Mexico is a key talent hub in North America, sharing a long border with the United States and offering strategic access to global markets through trade agreements like CUSMA/USMCA. With the 15th-largest economy in the world and a young, growing labor force, Mexico is an attractive location for international hiring.

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Mexico’s large economy and population, cultural influence, and steady democratization make Mexico an ideal place to hire remote workers, including workers who are digital nomads.

Types of Contracts

In Mexico, the following contract types are available:

• Fixed-term contracts
• Indefinite contracts

Working Hours

A standard working week in Mexico is 48 hours long, made up of 6 days of 8 hours and 1 rest day.

The Federal Labour Law establishes the following types of working hours:

• Daytime: Between 6:00 AM to 8:00 PM
• Nightly: Between 8:00 PM to 6:00 AM
• Mixed: when the shift is arranged with daytime and nightly working hours. The night period must be less than 3.5 hours.
• The maximum working hours shall be 8 hours during the day, 7 hours at night, and 7.5 hours when it is mixed.

Overtime

If an employee works for more than 48 hours in a week, they are entitled to additional and proportionate pay for the extra hours worked. The overtime is not limited and those hours will be paid at +100% of the hourly rate.

Sunday Work

Employees are also entitled to a 25% premium on their standard salary when they work on a Sunday, according to Mexican labor laws. If the work on Sunday is in excess of 48 hours for that week, then the employee is paid a 200% bonus on their Sunday wages (125% of normal hourly wages x 3).

Minimum Wage

The general minimum wage in Mexico is MXN 294.50 per day (January 2026), and MXN 442.87 per day in the Northern Border Free Zone (Zona Libre de la Frontera Norte — ZLFN). The minimum wage is set annually by the Comisión Nacional de los Salarios Mínimos (CONASAMI) and takes effect on January 1 each year.

Probation Period

It is not mandatory to include a probation period in the employment contract. Trial period (período a prueba) and initial training period (período de capacitación inicial):

• Standard roles: up to 30 days
• Management, technical, or professional roles: up to 180 days

These apply only to indefinite contracts. During the period, the employer may terminate if the employee fails to demonstrate the required skills or knowledge. All labour rights apply during this period.

During the probationary period, a company can terminate employment if the employee has demonstrably poor performance or does not have the knowledge required to execute the job properly at the end of the test contract, or that contract can be terminated.

13th and 14th Month Salaries

In Mexico, there are a few mandatory bonuses that employers must offer:

• Christmas bonus: it should be paid before December 20th each year and be equivalent to at least 15 days of salary.  This benefit is prorated and accrued reflecting the actual time worked in the corresponding years.
• Vacation bonus: the employee should receive a vacation bonus equivalent to 25% of their base salary.
• Prima de Antigüedad (Seniority Premium): 12 days' salary per year of service, capped at twice the daily minimum wage per day (LFT Art. 162).
  • On voluntary resignation after 15+ years: payable in full
  • On unjustified dismissal: payable regardless of tenure (from year 1)
  • On death or permanent disability: always payable
  The 15-year threshold applies only to voluntary resignations — on dismissal without cause, the seniority premium is always owed.

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Taxes & Local Employment Costs

Employer Taxes & Contributions

The Mexican Social Security Institute (Instituto Mexicano del Seguro Social or IMSS) oversees social security in Mexico. Contributions to social security are required from both workers and companies, with the company responsible for withholding and remitting these contributions to the IMSS.

Estimated total employer cost in Mexico: ~32–35% of gross salary, comprising IMSS social security (~12–15%), INFONAVIT housing fund (5%), SAR retirement (2%), and state payroll tax ISN (~2%). Exact rates depend on the state, the employee's salary level, and the employer's IMSS risk classification.

Mandatory Regime Coverage Includes:

• Occupational Risk
• Illness and Maternity
• Disability and Death
• Retirement and Current Working Elders
• Day Care and Social Services

Retirement Savings (SAR / AFORE)

• Managed by CONSAR (Comisión Nacional del Sistema de Ahorro para el Retiro).
• Employers contribute 2% of the employee’s base salary into the retirement subaccount (SAR).
• Employees also contribute separately (about 1.125% of base salary), so it is not fully employer-funded.
• Funds are managed through AFORES (private retirement fund administrators).

INFONAVIT (Housing Fund)

• Employers must contribute 5% of each employee’s base salary to INFONAVIT.
• Contributions go to an account in the worker’s INFONAVIT portal, where employees can track savings and apply for housing loans or credits.

State Payroll Tax (Impuesto sobre Nómina – ISN)

• A state-level tax levied on employers, generally ranging from 1% to 3% of total payroll.
• The exact rate and base vary by state (e.g., some states apply exemptions or special rates for certain industries).
• Employers are responsible for calculating and remitting this tax to the local state authority.

Non-Deductible Portion of Employee Benefits

• Under the Income Tax Law (ISR), Article 28, not all employee benefits are deductible for the employer.
• Generally, only 47% or 53% of certain exempt benefits (e.g., food vouchers, savings funds) are deductible, depending on whether the employer maintained or increased benefits compared to the prior year.
• The remainder is non-deductible and must be factored into the employer’s annual corporate tax filing.
• This does not create an additional payroll tax but reduces the employer’s ability to deduct expenses, effectively increasing the company’s taxable base.

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Annual Leave

In Mexico, employees are entitled to a certain number of days of paid vacation leave based on their length of service with their employer. Employees are entitled to 12 days of paid annual vacation in the 1st year of service. The number of vacation days increases by 2 days each subsequent year of service, up to 20 days in year 5. After the 6th year of service, the number of vacation days increases by 2 days every 5 years of service.

• 0-1 years of service = 12 days
• 1-2 years of service = 14 days
• 2-3 years of service = 16 days
• 3-4 years of service = 18 days
• 4-5 years of service = 20 days
• 5-10 years of service = 22 days
• 10+ years of service = 24 days

The holiday leave is accrued during the first year which goes from the start date of the contract and the last year. The holiday leave is accrued during the first year which goes from the start date of the contract and last year.

Vacation days may not be paid out under any circumstance except when the employee is discharged (prorated amounts will be considered).

Vacation Premium

Although the vacation premium is a different benefit from vacation days, these two benefits are directly related. The vacation premium is equivalent to 25% of an employee’s base salary corresponding to the vacation period - on top of the daily salary per vacation paid day.

Carrying Over and selling Annual Leave

Typically, an employee is not able to carry over unused vacation into the following reference year. Thus, if the employee does not go on holiday, he will lost it. In addition, vacations must never be compensated with any remuneration, i.e. the employer must grant to the employee the total amount of days off they have accumulated.

Sick Leave

For non-work-related illness, there is a 3-day waiting period during which IMSS does not pay. The LFT does not require employers to pay wages for these 3 days — whether they do depends on company policy or the employment contract. From day 4, IMSS pays 60% of the employee's registered daily wage (salario de cotización) for up to 52 weeks, extendable to 104 weeks for the same illness.
After this, they are to be compensated at 60% of their typical pay rate.  This benefit, amounting to 60% of the employee's regular wage, commences from the 4th day of illness and lasts for up to 52 weeks, with the possibility of extension for an additional 52 weeks on an unpaid basis.

There are different types of disability benefits available:

• Total temporary disability (TTD)
• Partial permanent disability (PPD)
• Permanent total disability (PTD): In this case, the worker is entitled to a maximum of 52 weeks of paid leave based on medical evaluation.

Under federal law, employers with employees filing valid workers' compensation claims in Mexico must ensure access to medical care, physical therapy, rehabilitation, and hospitalization if necessary. They are also obligated to provide orthopedic devices and prosthetics for employees who have lost limbs or other body parts in workplace accidents. It's crucial to note that employers must pay injured or ill employees 100% of their total temporary disability benefits for a period of up to 3 months from the date they were approved to receive workers' compensation in Mexico.

Maternity Leave

An employee can take 6 weeks of maternity leave before giving birth and an additional 6 weeks of leave after their child is born, for a total of 12 weeks of paid maternity leave. If the employee chooses, they can adjust their maternity leave benefits so that their leave time begins 4 weeks before giving birth and extends 8 weeks after their child is born.

During leave, the employee receives 100% of their salary paid by the social security institute (IMSS).

Additional Maternity Leave

If the mother has a difficult labor or delivery, the child is unwell and must stay in the hospital, or the child is born with a disability, employees are eligible for an additional 2 weeks of maternity leave or more, depending on the situation. When extended maternity leave is granted, the employee is only entitled to 50% of their total salary for the extended period, and this period cannot last for more than 60 days.

Many employers are not required to pay maternity leave because employees can use IMSS benefits. However, for employees to be eligible to use these benefits, they will need to have been contributing to the social security fund for a minimum of 30 weeks within the year leading up to the beginning of their leave time.

Paternity Leave

Employers in Mexico should grant working fathers 5 working days of paternity leave with pay for the birth of their children.

Public Holidays

The following public holidays are observed in Mexico:

• New Year’s Holiday - January 1
• Constitution Day - First Monday of February
• Benito Juarez Day - Third Monday of March
• Labor Day - May 1
• Independence Day - September 16
• Revolution Day - Third Monday of November
• Christmas Day - December 25

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Benefits

While not mandatory, many employers choose to provide additional benefits to their employees. These may include:

• Life Insurance: Coverage that provides financial protection to the employee's beneficiaries in case of death.
• Major Medical Insurance: Comprehensive health coverage that may extend to the employee's family, including spouse and children.
• Minor Medical Insurance: Coverage for minor medical expenses, excluding major injuries or treatments.
• Work from Home Allowance: An allowance provided to employees who work remotely, typically ranging around 1,000 MXN gross per month. There's no fixed minimum or maximum amount for this allowance.
• Grocery Coupons: Vouchers or coupons provided to employees for purchasing groceries, usually capped at 7% of the employee's salary.‍
• Profit share: is a mandatory benefit paid to employees in May every year and that have more then 3 months with the employer. The amount varies based on the employer’s profit.

These additional benefits complement the minimum benefits required by law and contribute to a more attractive employment package.

Process

Justified Grounds for Termination

Article 53 of the Labor Law outlines the following causes for termination of the employment relationship:

1. Mutual Consent: Termination by mutual agreement between the employer and the employee.
2. Death of the Employee: Termination occurs upon the death of the employee.
3. Expiration of Work or Contract Term: Termination due to the completion of the work, expiration of the contract term, or the full investment of capital, as outlined in Articles 36, 37, and 38.
4. Physical or Mental Incapacity: Termination due to the physical or mental incapacity of the worker, rendering them unable to perform their duties.
5. Cases Under Article 434: Termination based on reasons specified in Article 434.

Failure by the employer to verify the cause of termination results in termination without cause. In such cases, the worker has the right to either reinstatement or compensation. The employer may opt for compensation by providing:

• Three months of salary.
• 20 days of salary per year of service.
• Payment of overdue wages, if applicable.
• Accrued vacation and Christmas bonuses up to the time of dismissal.

Note: Employers should carefully consider these provisions when terminating an employment relationship in Mexico to ensure compliance with labor laws and mitigate the risk of legal disputes. It is advisable to seek legal counsel to navigate termination processes effectively and uphold the rights of both parties involved.

Grounds for Termination Due to Gross Misconduct

1. Deception of Employer: The worker materially deceives their employer, such as through fraudulent expenditures or inventory manipulation.
2. Lack of Integrity or Honesty: The worker exhibits a lack of integrity or honesty, engages in acts of violence, makes threats, or delivers insults, whether during or outside of working hours.
3. Property Damage: The worker intentionally causes property damage during their work duties.
4. Immoral Acts or Harassment: The worker commits immoral acts or engages in harassment, including sexual harassment, towards their coworkers.
5. Disclosure of Confidential Information: The worker reveals company secrets or confidential information without authorization.
6. Excessive Absences: The worker accumulates more than three absences within thirty days without obtaining permission from the employer or providing a justifiable reason.
7. Intoxication at Work: The worker arrives at the work site in a state of intoxication, impairing their ability to perform their duties safely and effectively.

Employers should adhere to these guidelines when considering termination with just cause in Mexico. It is essential to ensure that any termination decisions are made per labor laws and established company policies. Seeking legal advice can provide further clarification and guidance throughout the termination process.

Notice Period

There is no statutory advance notice period in Mexico. The employer must provide written notice of dismissal at the time of termination, stating the specific cause and date. If dismissal is for gross misconduct (rescisión), the employer must formally notify the employee and, if contested, register the claim with the Tribunal Laboral within 30 days of becoming aware of the misconduct — failing which the right to rescind without compensation is lost.

Severance Pay

In Mexico, terminating an employee without reasonable cause requires severance. Termination without just cause (despido injustificado) entitles the employee to the constitutional indemnity (LFT Art. 50):

• 3 months' salary (indemnización constitucional)
• 20 days' salary per year of service (for all years, not just beyond 15)
• Seniority premium (prima de antigüedad): 12 days' salary per year of service, capped at twice the daily minimum wage per day
• Proportional Aguinaldo and vacation premium accrued to date

The 20-days-per-year payment applies from the first year of service — it is not limited to employees with 15+ years tenure.

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PTU – Profit Sharing (Participación de los Trabajadores en las Utilidades)

• What it is: A mandatory annual profit-sharing obligation.
• Legal basis: Article 123 of the Mexican Constitution and the Federal Labor Law (LFT).
• Rate: Employers must distribute 10% of their taxable profits from the prior fiscal year among eligible employees.
• Payment timing: Must be paid by May 30 each year (June 29 for companies classified as newly created or those producing goods/services for new markets).
• Eligibility:
  • All employees who worked during the fiscal year (including those no longer employed at the time of payment) are entitled, except company directors, general managers, and partners/shareholders.
• Distribution method:
  1. 50% is distributed in proportion to each employee’s days worked.
  2. 50% is distributed in proportion to each employee’s wages earned.
• Cap: Following 2021 reforms, PTU is capped at 3 months of the employee’s regular salary OR the average of the last 3 years’ PTU received, whichever is higher.

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Aguinaldo – Christmas Bonus

• What it is: A mandatory 13th-month bonus.
• Legal basis: Article 87 of the Federal Labor Law.
• Rate: At least 15 days of wages, though many employers offer more as a benefit to remain competitive.
• Payment timing: Must be paid by December 20 each year.
• Applies to: All employees, prorated if they didn’t work the full year.

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