexico is the Mexican Peso, with 1 Mexican Peso equivalent to around $0.049 US dollars. Typically, payroll is bi-monthly, with employees paid on the 15th and the last day of the month. 

Working hours in Mexico 

Mexico labor laws have three sets of guidelines about working hours. In general, the maximum workweek is 48 hours capped at 8 hours per day. But it’s also broken down by shifts. 

  • Day shift between 6am and 8pm is 48 hours a week
  • Night shift between 8pm and 6am is 42 hours a week 
  • Mixed shifts are 45 hours per week 

Often, employment contracts and collective bargaining agreements can infringe on these guidelines. Were you aware of them?

Overtime in Mexico 

The first 9 hours of overtime are paid at 200% of the regular wage. Any hours past 9 are paid at 300% of regular wages. When working a shift, the first 3 hours after the end of the normal shift is paid at 200% and any further time is at 300%. 

Mexico’s minimum wage 

The national minimum wage is 141.70 Mexican Pesos per day. Minimum wages do differ based on location, industry, and job title. 

Severance pay in Mexico 

Employers must pay severance pay if an employee is terminated without a reasonable cause. The acceptable reasons include: 

  • False statements about qualifications
  • Policy breaches
  • Vandalism
  • Sexual harassment
  • Alcoholism at the workplace
  • Conveying company secrets
  • Not complying with safety procedures
  • 4 unexcused absences in a 30-days

Severance pay is equal to three times the regular monthly payment. If an employee has worked for the company for more than 15 years, they are entitled to an additional 20 days of pay per year worked over 15. 

Are you convinced you need help with global hiring yet? Check out Skuad’s affordable pricing structure for hiring talent in Mexico to learn more.

Mexico payroll taxes and deductions 

Employers must calculate and submit taxes for themselves and their employees, and it’s vital they get these correct. The contribution amounts are listed below. 

Employer contributions:

  • 26.54% to 33.58% toward social security 
  • 5.15% toward retirement
  • 5% toward the national housing fund 

Employee contributions: 

  • 1.65% toward social security 
  • 1.125% toward retirement 

Income tax rates: 

  • 1.92% for up to 7,735.00
  • 6.4% for 7,735.00 to 65,651.07
  • 10.88% for 65,651.07 to 115,375.90
  • 16.00% for 115,375.90 to 134,119.41
  • 17.92% for 134,119.41 to 160,577.65
  • 21.36% for 160,577.65 to 323,862.00
  • 23.52% for 323,862.00 to 510,451.00
  • 30.00% for 510,451.00 to  974,535.03
  • 32.00% for 974,535.03 to 1,299,380.04
  • 34.00% for 1,299,380.04 to 3,898,140.12
  • 35.00% for over 3,898,140.12

Leave entitlement in Mexico 

First-year employees are entitled to 6 paid days off a year. For each additional year of employment, they get an additional 2 days of paid time off. After 4 years of service, an additional 2 days are added every five years. 

Mexico celebrates 8 public holidays. Employees missing work due to work injury or illness are entitled to 100% of pay. Employees with other illnesses are entitled to 52 weeks of paid leave at 60% of regular wages. 

Female employees are eligible for 12 weeks of paid maternity leave. The employee must take 6 weeks before the birth and 6 after. Employers are responsible for paying 40% of the wages during maternity leave. Female employees can also get 6 weeks of paid leave following the adoption of a child. 

Fathers receive a mandatory paid leave of 5 days. 

Payroll compliance in Mexico 

To pay employees in Mexico, a business must be registered with the National Registry of Foreign Investment. They must also register with the social security office and have a tax identification card. A certificate of registration with the National Institute of Migration must be obtained before hiring in Mexico. 

Payments to employees and regulatory agencies must be made from a Mexico-based banking institution. Employers must pay into the national housing fund monthly. Payroll taxes must be paid to the proper agency by the 10th of each following month. 

As you can see, there are many expectations and a lot of responsibility for a business doing business in Mexico. 

Book a Skuad demo today and talk to a representative about what’s expected as an employer when hiring in Mexico.

Payroll Providers in Mexico: how to start building your team? 

Outsourcing payroll services in Mexico can make your job simple and allow for flexible hiring. When you partner with Skuad, you take the guesswork out of international payroll in Mexico. Working with us will enable your business to partner with one company that does it all! We provide the following: 

  • Optimal exchange rates
  • Consolidated data in one location
  • Statutory benefits
  • Flexible hiring 
  • Global expansion
  • Simple workflows
  • 100% compliance 
  • Improved employee experiences 

Learn more about our top benefits below. 

100% compliance 100% of the time 

There are no ifs ands or buts about it, we maintain 100% compliance 100% of the time. Our secure platform maintains cybersecurity and IP compliance regulations. We have a team of HR experts from all countries available to draft compliant employee documents and contracts. We follow all local laws related to housing employee information, too. 

Simple workflow on an easy-to-use platform 

Our easy-to-use platform makes paying global workers in their currency of choice as easy as clicking a few buttons. Our platform is secure and safe, meaning your intellectual property and employee information stays confidential. You’ll be able to easily track and approve leave or contractor invoices on one centralized and convenient platform. 

Global expansion and flexibility

Skuad hires workers in 160+ countries. You can quickly scale your organization and hire talent from all over the world for a fraction of the costs it would take to establish new entities in each location.  Our global HR and payroll outsourcing in Mexico allows businesses to run cross-border payroll, maintain compliance, provide benefits, and manage third-party payments. 

Exceptional employee experience 

At Skuad, we create an exceptional and seamless employee experience. Your workers won’t be confused about anything and someone is available to answer any questions they may have. Are you ready to level up your employee experience while hiring globally? 

Contact Skuad to book a free demo so you can start hiring in Mexico (or anywhere else in the world) today!