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There are two main ways forward for companies thinking about hiring employees in Mexico. The first one is with a professional employer organization, or PEO, such as Serviap Global. These businesses are also known as employer of record (EOR) companies. The second one is by setting up your own legal entity in the country. Whichever one suits you best will depend on your particular needs.
However you eventually go about hiring employees in Mexico, you will be gaining access to a vibrant and exciting economy that is developing rapidly. The country has been investing heavily in education and has a growing number of STEM graduates who are highly trained.
Additionally, there is a strong manufacturing sector, which is a key destination for outsourcing, especially nearshoring. A number of US companies in particular are considering moving production plants to their neighbour and considering setting up a Mexican warehouse. This also of course means hiring employees in Mexico to run the operation.
Types of contracts for hiring employees in Mexico
Contracts may be for a specific task or period of time, seasonal or indefinite, and, where appropriate, may be subject to testing, initial training or a probationary period. Unless stated otherwise when hiring employees in Mexico, the relationship will be assumed to be for an indeterminate period.
Hiring employees in Mexico means following the Federal Labor Law (LFT in Spanish) so that you stay compliant. This is one of the principal reasons for working with an EOR or PEO company, as they are well aware of all the necessary codes. Here is a potted guide:
|Contract for an undetermined time (Article 39, LFT)||It is considered an indeterminate work relationship when an agreement exceeds 180 days. In this case, a trial period may be established, which may not exceed 30 days, with the sole purpose of verifying that the worker meets the requirements and knowledge necessary to achieve the work requested. It is important to clarify that the probationary period may be extended up to 180 days, only in the case of management, managerial positions and other persons exercising management or administration functions.|
|Contract for specific work or time
(Article 37, LFT)
|A fixed-term contract can only be stipulated when required by the nature of the work to be provided or when it is intended to temporarily replace another worker.|
|Recruitment for initial training. (Article 39 B, LFT)||The law considers that there is period for initial training when a worker is obliged to provide subordinate services under the direction and command of the employer, while the worker acquires the knowledge or skills necessary for the tasks they will do. When the trial or initial training period is over and the employment relationship continues, it is considered to be an indeterminate period contract.|
|Trial Period Contract
(Article 39 A, LFT)
|In the case of trial periods when hiring employees in Mexico that will be from 30 and up to 180 days, for administrative, technical, or specialization work, at the end of their period, if the employer may decided to terminate the employee at no obligation to them.|
|Contract for work relationship by season
(Article 39 F, LFT)
|A seasonal contract may be used when the activities do not require the provision of services all year. It should be clear that workers who provide services under this type of contract have the same rights and obligations as workers for an indefinite period, in proportion to the time worked. To avoid abuses in the use of these new figures, the contracts must be established in a written agreement and the trial and training periods will be determined.|
Basic requirements for contracts when hiring employees in Mexico
The information that the contract must contain when hiring employees in Mexico is established in Article 25 of the Federal Labor Law:
- Name, nationality, age, sex, marital status, unique population registration code, federal taxpayers registry and physical address of the worker and employer
- If the employment relationship is for work or time determined by season, initial training or for an indefinite period and, if applicable, if it is subject to a trial period
- The service or services that must be provided
- The place or places where work should be provided
- The form and amount of the salary
- Other working conditions, such as days of rest, vacations and other that are agreed by both parties when hiring employees in Mexico
Payroll when hiring employees in Mexico
The payroll is one of the most important documents within a company, since it controls all the withholdings, at or about legal minimums, of the salary of the employees. In their accounts are the final amount that a worker will receive and the amount that the company will invest in a given period. This is important to stay legally compliant when hiring employees in Mexico.
Legal benefits when hiring employees in Mexico
Work benefits are additional benefits provided through a worker as a condition of their labor relationship. The benefits are established in a contractual relationship and will be independent of salary, they may consist of an economic, cultural, or medical nature. The law establishes mandatory benefits that every employer hiring employees in Mexico must grant, the others will be agreed by mutual agreement in the individual work contract.
|Minimum wage in Mexico||There are two monthly minimum wages in Mexico as of 2023, with the northern border region where many factories are based having a higher minimum of MXN$9,372.30 (approx USD$550), which an employer of record in Mexico will guarantee is paid, in the event of a project that involves minimum wage employees. The regular minimum wage is MXN$6,310 (approx USD$370) per month.|
(Articles 5, 82 and 101, LFT)
|The compensation that an employer is obliged to pay its workers for the work they have done during a set period. Pay must be equal for the same work, regardless of sex or nationality.|
(Article 76, LFT)
|Workers who have more than one year of service are entitled to enjoy an annual period of paid vacation no less than 12 days with two days being added for each year of seniority to a maximum of 24.|
|Vacation bonus (Articles 79 and 80, LFT)||Workers will be entitled to a bonus of no less than 25% of their regular salary they would have earned during the vacation period. If the employment relationship ends before the year of service is completed, the worker will be entitled to a remuneration proportionate to the time of services rendered.|
(Article 87, LFT)
|The workers will be entitled to an annual bonus that must be paid before the 20th day of December, equivalent to at least fifteen days of salary. If terminated before the day in which the bonus is due, the employee is entitled to the proportion of the bonus accrued up to that point in the year.
(Ex. If fired in August, they are entitled to 8 months’ contributions to the bonus)
|Social Security (Articles 15, 38, 56 and 58, LFT)||Social security will provide the employee with medical, surgical, pharmaceutical, and hospital services. The mandatory regime includes insurance for: occupational risk, illness and maternity, disability and death, retirement and currently working elders, day care and social services.|
|Common extra benefits||Examples of work benefits are: food service, transport service, private health insurance, meal vouchers, gas vouchers, savings funds, productivity bonus among others.|
Labor contracts: Workday and holidays in Mexico
According to Article 58 of the LFT when hiring employees in Mexico, the workday is the time during which the worker is available to the employer. The duration of the workday will be mutually agreed, without exceeding the legal maximum of 8 hours per day or 48 hours per week.
For every six days of work the employee must enjoy at least one rest day. During the workday the worker will be granted at least one half hour break. The work day may be extended due to extraordinary circumstances, never exceeding three hours a day or three times in a week.
|Type of work shift||Working hours per shift||Extra pay||Sundays|
|Day shift||8 hours||100% over their hourly salary||If the employee is working on Sunday (but still under 48 hours a week), they are owed a 25% bonus over their normal hourly wages. If the work on Sunday is in excess of 48 hours for that week, then the employee is paid a 200% bonus on their Sunday wages.|
|Night shift||7 hours|
|Mixed shift||7 ½ hours|
According to the Article 715 of the Federal Labor Law (LFT), when hiring employees in Mexico, business days are all days of the year except Sundays, mandatory rest, and holidays.
|Mandatory rest days||Holiday name|
|January 1st||New Year’s Day|
|February 5th||Day of the Constitution|
|March 21st||Benito Juarez’s Birthday|
|May 1st||Labor Day|
|September 16th||Independence Day|
|November 20th||Day of the Mexican Revolution|
|December 1st (Presidential Election year)||Every 6 years|
Employee termination in Mexico
After hiring employees in Mexico, the employment relationship may be terminated at any time, with just cause:
- The worker has deceived their employer in a material way (expenditures, inventory, etc.)
- The worker presents, a lack of integrity, a lack of honesty, acts of violence, threats, or insults, whether during or outside of working hours
- The worker, intentionally causes property damage during the performance of work
- The worker commits immoral acts or harassment and or sexual harassments against their coworkers
- The worker reveals secrets or confidential information from the company
- More than three absences in a period of thirty days without the employer’s permission or just cause
- The worker arrives at the work site in a state of intoxication
An employer who dismisses a worker must give written notice clearly stating the conduct or behavior that motivate the decision and the date or dates during which they were committed. The lack of notice to the worker or the relevant government authorities will provide the employee with grounds to successfully claim that the dismissal was unjustified.
Labor termination settlement
If the employer does not verify the cause of the termination it is considered a termination without cause. The worker will then have the right to be reinstated in their job position or to be compensated. The employer will be exempt from the obligation to reinstate the worker, by paying compensation as follows:
- Three months of salary
- 20 days of salary per year of service
- Payment of overdue wages, if applicable
- Vacation and Christmas bonuses accrued by the time of dismissal.
Serviap Global can help if you are hiring employees in Mexico
At Serviap Global, we provide recruitment and PEO services in Mexico, and are ready to help you find the staff you need when hiring employees in Mexico. We assist clients in dozens of countries across six continents, so wherever you are seeking to hire, we can help.
Contact us today to discuss PEO in Mexico, or any other market where you may be looking to expand.