Professional Employer Organization (PEO) in Mexico

What is a PEO?

A professional employer organization is a service that acts as your human resources (HR) team. They’ll take care of the administrative responsibilities for SMEs, startups, and other companies that don’t plan to or have the financial means to physically expand into other countries.

Your PEO in Mexico would take on the responsibilities of managing the payroll of your Mexican employees as well as the onboarding process, creating competitive benefits packages, and ensuring that your business remains compliant with the country’s local labor laws.

With the help of a PEO service in Mexico, business owners don’t have to take on tedious HR tasks or any other administrative tasks. The PEO will be your in-house team and local legal counsel — and at a much better rate.

If you want to learn more about what a PEO service can do for your business, get in touch with a team member at Skuad today.

What are the benefits of using a PEO provider in Mexico?

When you partner with a PEO in Mexico, you’ll be able to grow your small business into an international competitor within your industry. 

Let’s take a look at the benefits of using a PEO service in Mexico, and exactly how the service can make a difference in your business’s future growth.

Hire the absolute best

Remote work isn’t just on the rise — it’s in demand. 

With more employees working from home, the pool of potential candidates has increased exponentially. This means there are no limits to where you can source from, globally speaking. 

Working with a PEO means you have a global talent pool right at your fingertips, including Mexico. The country’s talent pool is only becoming more skilled and hungry for better opportunities, making it the perfect place to find the best person or people to add value to your company.

Become a global competitor

The whole point of working with a PEO in Mexico or elsewhere in the world is so you can create an international workforce. Partnering with a PEO means that you can begin establishing a global reputation within your industry at a much larger scale than your home country will allow.

What’s more, PEO services in Mexico specialize in Mexican work culture and labor laws. This means they’ll help you design the perfect benefits package that rival’s your competition to ensure that you’re attracting and retaining top talent from the country. 

Save on unnecessary expenses

Doing business in Mexico can become very expensive very quickly. As a startup or even an established medium-sized business, you may not have the capital to expand into another country on your own.

By partnering with a PEO in Mexico, you can get your hands on a full suite of HR and legal services to help you manage all the administrative tasks from payroll to taxes and reporting. Your new team will also make sure that you always remain compliant with the local labor laws, and they’ll do it for just a fraction of what it would cost you to hire these teams on your own. 

Gain experience in new markets

Doing business in Mexico means you’ll have the potential to do business throughout all of Latin America, plus North America as they’re essentially connected. Using a PEO to hire and onboard employees within Latin America will allow you to gain first-hand insight into the entire region’s markets. 

This can help you expand into those neighboring markets over time.

Skuad is the professional employer organization in Mexico that helps you expand into neighboring markets. Get in touch with a Skuad team member to talk about market insights today!

Avoid having to set up a legal entity in Mexico

Without a PEO in Mexico, you would have to set up a legal business structure within the country all on your own — just so you can take on international workers remotely. The entire process of forming a business entity in another country is not only incredibly time-consuming, but it’s insanely expensive.

Insanely expensive doesn’t even cover the part where you would have to hire and pay your own HR and legal teams to work within the country.

You would also have to physically be in the country to see the process through, which means incurring other expenses for accommodations, airfare, etc. It adds up quickly.

Gain cultural awareness and total compliance with local labor laws

Every country has a different work culture, and Mexico is no different. Understanding the cultural differences in regard to how other countries manage their employees is crucial when it comes to hiring internationally.  

Your PEO in Mexico will work endlessly to make sure that you stay informed about the cultural differences as well as the ever changing labor laws as an employer of Mexican workers.

For example, did you know that while an ample amount of paid vacation days isn’t expected in the country, long and social lunches are a big deal? That’s right — you can expect your Mexican employees to be enjoying lunch among family or friends from 2:00 pm to 4:00 pm.

Don’t worry though, Mexican employees have excellent work ethic as they tend to work upwards of 40 hours per week (most likely to make up for a lengthy lunchtime!).

Other things that you’ll need to know about the work culture in Mexico include…

Hiring and employment law in Mexico

• The typical working hours for Mexican employees consist of 8 hours a day, 40 hours a week. However, typical working hours will vary by industry, and overtime is usually capped at 3 hours per day for a total of 9 hours per week.

• Employee contracts in Mexico are a legal requirement. They must also be written in Spanish, and clearly define the terms of employment, including compensation, benefits, and termination requirements. 
• ‍Maternity leave is strict in Mexico. Women are entitled to 6 paid weeks prior to giving birth and 6 paid weeks after giving birth. Medical complications allow for an additional two weeks of paid leave while men receive 5 paid days for paternity leave when a child is born or adopted.

Income tax rates in Mexico

Employees in Mexico pay a progressive income tax with the top rate being 35% and starting at a salary rate of Mexican pesos (MXN) of 3,000,000.01.

Mexico’s current income tax brackets look like this (in MXN):

• 0 – 6,942.20: 1.92%
• 6,942.21 – 58,922.16: 6.40%
• 58,922.17 - 103,550.44: 10.88%
• 103,550.45 - 120,372.83: 16.00%
• 120,372.84 - 144,119.23: 17.92%
• 144,119.24 - 290,667.75: 21.36%
• 290,667.76 - 458,132.29: 23.52%
• 458,132.30 – 874,650.00: 30.00%
• 874,650.01 – 1,166,200.00: 32.00%
• 1,166,200.01 – 3,498,600.00: 34.00%
• 3,498,600.01 and over: 35.00%

It’s the employer’s responsibility to deduct income tax according to their Mexican employees’ earnings under this progressive system.

There’s a lot to learn about the employment laws in Mexico as well as the country’s work culture, and expectations. As your PEO in Mexico, Skuad will keep you compliant.

What does it cost to build a team in Mexico?

There are only two ways to hire talent from Mexico: Set up a business entity within the country, or partner with PEO services in France to take care of it for you.

Cost of setting up a business in Mexico

There are several types of entities you could set up in Mexico. All of them are very costly and very time-consuming. For example, the “fast business set up solution” entity comes with a starting cost of US$37,600 — and that’s just for the Mexico registration fee.

You’ll also have to set up a corporate bank account, take into consideration government fees, legal fees, visas, and more. The total engagement period can take up to 22 weeks or more, which means you’ll have to stay there during this time - and those accommodation fees rack up pretty quickly.

Using a PEO in Mexico

Partner with a PEO in Mexico and you’ll only have to pay a fraction of the cost of forming a legal entity. With Skuad, you can even get started for free to see how you like it.

Our PEO services begin at $19 per month, providing you with the means to onboard and pay your international employees in Mexico. If you need us to also act as your employer of record (EOR), to hire international employees on your behalf as well as manage your payroll, benefits, compliance, etc., prices begin at $199 per month.

We also serve enterprise businesses, which we offer customized prices for (just reach out to our team to talk business).

When you’re ready to start onboarding and paying employees in Mexico, book a demo to see how Skuad’s PEO services work.