How to expand your business in México

Why is Mexico a good option?

When you want to expand your business abroad, you must make sure that the country you wish to settle in has the right conditions for your business, but also that it’s culture and legal system are comprehensible and adaptable to your company. Setting a branch of your business in Mexico it’s a great strategy to expand it. The Mexican economy has the stability to warranty significant gains as well as growth since it is the 10th largest economy in terms of purchasing power parity and 14th largest in nominal terms. Another advantage of settling in Mexico is that they have 12 free trade agreements with 46 countries, including Japan, Israel, the European Union and much of Central and South America. With the most influential agreement being the North American Free Trade Agreement (NAFTA), between the United States, Canada and Mexico. Although NAFTA will come to an end when the United States-Mexico-Canada Agreement (USMCA) is ratified. The new agreement increases labour and environmental regulations, and incentivizes domestic production of automobiles. The agreement also provides updated intellectual property protections. This variety of agreements and Mexico’s strategic location, next to the USA, could help you reach new markets. Mexico’s foreign investment is most prominent in manufacturing, mining, and financial services. Within the manufacturing sector, the largest are the automobile, auto parts producers and steel manufacturers. The country has two main sources of wealth: oil and tourism, which represent almost 30% of the gross domestic product, and its industry is increasingly dominated by the private sector. Recent administrations have expanded competition in natural gas distribution, electricity generation, seaports, railroads, telecommunications and airports. Although Mexico offers many strategic and commercial advantages, you need to be cautious with its labor laws, payroll, and tax system if you want to expand your business there. Consider hiring local assistance to help you with payroll services, labor laws, taxation, and hiring procedures, as well as guiding you with the business etiquette you must follow while in Mexico.

4 things you need to know about Mexican payroll laws

1. Minimum wage. There’s a national minimum wage standard that applies regardless of their industry, experience or job. Nonetheless, only 43 municipalities located next to the border with the United States have a more substantial minimum wage.
2. Minimum paid holiday. Workers have a minimum of days for vacation according to the years of service in a company. After the first year, they have six days of vacation. After two years, they’ll have eight days, and so on. Don’t forget that there are mandatory rest days like Christmas and New Year.
3. Overtime. Working hours vary depending on the type of work shift. They can work for longer hours only if workers get overtime pay.
4. Taxes and deductions. Taxes and deductions. Mexico has specific tax rates, and you will be obliged to make a monthly and annual statement. Remember that you will also have to pay for the social security contribution.

Before moving your entire current team to Mexico, you have to know that their labor laws establish that only 10% of your staff can be foreign, but there are no restrictions in terms of their positions within the company.

Legal entities

These are the most popular legal entity types:

• Sociedad Anonima or S.A and the Sociedad Anonima De Capital Variable or S.A. De C.V that establishes that shareholders are only responsible for their own contributions and assets.and the limited liability company
• Sociedad de Responsabilidad Limitada or S. De R.L. that will help provide insulation to you as an investor and will mean you are not personally liable for the debts or funds of your company.

Nevertheless, it is also worth noting that there are more categories:

• SAS: Sociedad por Acciones Simplificada (Simplified Shares Company)
• SAPI: Sociedad Anónima Promotora de Inversión (Stock Corporation for Investment Promotion)
• SOFOM: Sociedad Financiera de Objeto Múltiple (Multi Purpose Financial Company)

Hire a PEO to hire and manage the personnel

Although it’s relatively easy to expand your business to Mexico, make sure you get the assistance of a co-employment organization that will save you time and money. A Professional Employer Organization (PEO) manages the hiring of the right staff for your company, their onboarding process, payroll services, taxation, benefits, insurance, and social security, among many other HR responsibilities. By using this co-employment model, you can save up to $450 annually per employee in administrative costs. At the same time, you will be able to concentrate on the strategies and administration of your business, while a PEO handles all the HR activities. Another advantage of PEO is that while they do the hiring, you will have control of the daily activities of your employees and who can no longer be a part of your company. At SERVIAP we have broad experience hiring and managing personnel through our PEO service, taking care of your payroll and your local personnel while you reach your objectives. We invite you to contact us today to take the first step towards expanding your business into new countries.