Employer Of Record Mexico
Infotree Global Solutions assists organizations planning for expansion in Mexico by providing employer of record services in Mexico. If you wish to recruit professionals in Mexico, you can easily accomplish it with us without even having an establishment in Mexico. Our team of dedicated professionals would take up all the recruitment and payroll management responsibilities for your organization. From searching for ideal employees to hiring and onboarding them, we take every step on your behalf in total compliance.
Our Mexico employer of record would give you insights into the compensation, benefits, and facilities required for your employees in Mexico. Here are some of the important factors you need to know before you start hiring in Mexico:
Table of Contents
• Hiring In Mexico
• Employment & Labor Laws In Mexico
• Challenges When Expanding Into Mexico
• Employment Contracts In Mexico
• Payroll & Tax In Mexico
• Mexico Compensation And Benefits
• Why Infotree Global Solutions?
Hiring In Mexico
Before you start your business operations in Mexico, it is important to go through the recruitment laws of the country. Having knowledge of the Spanish language is vital to carry out the hiring process. Besides, it is good to be familiar with the cultural norms of the country to avoid unforeseen issues. Since 1917, the Federal labor law is an integral part of the Mexican Constitution. It describes all the legal considerations for work hours, employee discrimination, minimum salary, and workplace safety along with labor unions. Mexico is consistently adding flexibility to its labor laws to make it more adaptive for varied business needs. According to the 2017 initiative, it has encouraged a digital-based system to facilitate organizations with self-report administrative activities. It has further assisted in bringing more transparency and compliance.
One prime factor of transparency lies in the written contract with clear terms and conditions for all employees. Being associated as your Mexico employer of record, we take charge of the employee contract and ensure to meet all the legal requirements. Be it cultural norms or best practices of hiring, we keep you updated on all the employment laws as and when they change.
Employment & Labor Laws In Mexico
Mexico Employment law has few legal obligations which every employer needs to abide by. They should provide formal written employment letters for all employees. An Employer of Record Mexico assists you to learn about the contract. Every contract must include all required details like remuneration, job title, termination policy, and others. Contracts should be in the Spanish language using the Mexican peso currency.
The minimum wage of the employees is 141.70 pesos for a working day set by the Mexican authorities. Every employer is obligated to pay the basic amount to their employees and the additional amount for overtime. If an employee works on public holidays and weekends, he is entitled to get a premium of 25% above what they are paid on other days.
A company can terminate the employment on multiple grounds such as violence towards staff, sexual assault to the opposite gender, dishonesty, threats, and many others. Sometimes, termination may also take place for loss of huge sum and damage of company asset.
• Maternity Leaves
The company should grant maternity leave of around 42 days (a total of 84 days) to the pregnant women employees both before and after delivery. In case of the child’s health-related complication, the company needs to provide another 2 weeks. Maternity leave is paid for by Social Security, not the employer.
A 1-year service with any Mexican company provides the employees with an earned leave of 6 days, which should be used for the vacation only. It adds two days of additional leaves with every passing year of service. After five years, when the leaves amount to 14 days, employees are benefitted to avail two additional paid leaves.
Challenges When Expanding Into Mexico
It is important for business owners to get familiar with the country norms and laws as income tax rules, corporate tax, insurance rules may vary. The company’s name needs to be registered with approval from the Ministry of Foreign Affairs. Then the setting up procedure needs to go through the process of obtaining a Tax ID number, which requires signing the incorporation deed, obtaining tax registration, submitting the incorporation deed to the Public Register of Commerce. After these steps, the Tax ID number will be available after registering with the Ministry of Finance and Credit. Then the business needs to be legalized through registering with and paying taxes to various local authorities. It needs to be registered with Mexican Social Security, SIEM, and the National Institute of Statistics. Payroll tax needs to be paid to the local tax authority.
Employment Contracts In Mexico
Every employee you hire for your corporate office in Mexico has to be handed an employment contract in the country’s local language. A Mexico Employer of Record will provide you all the details you need to prepare the contract while ensuring your complete confidentiality. You will be able to get actionable insights about the clauses specifying benefits and entitlements for the employees. An employee contract should mention the date of commencement, job location, job description, job role, the list of holidays and leaves, etc. Apart from this, you might also have to carry out the procedures for other legal contracts like collective bargaining contracts facilitated mostly by trade unions. There are individual, specific terms and trial period contracts that bring flexible opportunities for foreign employees and enable them to hire according to their project preferences.
Type Of EmploymentContracts:
There are different types of contracts and you can find more about them with Employer of Record Mexico assistance.
• Individual Contacts
This type of employment engages an individual in subordinated personnel services for a business on a salary basis. The contract includes the obligations for both parties during the project duration. Although not a mandate but a written contract is highly recommended to avoid any legal issues.
• Specific Project Contract
The contract comes with a timeline to complete a certain project. Under this contract, the term is specified as per the nature of the work. Another type of contract is an indefinite term contract, which is set for any going on project that needs an uncertain period of time.
• Trial Period Contract
It has been added in Article 39-A to dismiss the worker if the owner does not wish to garner the employee relationship in the trial period. The employee can be dismissed by seeking the consent of Mexico’s Training and Productivity Commission. This law also assures that consecutive contracts should not be used for training to safeguard the labor benefits.
• Seasonal Contracts
In article 39-F, it is stated that under seasonal contracts, workers possess the same rights as individuals that are hired for indefinite contracts. While starting business operations in Mexico, the companies should have a clear understanding of different labor contracts to manage their staff effectively. Take the help of a Mexico Employer of Record to learn more about labor rights and regulations.
• Collective Labor Contracts
Collective bargaining agreements may be existed by the employee and usually, this kind of agreement is made by labor unions to establish the work conditions. The contract mentions all the compulsory terms for the specific industry. It encompasses all the details like benefits, work shifts, compensation, and positions.
• Foreign Employees Contract
There are certain terms for companies willing to initiate employment contracts with international employees. It outlines that 90% of the company’s employees must be Mexican residents. Besides, all employees in positions that require technical skills must be Mexicans until the position needs a very specific knowledge that is available to foreigners only.
Payroll & Tax In Mexico
Mexico has a progressive income rate but certain areas of taxation including payroll depend on the employee’s salary. Mexico’s individual income tax rates range from between 1.92% and 35%. Non-residents (on work permit/visa) pay 15% to 30%. To manage taxation and legal activities, most companies usually hire services from the Employer of Record Mexico for better management.
In addition to this, here are some other taxes that constitute an important part of the Mexican taxation system –
Federal and Payroll Tax – A federal tax of around 30% is levied on vacation premium exemptions, grocery coupons, and Christmas bonuses. The taxation system also consists of a payroll tax, which ranges between 1% and 3% of the salaries withheld by the employer.
Withholding Tax – The system also imposes a withholding tax on certain categories of income state to non-residents, which has entered the economy into double tax treaties with several nations that can lessen the tax liability on the income generated by foreigners.
Corporate Tax – Companies registered in Mexico are subjected to the Federal corporate income tax at a rate of flat 30% which generally aligns with the calendar year. To manage all these taxations, a lot of businesses usually hire Mexico Payroll Services to address all the legal requirements.
Social Security Tax – In Mexico, the social security rate is levied on employers at 7.58 % and 1.65% on employees. These amounts are contributed towards retirement pension, Life Insurance, and other contributions.
VAT – The rate for Value Added Tax in Mexico is classified into three categories, namely Standard (16%) Reduced (8%), and Zero (0%).
Municipal Tax – In Mexico, the municipal tax, also known as the property tax, is levied on the assessed value of the real estate. The tax rate is between 0.05% to 1.2%, depending on the property location, and is payable to the state government on an annual basis.
Mexico Compensation And Benefits
The employer is obligated to submit employee benefit contributions to the authorities directly. Contributions need to be done both from the employer’s and the employee’s part, amounting to around 30% of the base salary. These are among the benefits the company will pay for the employee: Life insurance, retirement, Govt. health plan (IMSS), Public Housing Contribution, Public Child-Care deduction, and Stage wage taxes.
The company needs to pay the benefits outlined by the labor law to the employees. These benefits include minimum wage (per day), one non-work day per week, vacation bonus of 25% of the wages for the vacations accrued, severance pay for dismissal without cause, etc. The severance pay will include 90 days of salaries as legal compensation, seniority bonus, and all the fringe benefits owed till the date of dismissal. Termination needs to always follow legal notice in writing, otherwise, it can be deemed illegal. Consider taking assistance of an Employer of Record Mexico to have a clear understanding of the same.
There are different types of bonuses in Mexico as per Article 87 LFT. The Christmas bonus is similar to 15 days which is paid before 20th December every year. If a worker continues to work on the seventh day, he is eligible for a Sunday bonus which is 25% on the salary of the days as per Article 71 LFT. In addition, workers are eligible for sharing employer’s annual profits under the Federal Labor Law,
Why Infotree Global Solutions?
Companies should focus more on growing the business instead of spending time with legal formalities, different tax structures, and other employment-related issues. We at Infotree Global Solutions will help you set up your business in Mexico by managing payroll services and other legal formalities within the shortest possible time. Our employer of record services is designed to best suit the interests of employees and employers. Our experienced in-territory experts will be constantly present to supervise and regulate your business endeavor in Mexico.
If you are seeking a professional employer of record service in Mexico, do not waste your time searching any other service provider and call us straight. We are committed to providing the best result to our customers and will make your company’s task our priority.