Global Payroll and Benefits — 6 min
In our guide on hiring employees in Mexico, we touched on how to pay remote workers in Mexico. Let’s take a closer look at the complexities of paying workers in Mexico and talk about how to ensure businesses stay compliant with Mexican labor laws.
In 2017, changes to labor laws created new rules that require employers to pay all full-time employees who live in Mexico as if they were permanent Mexican citizens. Now, expats and citizens follow the same system of rules, simplifying things for the Mexican government while creating a few complications for foreign employers.
Employers of workers in Mexico must now pay their workers in Mexican pesos through government-approved Mexican banks. Employees can convert their payments after the fact, but they cannot receive their salaries in American dollars or any other currencies.
Employers typically set up accounts for employees, but these accounts are specifically for payroll receipt. These payroll bank accounts receive deposits from employers, which employees can spend by using a bank-provided debit card. While payroll bank accounts do allow employees access to their money, they do not provide a full range of banking services, so employees should still open their own bank accounts for personal use.
Companies must be diligent to ensure workers in Mexico receive a consistent salary. Remote offers full-service employer of record services in Mexico for a flat fee, guaranteeing compliance with all local employment laws while providing a consistently exceptional experience (and consistent payment amounts) for remote workers in the country.
Until 2017, employers only had to pay social obligations and taxes on wages for workers in Mexico. Now that employers must keep employees’ net pay in Mexico (via the requirement to use Mexican banks), employers are responsible for the full range of payroll deductions and contributions. These deductions include social security, taxes, and other benefits explained further in our guide to hiring in Mexico.
These changes prevent employers from processing payroll outside of Mexico for employees who work in the country. Employers who are used to splitting payroll between two countries cannot do so in Mexico. When processing payroll in Mexico, all deductions from employees’ paychecks occur in Mexico and are subject to Mexican payroll obligations.
Failure to abide by these rules could result in fines, penalties, or a ban from doing business in the country.
Companies outside Mexico can only pay workers in Mexico directly if those workers are independent contractors. Full-time employees in Mexico must be employed by a local legal entity and must have an appropriate Mexican work permit to work in the country. Companies should not attempt to pay employees in Mexico as contractors, because the Mexican government takes worker misclassification claims seriously.
Businesses can choose to open their own legal entities in Mexico by going through the appropriate government channels and hiring their own lawyers, payroll providers, and benefits administrators. Most companies, however, choose to work with an employer of record, like Remote.
As an employer of record, Remote manages payroll, benefits, taxes, and compliance for businesses with employees in Mexico and other countries around the world. We keep companies compliant with all applicable labor laws while providing a first-class experience for remote employees.
Businesses cannot simply pay employees, withhold social contributions, and report taxes in Mexico on their own. Companies with Mexican employees must also submit pay stubs to the Servicio de Administración Tributaria (SAT), Mexico’s internal revenue service, for approval.
Only after the SAT receives and approves an employee’s pay stub can an employer forward the pay stub to the employee. The SAT verifies that the amount the employer is supposed to pay the employee matches the amount actually paid. This process, in combination with the government’s approval process for payroll-approved banks, is designed to protect employees from fraud.
Remote handles this process automatically for all Remote customers.
Mexico is home to a talented pool of workers for businesses in all sorts of industries. From tech to finance and from healthcare to consumer goods, companies looking to expand to Mexico will find plenty of talent on the other end.
Remote empowers businesses to all sizes to employ and pay top global talent. With our robust employer of record solution, we offer the strongest guarantee of compliance along with the best employee experience for your team members in Mexico. Reach out today to learn how we can help your global business grow.
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