Employment laws in Mexico: How to hire and stay compliant

Beyond its incredible food and culture, Mexico is also an attractive destination for companies who are looking to hire employees remotely. The country is digitally well-connected, has a diverse and talented workforce, and low labor costs. These factors make hiring remote employees from Mexico an attractive option for many businesses looking to expand their workforce internationally while remaining cost-effective.

When companies hire workers from Mexico (or globally), they must make sure they comply with local employment laws around taxes, benefits, minimum wages, and more. Non-compliance with local employment laws can have severe legal and financial implications for companies when hiring abroad. 

One of the best ways to ensure compliance with local employment laws is to work with a global employment partner like Remote. We have the expertise to understand key employment laws in Mexico, as well as to manage recruitment and administration processes efficiently.

This guide will discuss the basics of employment law in Mexico and help you know more about how to employ and pay workers in Mexico while staying compliant with local rules. You’ll also learn how you can partner with a global employment service to minimize compliance risks while hiring internationally. 

Understanding key labor laws in Mexico

Every country has its own specific set of rules and regulations when it comes to employment. 

These considerations are typically unique to each country. 

Key labor laws in Mexico are the Mexican Constitution (Constitución Política de los Estados Unidos Mexicanos) and the Federal Labor Law (FLL) which grant protection to all workers in Mexico, whether they are foreigners or citizens. 

Some other considerations to keep in mind:

• In Mexico, employers are required to provide written contracts for every employee as well as severance packages in the event of dismissal or closure of business operations.

• Under the FLL, employees have the right to receive a minimum wage and employee benefits such as paid vacation days and health insurance coverage. 

• Companies also need to be aware of labor union regulations, so they can ensure compliance with collective bargaining agreements that may already exist between their workforce and unions.

• Companies also have to ensure that non-discriminatory hiring and management practices are followed.

Do employment laws in Mexico vary by state?

The FLL covers the provision of fundamental benefits to employees, such as social security benefits, mandatory paid government holidays, and vacation premiums. Other items such as minimum wage requirements are covered by the law of each Mexican federal state (31 states and one federal district of Mexico City).

For example, in the state of Chihuahua, the minimum wage would be different from that in Mexico City. In Baja California Sur, there are no restrictions on working hours, while other states limit them to eight or nine hours a day. Some states require employers to provide additional benefits such as vacation time and health insurance for their employees.

As you can tell, variations in Mexican employment law by state make it challenging to hire and pay workers in the country.

Fortunately, Remote makes it simple for you to keep up with applicable labor regulations, policies, and laws. Our team of employment experts can provide comprehensive guidance so that you can remain up-to-date on developments in Mexican employment law.

For more information on attracting top talent in Mexico, visit our Mexico country page.

What do you need to know before hiring a Mexican employee?

Companies looking to hire in Mexico need to register for a Mexican tax ID, as well as other requirements such as social security and workers’ compensation insurance. This is why you need to either establish your own local legal entity in the country or work with an employment partner like Remote to hire people remotely.

At Remote, we make employing remote workers and contractors in Mexico quick, and easy. We manage payroll and benefits according to Mexican law, as well as matters regarding onboarding and offboarding team members. Partnering with Remote gives you the freedom to focus on business growth, while we can handle the process of hiring and paying your team members in Mexico from start to finish.

Calculate employee hiring costs in Mexico with Remote’s Salary Calculator

If you want to calculate your hiring costs to plan and budget in time, check out our free Employee Cost Calculator. Simply plug in the country, position, and salary for the position you want to hire for, and our tool will you give a breakdown of what it costs for you to hire an employee in the chosen country.

If you want additional information like how you can offer the best benefits to attract the right talent in Mexico, contact our team for advice and guidance.

Want to see how much your next hire will cost you?

Our free Employee Cost Calculator gives you a full breakdown of employment costs in every country.

Try it now

Statutory employment rights in Mexico

What is the minimum wage in Mexico?

As of January 2024, the Northern border minimum wage is higher because of the higher cost of living due to its proximity to the US and is MXN 374.89.41. The general daily minimum wage applicable to the rest of the country is MXN 248.93

What are the standard working hours in Mexico?

The standard working hours in Mexico are 48 hours per week. For every six days of work, employees must be given one day off. 

What is the overtime rate in Mexico?

All employees who put in extra hours of labor are due overtime compensation regardless of their job title, salary range, or any other variable. If additional work, nine hours or below, was completed during seven days, then the overtime rate is twice the standard hourly rate. If over nine hours were worked, then the overtime rate is three times the standard hourly rate. 

How do probation periods work in Mexico?

An employer can put in place a probationary period for 30 days if the job contract is valid for more than 180 days, or has no set end date. For managerial, technical, and professional roles, it may be possible to lengthen this trial duration to up to 180 days.

What discrimination protections does Mexico provide for workers?

The Mexican Constitution as well as the FLL prohibits any sort of discrimination against employees. Employment legislation allows for penalties to be imposed on employers found guilty of discriminative acts. 

Can employees in Mexico join unions?

Yes, employees in Mexico have a long history with labor unions and there have been recent updates on laws governing them.

Are there collective bargaining agreements in Mexico?

Mexico has a history of collective bargaining agreements, which are legally binding contracts between employers and employees that set out the terms and conditions of employment. These agreements cover wages, hours worked, job security, health benefits, and other important issues related to labor rights. If applicable to a company or industry, some employers must comply with these laws when hiring workers remotely in Mexico or any other country where they operate.

Can companies drug test employees in Mexico?

Companies can drug test employees in Mexico. 

However, employers must comply with regulations around drug testing, and also ensure that any tests are conducted in a fair and non-discriminatory manner. Additionally, employers should provide clear information to employees about the purpose of the test and how it will be administered before conducting any tests.

Employers may refuse to employ someone solely due to them not taking a drug/alcohol test. However, the employer must be mindful of their obligations concerning data privacy laws in Mexico and refrain from any kind of discriminatory actions.

Managing employee offboarding in Mexico

Does at-will employment exist in Mexico?

Mexico does not recognize at-will employment.

How do companies terminate employees in Mexico?

There is no legal requirement for employers or employees to give the other party prior notice of their dismissal or resignation. No employee notice obligations are valid under Mexican law. However, if an employer has committed to notify personnel ahead of terminating employment, this may be enforceable. It is uncommon in Mexico, though, for employers to make such agreements with employees.

Are terminated employees in Mexico entitled to severance pay?

If an employee is dismissed without a reasonable cause, those hired for an indefinite period will be eligible to make claims for either reinstatement or mandatory severance that covers:

• their entire salaries

• bonuses

• accrued benefits like vacation pay, vacation premium, and Christmas bonus.

Severance pay is determined by combining various components. It includes a base of 90 days' worth of total compensation, encompassing the daily base salary and associated employment benefits. Additionally, there is an extra 20 days of total remuneration and a longevity bonus of 12 days for each year of employment. However, the total severance pay is capped at twice the daily minimum wage.

Meanwhile, individuals on definite-term contracts are generally entitled to a bigger severance payout determined by various conditions. 

Differences between employees and contractors in Mexico

What regulations separate employees and contractors in Mexico?

In Mexico, employees in the private sector are subject to the FLL and must be registered with the Mexican Social Security Institute (MSSI). 

Contractors, on the other hand, are not subject to FLL and do not need to register with MSSI. Employees have more rights and protections than contractors under Mexican law, including minimum wage requirements, overtime pay regulations, and social security benefits. Employers of both employees and contractors must comply with applicable tax laws in Mexico.

What are the relevant rules on contractors in Mexico?

In Mexico, independent contractors are not subject to managerial control and have the freedom to direct their own work performance, working hours, and location. Contractors are excluded from statutory employee benefits and are not protected by Mexican labor laws.

Can employers hire employees on fixed-term contracts in Mexico?

Companies can hire fixed-term employees in Mexico via seasonal or definite-term contracts. The FLL further determines how long a particular employee's working relationship will last under these types of contracts.

What are the misclassification laws and penalties in Mexico?

There may be hefty fines and penalties associated with employee misclassification.

Misclassifying employees as contractors can result in the employer paying back benefits, severance pay, criminal sanctions, and fines.

Working with a global employment partner can ensure workers are classified correctly, and helps you avoid the risks associated with misclassification. To learn more about this topic, read our guide about the consequences of misclassifying employees as contractors.

Mexico —

12 min

Mexico labor laws: your guide to compliant hiring in Mexico

Ready to expand your business into Mexico? Learn more about Mexico labor law, including definitions, recent changes, and how it affects your business.

The fast, simple, compliant way to hire in Mexico

While hiring employees in Mexico and beyond, it’s crucial to understand and comply with applicable labor laws and ensure ongoing compliance. Mexican labor laws can be complicated, and difficult to navigate, especially if you decide to do the heavy lifting yourself.

The best way to mitigate risks when it comes to international hiring is to work with an employer of record (EOR). A global employment service like Remote takes away the burden of understanding and complying with different wage requirements, taxation rules, legal guidance on employee contracts, visas/work permits, and other complex requirements.

Remote is the best-in-class global employment partner that offers multi-country payroll services. Remote has been consistently ranked as a top provider on G2 for providing an easy and secure platform for companies to hire internationally. 

With Remote, companies can automate typically manual processes such as managing employee contracts and compliance requirements across multiple countries in one place. Our intuitive global HR platform eliminates the need to manually manage onboarding paperwork, policies and procedures, and documentation while helping you stay compliant with Mexican labor laws.

Remote makes global expansion safe, simple, and easy! For more insight into how Remote can help you grow in Mexico, check out our Mexico Country Explorer page. To get an idea of how much it would cost to hire an employee in Mexico, take a look at our free Employee Cost Calculator.

References:

https://www.constituteproject.org/constitution/Mexico_2015

https://thelawreviews.co.uk/title/the-employment-law-review/mexico

https://uk.practicallaw.thomsonreuters.com/3-502-9997 

https://www.gob.mx/epn/en/articulos/mexican-social-security-institute 

https://resourcehub.bakermckenzie.com/en/resources/contingent-worker-misclassification-risk-comparison/latin-america/mexico/topics/contingent-worker-misclassification-risk-map 

https://leglobal.law/countries/mexico/employment-law 

https://iclg.com/practice-areas/employment-and-labour-laws-and-regulations/mexico