As the workforce becomes more distributed thanks to advancements in technology, many companies are looking to expand their hiring territories. Hiring employees in Mexico is an attractive option for several reasons. Mexico has a skilled workforce known for their technical proficiency, and it’s the 11th largest country in the world by population. For U.S. companies in particular, the strong economic relationship and geographical proximity can also lay the foundation for strong business collaborations.
If you want to expand your workforce territory to Mexico, hiring and onboarding professionals requires careful consideration. As with most territories, hiring in Mexico isn’t a quick and easy process. There are complexities involved with establishing an entity to hire legally in other countries. As a simpler alternative, many companies look to employer of record (EOR) services in Mexico.
What to know about employers of record in Mexico
An EOR is an entity that acts as an employer from a compliance standpoint, allowing your company to onboard talent in other countries. EORs manage hiring, taxes, and legal functions, as well as HR and payroll tasks. As a third-party organization, an EOR is responsible for employment tasks, which enables your company to quickly and seamlessly expand in international markets.
Pros of using an EOR to hire in Mexico
If you’re considering hiring in Mexico, EOR services present several advantages. Many companies pursuing rapid global expansion are drawn to EORs because they allow them to expand into foreign markets quickly. Plus, Mexico’s tax and labor laws are less ofw concern, as an EOR helps mitigate those risksfor you. This will help save time for your HR and legal teams so they can focus on other business initiatives.
EORs also offer in-depth knowledge of the local culture and employment processes, since they’re already established in the country. They’ll know how to attract potential candidates for the specific positions you’re looking to fill.
Cons of using EOR services to hire in Mexico
Before committing to an EOR it’s important to know that Mexico will be the only country in which you can partner with that specific entity. This is because each EOR only offers services in one country. For instance, an EOR in Spain only allows you to hire in Spain. Keep this in mind if you’re planning to expand into multiple territories, as you’ll need a different EOR for each location.
Researching various EORs to ensure you’re partnering with the right one can be time-consuming. Each EOR has its own unique operating model, and you may find that one offers better services than another. Costs will also vary from one EOR to the next. This limited alignment can make managing multiple partnerships an administrative burden. Thus, while this option may suffice if you’re only interested in Mexico, hiring elsewhere may call for a different solution.
Global employment platforms: An alternative to EORs
When expanding your hiring territory to Mexico, employer of record services aren’t the only option. One alternative is using a global employment platform, such as Oyster. Our all-in-one solution allows you to easily onboard and manage team members based in Mexico along with over 180 countries across the globe. Oyster simplifies hiring across borders by managing all of the details of employment on your behalf, including:
- Compliance with local laws
- Onboarding
- Payroll
- Time off management
- Benefits
- Offboarding
Considerations for finding talent in Mexico
Since Mexico’s employment laws might be different from what you’re used to, it’s important to familiarize yourself with some of the country’s labor laws and other considerations for hiring. Partnering with an expert is the best way to ensure compliance, but here are a few details to know at a glance.
Employment contracts
Federal laws in Mexico require written contracts between individuals and their employers. There are no statutory language requirements for employment contracts in Mexico, but Spanish is recommended. If an employee is hired on a probationary period, it must be defined within the contract. The contract must also include the employee’s personal information, such as their name, address, and age.
Termination and severance
There must be specific ground for termination of employment in Mexico. Otherwise, a worker terminated without cause is entitled to reinstatement or severance amounting to:
- 90 days of their daily total compensation
- 20 days of their daily total compensation for each year of service
- 12 days of base salary for each year of service, plus accrued salaries and benefits such as paid vacation and Christmas bonuses.
Compensation and benefits
Mexico has a minimum wage that varies by state. Employers are required to pay a Christmas bonus, or aguinaldo, which typically varies from half a month to a full month’s salary. Employers can also choose to provide additional benefits packages as part of their attraction and retention strategies.
Working hours
Working hours in Mexico cannot exceed eight hours per day or 48 hours per week. Employees cannot be required to work more than three hours of overtime per day, three times per week. Overtime is paid at a rate of 100% for the first nine hours, and 200% for any additional hours worked voluntarily.
Taxes
As in many other countries, employers are subject to certain taxes in Mexico. This includes a 30% corporate tax for companies based in Mexico, payroll taxes that vary by state, withholding taxes, and social security contributions to life insurance, unemployment, and disability insurance programs.
Holidays and vacation
Public holidays in Mexico are based on region. Typically, employers recognize the following holidays by granting employees time off or by giving overtime pay for people who have to work on these days:
- New Year’s Day (January 1st)
- The first Monday in February
- The third Monday in March
- May 1st
- September 16th
- The third Monday in Novemebr
- December 1st every six years
- December 25th
- The applicable days determined by federal and local laws for ordinary elections
The minimum number of statutory paid holidays varies based on the employee’s length of service. Employees are also entitled to a vacation premium, which is paid out as a lump sum at a rate of 0.25 times their annual salary during their vacation period.
About Oyster
Oyster is a global employment platform designed to enable visionary HR leaders to find, engage, pay, manage, develop, and take care of a thriving distributed workforce. Oyster lets growing companies give valued international team members the experience they deserve, without the usual headaches and expense.
Oyster enables hiring anywhere in the world—with reliable, compliant payroll, and great local benefits and perks.
