Expand your business into Mexico without a Mexican entity
Mexico’s large, diverse territory, growing economy, and large population make it an excellent place to do business. But any organization interested in expanding into the North American country will need to navigate the complex regulations and cultural differences. These barriers can result in delays, potentially leading to a loss of revenue.
At New Horizons, we offer comprehensive outsourcing solutions to help businesses of all kinds expand into Mexico. Our Mexico PEO & Employer of Record, payroll, and additional services can set you up with everything you need to successfully grow your operation in Mexico.
Our dedicated in-house recruitment team can also help you find, hire, and onboard new employees for you in Mexico, even if you don’t have an entity in the country.
Our services can speed up your entry to the Mexican market, significantly cut the cost of expansion, and give you greater flexibility throughout the entire process.
Our Mexico PEO simplifies your expansion
New Horizons enables your business to expand its operations into Mexico without having to set up a legal subsidiary.
Employment & Labor Laws in Mexico
Mexico employment contracts
Employers in Mexico are legally required to provide formal written contracts of employment for all employees. Any contract should include all relevant details such as salary/wage, termination terms, job title, and so on. Contracts should also always be written in Spanish and use the Mexican peso currency (MXN).
By partnering with our Mexico Employer of Record & PEO, New Horizons’ team of local experts can provide assistance for drafting strong employment contracts that are compliant with local regulations.
Mexico working hours
The average Mexican office operates between 8 am-6 pm from Monday to Friday, although this can vary by industry and company. Some companies still offer extra-long lunch breaks (or ‘siestas’), but the normal length is around one hour.
Working hours are limited to 11 per day and 50 per week, with at least one 24-hour period off per week, and if limits are exceeded then overtime pay must be provided at 1.5 x normal pay.
Public holidays in Mexico
There are several nationally and regionally recognized public holidays in Mexico. Employees who have to work on these days are often entitled to overtime pay:
Mexico vacation leave
After one year of employment, workers in Mexico are entitled to six days of vacation leave. This entitlement increases by two days for every additional year up to four years of employment, then two days per five years of employment.
Many employers choose to offer more generous vacation allowances, with more senior employees regularly getting 15 or more days per year.
Mexico sick leave
Usually, employees can take sick leave upon agreement with their employer, and compensation will depend on the individual agreement. In cases of non-work-related sickness, employees can access a government-funded 60% of wages if they present a doctor’s note, and for work-related sickness, they can receive 100% of wages.
Maternity and paternity leave in Mexico
Mothers can take six weeks of paid maternity leave before and after their birth date (12 weeks in total), and fathers can take five days of paid leave. The government covers these payments, and the limit is 2500% of the minimum wage.
It is common for employers to offer additional payments as part of benefits packages.
Employee severance and terminations in Mexico
Termination payments in Mexico are very complex and are made up of a variety of inputs:
- – Unpaid wages
- – Holiday bonuses
- – Outstanding vacation days
- – 13th month bonuses
- – Any other benefits or payments included in the contract of employment
If employees are terminated without proper cause, they may also be entitled to a severance payment. In these cases, the employee will receive three months of salary, an additional 20 days for every year of employment, and a seniority bonus of 12 days of salary for every year of employment (at a limit of 200% minimum wage).
In practice, many terminations will result in a severance payment as it is notoriously difficult to prove ‘proper cause’ to the authorities.
Navigating employee terminations and handling severance packages can be complicated for companies expanding overseas for the first time. New Horizons’ Mexico PEO can mitigate risk for foreign companies and provide guidance through this process.
Taxation in Mexico
Mexico follows a progressive taxation system, with employees paying a higher percentage in tax at higher income levels, with a maximum rate of 35%. Non-residents pay up to 30%.
The corporate tax rate in Mexico is 30%.
Contributions for retirement are unique and difficult to understand. The Mexican Administrator of Retirement Funds (AFOREs) handles retirement and housing accounts for employees, and workers can choose what they want to start funding, then employers will have to contribute a percentage of salary to these funds. The percentages can vary for the type of worker, and AFORE accounts will be automatically assigned by the government if an employee hasn’t chosen an account after one year of employment.
Health coverage in Mexico
The IMSS provides healthcare coverage for Mexicans, so health benefits are not strictly necessary through employers. However, the healthcare system is known for long wait times and shortages, so it’s fairly common for employers to offer private insurance.
Mexico compensations & benefits
Compensation Laws in Mexico
As of 2020, the minimum wage in most of Mexico is 123.22 pesos per day. There is a higher rate in the northern border states of 185.56 pesos per day.
The aguinaldo is a yearly bonus, which employees in Mexico are also entitled to. This is generally around four weeks of salary, but can be more depending on the employer.
Benefit management in Mexico
Establishing a Mexican benefits package as a foreign employer can be a difficult process, and administrative procedures to follow, complex laws, and language barriers.
A simple solution is to outsourcing your Mexico benefits management to New Horizons. We can establish your benefits system quickly and effectively, offering expert guidance along the way so you can focus on a successful expansion operation.
New Horizons’ Mexico PEO can provide expert guidance to help simplify the process of expanding into Mexico.