4. Types of leave

There is no information about the types of leave for this country.
Learn more about types of leave >

Paid time off

Mandatory Vacations:


1 year seniority - 6 days

2 years seniority - 8 days

3 years seniority - 10 days

4 years seniority - 12 days

5 to 9 years seniority - 14 days

10 years or above ‚Äď additional 2 days per 5 years.


A no carryover policy is imposed in Mexico.

Public holidays

Mexico recognizes eight public holidays.

Sick days

No minimum required by law.

Maternity leave

Mothers are entitled to up to three months of leave fully paid by social security.

Paternity leave

No minimum required by law.

Parental leave

Parental leave in Mexico is not mandatory. However, private companies can choose to impose this.

Other leave

5. Employment termination

There is no information about employment information for this country.

Termination process

Although no formal process is required, it is encouraged that the termination be formalized before the conciliation and arbitration court.

Notice period

No notice period for termination is required.

Probation period

Probationary periods are optional in Mexico, but the common practice is 3 months.

Severance pay

If the resignation is voluntary, the employer is required to pay the employee all accrued benefits. If an employee has at least 15 years of service, he or she is entitled to 12 days' pay for each year worked. Employers must pay all benefits due to employees who are terminated for cause. The employer will also entitle 12 days of pay for each year worked by the employee. Severance pay will equal three months' salary, 20 days for each year of service, and a seniority bonus of 12 days per year of service for terminations without cause. Additionally, the employee will be compensated for lost wages from the date of termination to the date on which the employer complies with the Labor Board's decision.

6. Working hours

There is no information about the working hours for this country.

General working schedule

In general, office jobs operate from 8:00 a.m. to 6:00 p.m., although working hours have increased in recent years and frequently extend until 7:00 p.m. or later. It's worth noting that in Mexico, lunch breaks range from one hour for regular workers to three hours for executives. With the advent of the modern working era, the cultural tradition of a "Siesta" became extinct.

Overtime

Employees earning minimum wage may work up to 9 hours per week without being paid. The next nine hours will be compensated at a rate of 200 percent of salary, with any additional hours compensated at a rate of 300 percent.

Employees earning more than the minimum wage are exempt from overtime pay for 50% of the hours worked per week, up to a maximum of five minimum wage hours per week. The first nine hours will be compensated at a rate of 200 percent, and subsequent hours at a rate of 300 percent.

7. Minimum wage

There is no information about the working hours for this country.

The minimum wage is 141.70 MXN per day. However, the minimum wage in the Free Economic Zone of the Northern Border is different and is set at 213.39 MXM per day.

8. Employee benefits

There is no information about the working hours for this country.

The Mexican Social Security Institute (Instituto Mexicano del Seguro Social, IMSS), a federal agency in Mexico, requires all workers to have access to public health care. However, given some of the drawbacks of the public health care system, such as long wait periods to visit a doctor or specialist, a scarcity of physicians, a lack of flexibility, and so on, many companies provide their workers supplementary private medical insurance.

As part of their employment compensation, several businesses provide their workers with a private insurance plan. Despite the fact that fewer than 3% of Mexicans have private medical insurance, private medical services account for 52% of overall medical expenditures in the nation. Private insurance is often chosen since it covers more costly procedures.

Because the statutory benefits in Mexico are very generous, companies seldom provide many extra perks. Flexible work hours are a typical perk, and job sharing and telecommuting opportunities are often provided. Employers may provide extra advantages such as supplementary contributions to retirement savings, reallocation allowances for foreigners, and Life Insurance on occasion.

9. Taxes

There is no information about the working hours for this country.

Corporate tax

The corporate income tax (CIT) applies to income earned by Mexican resident taxpayers from global sources, as well as income earned by foreign residents from Mexican wealth sources and income earned by foreign residents from permanent establishments (PEs) in Mexico.

CIT is levied at a federal rate of 30%.

All corporate entities, including civil organizations, branches, and so on, are subject to the tax laws that apply to Mexican companies (unless specifically ruled out, such as not-for-profit organisations).

Taxpayers who only participate in agricultural, livestock, fishery, and forestry operations are eligible for a 30% decrease in their tax obligation.

Even if recent inflation rates have been steady at low levels, the Mexican Income Tax Law includes provisions to recognize the impacts of inflation for tax purposes in the areas of monetary assets and liabilities (annual monetary adjustment) and depreciable assets.

After a company has paid its CIT, after-tax profits (i.e. earnings from the after-tax earnings account, Cuenta de Utilidad Fiscal Neta or CUFIN) may be given to shareholders with no corporate tax charge. A withholding tax (WHT) of 10% is levied on dividend payments made to individuals or foreign persons (including foreign companies); this WHT does not apply to distributions of earnings subject to corporate-level tax made prior to 2014. If a corporation makes a distribution from earnings that have not been subject to CIT for any reason, such as distributions of book earnings (i.e., earnings that have not yet been recognized for tax purposes in Mexico), the corporation will also be subject to CIT on the grossed-up distributed earnings (gross-up factor is 1.4286).

Tax paid on dividends issued in excess of CUFIN may be applied to the CIT of the year or the two fiscal years after the year in which the tax on non-CUFIN distributions was paid. The CUFIN for the tax years in which the credit is claimed must be reduced by the amount of the grossed-up dividend payout.

Individual income tax

Resident people, regardless of nationality, are liable to Mexican income tax on their global income. Non-residents, even Mexican nationals who can establish tax residency in a foreign country, are taxed solely on income earned in Mexico.

For an income between MXN 0 to MXN 7,735.00, the tax rate is 1.92 percent.

For an income between MXN 7,735.01 to MXN 65,651.07, the tax rate is 6.4 percent.

For an income between MXN 65,651.08 to MXN 115,375.90, the tax rate is 10.88 percent.

For an income between MXN 115,375.91 to MXN 134,119.41, the tax rate is 16 percent.

For an income between MXN 134,119.42 to MXN 160,577.65, the tax rate is 17.92 percent.

For an income between MXN 160,577.66 to MXN 323,862.00, the tax rate is 21.36 percent.

For an income between MXN 323,862.01 to MXN 510,451.00, the tax rate is 23.52 percent.

For an income between MXN 510,451.01 to MXN 974,535.03, the tax rate is 30 percent.

For an income between MXN 974,535.04 to MXN 1,299,380.04, the tax rate is 32 percent.

For an income between MXN 1,299,380.05 to MXN 3,898,140.12, the tax rate is 34 percent.

For an income above MXN 3,898,140.13, the tax rate is 35 percent.

If the employee is deemed a non-resident for Mexican tax reasons, the tax rate on pay will range from 15% to 30%. The first MXN 125,900 in employment income earned during a 12-month floating period is tax-free.

VAT, GST and sales tax

VAT is levied at a standard rate of 16% on all sales of goods and services, as well as lease payments and imports of products and services.

In the case of the northern border area, a tax credit of 50% on the VAT rate may apply, resulting in a rate of 8% rather than 16%.

10. VISA and work permits

There is no information about the working hours for this country.

Foreigners wishing to work in Mexico must apply for a work permit as well as a residence visa.

The National Institute of Immigration is in charge of all immigration in Mexico, including the issuance of work permits.

Mexico has both temporary and permanent visas; the employee should apply for both with the help of the potential employer. Foreign nationals who want to stay in Mexico for longer than 180 days must get a temporary residence visa. People holding a temporary resident visa, in addition to the Mexico work permit, may live and work in the nation for up to four years with a Mexico work visa.

A foreigner may apply for a permanent residency visa after four years of employment (with the same firm).

11. Employer Of Record service terms

There is no information about the working hours for this country.

Employment contracts

In Mexico, it is legally needed to have a robust employment contract in place that specifies out the conditions of the employee's remuneration, benefits, and termination criteria. A salary and any compensation amounts should always be stated in Mexican pesos rather than a foreign currency such as USD in an offer letter and employment contract in Mexico.

Minimum assignment length

There is no set length for assignments. This is usually indicated in the employment contract for fixed-term employments.

Payment currency

Mexican Peso

13.Opening a subsidiary in Mexico

There is no information about the working hours for this country.

How to set up a subsidiary

A subsidiary enables you to operate as a branch of a parent firm while serving local clients in Mexico. In Mexico, it is known as a S.A. de R.L. (Anonymous Society of Limited Responsibility) or S.A. de C.V. (Anonymous Society of Variable Capital) and operates similarly to an LLC in the United States. The subsidiary has limited autonomy from the parent firm, and the parent company is still accountable for anything that goes wrong.

The procedure of establishing a Mexico subsidiary starts with selecting a company name and registering with the Ministry of External Affairs (SRE). Your name should be accepted if there are no duplicates. You will subsequently sign into a pro forma agreement under which any non-Mexican shareholder will be governed by Mexican law.

Hire a local attorney to draft paperwork such as company governance, period of existence, and others for you. Many work, salary, and benefits rules in Mexico may be explained by them. Every document should be notarized, and a power of attorney should be established for your subsidiary.

Subsidiary laws

You must comply with all Mexico subsidiary requirements as soon as you create a subsidiary, including zoning, environmental restrictions, health and sanitary concerns, and immigration.

Taxation is one of the most important parts of Mexico's subsidiary law. In most cases, the parent firm in the United States will obtain a tax credit for any income, dividends, and withholding taxes paid to the Mexican government. However, in order to avoid significant penalties, it is essential to comply with all Mexican tax rules. You must register for taxes and register as an employer with Mexican Social Security.

Subsidiaries in Mexico must pay workers in pesos using an in-country bank account. This is also how you will pay social security and other taxing organizations.

13. Why choose Rivermate as your Employer of Record / PEO in Mexico

Establishing an entity in

Mexico

to hire a team takes time, money, and effort. The labor law in

Mexico

has strong worker employment protection, requiring great attention to details and a thorough awareness of local best practices. Rivermate makes expanding into

Mexico

simple and effortless. We can assist you with hiring your preferred talent, managing HR and payroll, and ensuring compliance with local legislation without the hassle of establishing a foreign branch office or subsidiary. Our PEO and Global Employer of Record solutions in

Mexico

give you peace of mind so you can focus on running your business.

Please contact us if you'd like to learn more about how Rivermate can help you hire employees in

Mexico

via our Employer of Record / PEO solution.

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