Looking for a PEO in Mexico? Here’s what you need to know

How and why to partner with a PEO in Mexico.

Hiring employees in Mexico can have tremendous benefits for your company. With a predominantly young population, a diversified economy, and a fast-growing workforce, many organizations located in other countries are eager to tap into the Mexican labor market. The country also has a strong tech presence, with Guadalajara known as the Silicon Valley of Mexico.

With its central location, booming agricultural sector, and strong industrial presence, Mexico has become an attractive hub for foreign companies across a broad range of industries, from manufacturing to services. Further, its economy is strong and growing—it has the second strongest economy in all of Latin America, trailing only Brazil.

However, no matter where your company is located, there are challenges to hiring internationally, and sourcing talent from Mexico is no exception. Many companies turn to professional employer organizations (PEOs) to address the complexities of hiring abroad. Here’s a closer look at what this solution entails.

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What is a professional employer organization?

A professional employer organization, or PEO, is an entity that performs human resources (HR) functions on your company’s behalf in the country where you’re hiring. A PEO acts as a co-employer of your staff and helps with admin, compliance, payroll, and more. If your company is looking to hire employees in Mexico, enlisting the help of a PEO can streamline the process and alleviate some of the administrative burden.

PEOs can manage a number of responsibilities for employees in Mexico, including the following:

  • Payroll: A PEO can keep track of attendance and hours worked, and process payroll based on this data. They can also handle withholding taxes as needed.
  • Taxes: A PEO can file and pay applicable taxes, including local, state, and federal employment taxes.
  • Benefits: Your PEO partner can administer benefits, from enrolling employees in benefits plans to managing and processing claims. They can also oversee retirement benefits.
  • Compliance: PEOs may handle compliance matters, making sure that you’re following local labor laws and safety regulations.
  • Human resources: Some PEOs provide full talent management services, overseeing everything from talent sourcing to onboarding and offboarding.

Since these entities are familiar with the local labor market, they can help you structure competitive compensation packages that get your company noticed among job seekers in Mexico. They can also manage employment contracts, interviews, and time off. In other words, PEOs act as an external HR team for your organization.

Pros and cons of using PEO services in Mexico

While there are clear benefits to working with a PEO, there are also other options for onboarding talent in Mexico.

PEO services tend to be most beneficial for small- to medium-sized businesses that don’t have the internal capacity to oversee all the HR and compliance requirements of managing overseas employees. For instance, small to midsize companies may handle some aspects of hiring while leveraging a PEO for more technical tasks, like payroll administration.

Keep in mind also that you’ll need to have an entity in Mexico in order to co-employ staff with a Mexican PEO. Establishing an entity is costly and time-consuming, so this option makes sense if you’ll be hiring extensively in the country and plan to have a long-term presence there.

However, if you’re looking to expand your workforce beyond Mexico, PEO services have certain limitations. You’ll need a PEO for each location, and the process of vetting and partnering with a PEO can be research-intensive.

Not all PEOs deliver the same level of service, and it can be challenging to find the right fit. Some offer an extensive range of services, including recruitment, taxes, payroll, and compliance, while others may have a limited scope. If you’re looking to expand your workforce beyond Mexico, choosing the right PEO for each country can become a major expense of your time and administrative resources.

Alternatives to working with a PEO in Mexico

Working with a PEO means having shared risk and liability since you and the PEO act as co-employers of your employees. One way to reduce risk would be to work with an employer of record in Mexico which would take full legal responsibility as the employer.

Another option is to work with a global employment platform like Oyster that lets you compliantly hire, pay, and provide benefits to talent in Mexico—as well as 180+ countries across the globe. Rather than working with multiple vendors when engaging talent across geographies, you can use a single, automated solution that will keep you compliant with employment laws, tax regulations, and statutory requirements around the world.

Things to know about hiring in Mexico

Each country has its own employment regulations, so if you’re looking to hire in Mexico, it’s a good idea to familiarize yourself with the labor laws in Mexico. To work with Mexican talent, you’ll need to know about employment practices, norms, and expectations there. Here are just a few considerations to keep in mind.

1. Contracts

Employment contracts are required in Mexico and must clearly outline the terms of employment. The contract should include details about the employee’s compensation, benefits, and termination requirements. Contracts must be written in Spanish.

2. Working hours and time off

The standard workweek in Mexico is 40 hours, and cannot exceed 48 hours. One full day of rest is required.

Parental leave is strictly regulated in Mexico. Maternity leave begins six weeks prior to the due date, and lasts a total of 12 weeks. Employees are entitled to paid leave and may receive two additional weeks for medical complications. Five days of paid paternity leave are granted for fathers.

3. Pay schedules and wages

Employees in Mexico are entitled to a 13th-month bonus. Known as Aguinaldo, this payment must be made by the 20th of December each year.

The minimum wage in Mexico varies by territory. Northern Mexico has a higher minimum wage than the southern territory, so keeping these factors in mind is important when calculating the approximate costs of hiring in Mexico.

Simplify hiring in Mexico with Oyster

If you’re seeking an alternative to PEO services, a global employment platform is an option worth considering. Oyster’s automated platform allows your organization to hire, pay, reward, and manage talent in more than 180 countries (including Mexico) without having to set up a legal entity. 

Whether you’re seeking contractors, part-time talent, or full-time employees, Oyster streamlines hiring and onboarding along with benefits and payroll. We also bring a deep level of local knowledge to each territory in which we help you hire, with insights into local labor laws and job markets to help you stay competitive and compliant. As a trusted partner, Oyster empowers you to confidently onboard top talent virtually anywhere in the world.

Learn more about how Oyster can help you expand across borders and build a global team.

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. We let growing companies give valued international team members the experience they deserve, without the usual headaches and expense of hiring abroad.

Oyster enables hiring anywhere in the world—with reliable, compliant payroll and great local benefits and perks.

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