Mexico Labor Law Guide for Hiring Employees and Contractors
As of 2023, Mexico’s economy remains one of the largest in Latin America, with a GDP of approximately $1.3 trillion USD. The country’s economy is diverse, with key sectors including manufacturing, oil and gas, agriculture, and tourism.
Mexico is particularly known for its automotive industry, electronics manufacturing, and as a major exporter of agricultural products such as avocados and tomatoes. The service sector, especially tourism, also plays a significant role in the economy.
The official currency of Mexico is the Mexican Peso (MXN).
Minimum Wage
MX 248.93/day, MX $374.89/day (Northern Border Area)
Overtime Wage
200% of the regular hourly rate
Meal Breaks
30 minutes
Rest Breaks
15 minutes
Working hours
8 hours per day, 48 hours per week
Salary Payment Cycle
Weekly or bi-weekly
Payroll Taxes
Social Security, Housing Fund, Retirement Savings
Paid Vacation
12 days after 1 year of service
Overtime Hours
Over 48 hours per week
Night Shift Hours
125% of the regular hourly rate
Holidays
7
No Work Days
Sunday
To hire employees in Mexico, businesses must establish a legal entity in the country. The process to incorporate a business can take around 6 to 8 weeks and typically costs between MXN 15,000 to MXN 30,000, depending on the type of entity and legal fees.
Employers must sign a written employment contract with each employee, detailing the terms of employment, including job duties, salary, benefits, working hours, leave entitlements, and termination procedures. The contract must be in compliance with the Federal Labor Law of Mexico. Contractors and employees are treated differently under Mexican labor law, with employees receiving more extensive protections.
Mexico has a national minimum wage law, which as of 2024, sets the general minimum wage at MX$ 248.93 per day. However, there is a higher minimum wage for workers in the Northern Border Free Zone, set at MX $374.89 per day.
Certain professions, such as domestic workers and agricultural laborers, have specific minimum wages that differ from the general rate. Mexico does not have regional minimum wages outside of the Northern Border Free Zone, and the federal rate applies uniformly across the rest of the country. Employers are also required to provide holiday pay, which is typically 25% above the regular pay rate.
The standard working hours in Mexico are 8 hours per day and 48 hours per week. Any work beyond these hours is considered overtime and must be compensated at double the regular hourly rate. Employees are allowed to work a maximum of 3 hours of overtime per day, up to 9 hours per week.
Night shifts, defined as work between 8 p.m. and 6 a.m., are compensated at 125% of the regular hourly rate. The minimum legal working age in Mexico is 15 years, and child labor is strictly regulated. Employees under 18 are not allowed to work night shifts or in hazardous conditions.
Employers in Mexico must make several payroll deductions:
Social Security (IMSS): Employers contribute approximately 31% to 35% of the employee’s salary to cover social security, healthcare, and retirement benefits.
Housing Fund (INFONAVIT): Employers contribute 5% of the employee’s salary to the housing fund.
Retirement Savings (SAR): Employers contribute 2% of the employee’s salary to the retirement savings fund.
The current income tax regime in Mexico is progressive, with the following tax rates:
Income Level (MXN per year) | Tax Rate |
Up to 7,735 | Exempt |
7,735 to 65,651 | 1.92% |
65,651 to 115,375 | 6.40% |
115,375 to 134,119 | 10.88% |
134,119 to 160,577 | 16.00% |
160,577 to 323,862 | 17.92% |
323,862 to 510,451 | 21.36% |
510,451 to 974,535 | 23.52% |
974,535 to 1,299,380 | 30.00% |
Above 1,299,380 | 32.00% |
Mexico’s labor laws mandate several types of leave:
Paid Vacation: Employees are entitled to 12 days of paid vacation after 1 year of service, increasing by 2 days for every additional year of service, up to 20 days. After 4 years of service, the vacation entitlement increases by 2 days every 5 years.
Maternity Leave: 12 weeks of paid maternity leave (6 weeks before and 6 weeks after childbirth).
Paternity Leave: 5 days of paid paternity leave.
Sick Leave: Paid sick leave is provided through the Mexican Social Security Institute (IMSS), with employees receiving up to 60% of their salary during sick leave.
The following table lists the mandated holidays in Mexico:
Holiday | Date |
New Year’s Day | January 1 |
Constitution Day | February 5 |
Benito Juárez’s Birthday | March 21 |
Labor Day | May 1 |
Independence Day | September 16 |
Revolution Day | November 20 |
Christmas Day | December 25 |
Employers in Mexico are required to provide several benefits, including:
Social Security: Covers healthcare, maternity, disability, and retirement benefits.
INFONAVIT: Housing fund contributions for employees.
Aguinaldo (Christmas Bonus): A mandatory annual bonus equivalent to at least 15 days of salary, paid in December.
Profit Sharing (PTU): Employers must distribute 10% of their annual pre-tax profits to employees.
Mexico does not follow At-Will Employment laws. Termination must be justified under the Federal Labor Law, and employers must follow specific procedures, including providing a written notice of termination.
Notice Period: Generally, no notice period is required for termination with just cause. However, if an employee is terminated without just cause, they are entitled to severance pay.
Termination Benefits: If an employee is terminated without just cause, they are entitled to a severance payment, which includes 3 months of salary, 20 days of salary for each year of service, and any accrued benefits.
Legal Challenges: Employees can challenge their termination in labor courts. If the court rules in favor of the employee, they may be awarded reinstatement or additional compensation.
Employers can legally terminate employees for just cause, which includes misconduct, poor performance, or redundancy. However, the reasons must be clearly documented, and the employer must follow the legal process.
This guide provides a comprehensive overview of the labor laws in Mexico, helping businesses navigate the complexities of hiring and managing employees in the country.