Establishing and maintaining a Mexico payroll
Mexico is a huge, well-connected country with a low cost of living and a burgeoning economy, making it an exciting place to do business. Many foreign organizations choose to expand into the North American country, and it can be a very lucrative endeavor.
One important element of expanding into Mexico for many businesses will be the hiring of local staff, along with the associated payroll setup and management. This can often be a complex process, with long waiting times and delays regularly hindering expansion. There are also regional differences in employment law to take into account, which can complicate matters further.
Horizons offers a comprehensive Mexico payroll outsourcing service, designed to help organizations expand into Mexico seamlessly, even without a business entity registered in the country.
Why choose the Horizons payroll solution?
If you have an entity
If your business has already an official entity in Mexico, we can help you set up and run your in-country payroll, managing all of the associated HR, administration, and compliance work.
This solution is ideally suited to large organizations with a long-term outlook for expansion in Mexico.
If you don’t have an entity
If your business has not registered an official entity in the country, then you have the option of hiring through our Mexican subsidiary. We can act as employer of record in the country, set up and manage your payroll, and handle associated HR, administration, and compliance.
This solution provides a low-risk and flexible route of entry into the Mexican marketplace so you can get all the benefits of hiring locally without the hassle, and can focus on the important work of expanding your business.
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Mexico payroll guide
What are the withholdings and tax rules in Mexico?
Mexico’s progressive taxation system charges workers up to 35% of earnings, depending on income level. This sum is deducted from salaries before being paid to workers, then passed on to the government by employers.
Employees in Mexico contribute to special government-associated accounts called AFOREs, which help people save for retirement. Workers choose which type of account they want, and employers must add either 2% or 5% of salaries depending on the employee choices.
|
Sickness & Maternity
|
5.25% |
|
Disability & Death
|
1.75% |
|
Retirement
|
2.00% |
|
Layoff and Retirement Benefits
|
1.75% |
|
Child Care
|
1.00% |
|
Work Related Accidents (depends on the state)
|
0.50% – 3.00% |
|
Housing Tax
|
5.00% |
|
Payroll State Tax (depends on the state)
|
0.50% – 3.00% |
|
Total Employment Cost
|
up to 22.75% |
|
Sickness & Maternity
|
5.25% |
|
Disability & Death
|
1.75% |
|
Layoff and Retirement Benefits
|
3.15% |
|
Total Employee Cost
|
10.15% |
Up to 6,942.35 Pesos | 1.92% |
6,942.35 – 58,922.27 Pesos | 6.40% |
58,922.27 – 103,550.51 Pesos | 10.88% |
103,550.51 – 120,372.95 Pesos | 16.00% |
120,372.95 – 144,119.39 Pesos | 17.92% |
144,119.40 -290,667.83 Pesos | 21.36% |
290,667.83 – 458,132.39 Pesos | 23.52% |
458,132.39- 874,650.11 Pesos | 30.00% |
874,650.11 – 1,166,200.11 Pesos | 32.00% |
1,166,200.11 – 3,498,600.11 Pesos | 34.00% |
Over 3,498,600.11 Pesos | 35.00% |
Entitlements and terminations in Mexico
When employing staff in Mexico, you should always lay out the specific terms of entitlements and terminations in a formal contract of employment. These contracts should be written in Spanish, and use the local currency when referencing sums of money.
Mexican employees are entitled to various benefits, such as paid vacation days, maternity leave, and a guaranteed minimum wage. Some of these entitlements vary by region, for example, minimum wages are higher in the northern border states, so it is crucial that you fully understand both the national and regional legislation.
How to establish Mexico payroll outsourcing
An important part of the hiring and payroll process for many foreign organizations is setting up a Mexican entity to act as employer of record. This process can be lengthy and expensive, often taking weeks or even months to complete.
You can avoid the unnecessary hassle by outsourcing to the Horizons Mexico payroll outsourcing experts. Our team will handle everything for you, ensuring you are set up in days, not months. You can also choose to hire using our Mexican subsidiary as employer of record, helping you can focus on expanding your operations whether or not you already have a registered entity in Mexico.
Manage payroll in Mexico
Whether it’s EOR service or just payroll management, Horizons’ employment experts can help you get started in 24h.
