Mexico

While there are generally four ways of employing people across borders, not all are legal or sensible. Here is an overview of each way to employ a worker in Mexico, outlining the potential cons.

HQ country employment & payroll

While the person is in Mexico, they are employed and payrolled directly by the company’s HQ entity.
Cons: This may appear attractive, but it generally isn’t legal in the long term.
HQ payroll won’t be possible if the person is not a tax resident in the HQ country

Independent contractor agreements

People are locally registered as sole traders or limited liability company owners in Mexico and invoice for their work. There is no direct employment relationship.
Cons: In Mexico, this is not a compliant or legal way to engage full-time workers who work solely for your company. There will be challenges in attracting and retaining talent.

Direct local employer setup

The company sets up as a fully-compliant local employer. This often involves setting up a local entity and local tax registration.
Cons: Expensive, time-consuming, high-level of complexity. Unknowns around how obligations and costs will evolve over time. There will be a need to stay on top of changes in regulations.

Partnering with an Employer of Record Mexico /full-service Professional Employer Organisation

Employment is handled by a platform that specialises in employing people on behalf of customer companies. The Employer of Record helps to hire and pay employees.
Cons: For some countries, the ongoing costs may be higher than direct employment. Some education is needed to inform employees about how the employment relationship will work.

Setting up a local company in Mexico can be complicated, in particular after the initial setup when payroll needs to be calculated and run every month, taxes filed, benefits extended, change of rules and regulations followed.

As with every other country, there are certain costs associated with employing a worker in Mexico that come on top of the gross salary you are offering. In Mexico those are social security, retirement, contributions to the National housing fund, and payroll. To view the exact percentages and amounts given the salary you are planning to offer, you can use our handy calculator tool.

It means that Boundless is the legal employer of the individual, as far as the Mexican government, tax, and employment authorities are concerned. We are responsible for:

• informing you about any pre-employment requirements
• ensuring their employment is compliant with Mexican employment law
• informing you about the length of the maternity leave, paternity leave, public holidays, illness benefits, medical benefits
• providing a locally compliant employment contract
• processing local payroll
• filing employment-related tax returns
• issuing payslips to the employee
• distributing salary payments
• payments to the local tax authorities

Customers that work with an Employer of Record in Mexico are responsible for:

• sourcing and recruiting their own workers
• managing the employee’s day-to-day work load
• contributing to the personal / professional development of the employee through their work
• following any guidance we give on employment and HR best practices or legal obligations in Ireland, such as the employment contract, public holidays, annual leave, sick leave, maternity and paternity benefits, probationary periods, overtime pay, statutory redundancy payments, liability insurance and many others
• ensuring that payroll bills relating to their team are paid to Boundless before the cut-off point in each pay cycle

Boundless as the Employer of Record Mexico files all pertinent taxes and and contributions to the Mexican Social Security Institute as they relate to the compliant employment of an individual in their home country.

We carefully choose employment lawyers or advisories to partner with in each country we operate in, including Mexico. They ensure the Mexico employment contracts, and any other relevant documents required for new employees comply with the local jurisdiction. We have thorough discussions on specific norms such as payroll services, social protection, data protection, notice period or work-from-home regulations. Whenever a potentially sensitive issue arises in Mexico, our internal team contacts the relevant firm to ensure all steps are taken to resolve it promptly.

Any new employee that is locally employed through an Employer of Record gets full employment rights and benefits as specified in Mexican employment law. They get a locally compliant employment contract, statutory paid maternity leave, annual leave, illness benefits, relevant tax credit, severance pay, and many more. Health coverage is provided by the national healthcare system but due to long waiting times, employers often offer private insurance to employees.

In Mexico, both employers and employees have to pay taxes. For employers, these include social security, retirement, contributions to the National housing fund, and payroll and for employees, they include social security, retirement, and income tax. To get a clear overview with both employee and employer taxes, use our salary breakdown calculator.