How to Hire Employees in Mexico: Costs, REPSE and the 40-Hour Week
What a hire in Mexico costs on top of salary, from IMSS and INFONAVIT to the 4% Mexico City payroll tax, plus the 2026 hours reform, REPSE rules for employers of record, dismissal costs and four providers compared.
By Mexico in 2026: shorter hours ahead, outsourcing still banned
A foreign company can hire through its own S. de R.L. or S.A. de C.V., an employer of record, or contractors. The 2021 outsourcing reform banned the supply of personnel and limited third-party employment to registered specialised services, so your EOR must hold a current REPSE registration. For a first team of under ten people, a REPSE-registered EOR is the right route; an entity starts paying off once headcount and a ten-year horizon justify notary, SAT and IMSS overhead (see EOR vs entity setup).
Cost comes from IMSS branches, the CEAV retirement contribution and INFONAVIT, all charged on the integrated daily salary (SBC) up to 25 UMA, MX$2,932.75 a day in 2026. On top sit the state payroll tax (4% in Mexico City), the 15-day aguinaldo and the 25% vacation premium. Low salaries cost more in percentage terms because the IMSS fixed fee is charged per worker, whatever the pay.
Employment terms and working conditions
Four of these six rules changed in 2026 or change on 1 January 2027, so contracts written from older templates already carry the wrong hours and overtime terms.
Cost of employing someone in Mexico
Employer cost falls as a share of salary as pay rises, because the IMSS fixed fee is a flat amount per worker and social security stops at 25 UMA a day, while payroll tax and the aguinaldo keep growing. The cards use the 0.54355% work-risk premium of a new class I registration. An EOR applies its own IMSS work-risk premium, which can be higher, so ask the provider for its rate.
MX$4,193 a month on top of salary. The integrated salary is MX$414.20 a day, 3.53 UMA, which puts CEAV in the 6.613% band. The IMSS fixed fee of MX$727 is more than half the IMSS line at this pay.
MX$11,392 a month on top of salary. At 10.3 UMA the worker sits in the top CEAV band of 7.513%, so CEAV alone costs MX$2,759, more than INFONAVIT (MX$1,836) or the payroll tax.
MX$29,071 a month on top of salary. The integrated salary is capped at 25 UMA (MX$2,932.75 a day, about MX$89,156 a month), so IMSS, CEAV and INFONAVIT stop rising. Payroll tax and the aguinaldo still apply to the full MX$110,000.
Our calculation for a Mexico City employer, 30.4 days a month, verified 23 October 2026. Integrated daily salary (SBC) = daily wage × 1.0493 (15-day aguinaldo and 25% premium on 12 vacation days, first-year worker), capped at 25 UMA (Ley del Seguro Social, LSS, art. 28). UMA MX$117.31 from 1 February 2026 (INEGI, DOF 9 January 2026). IMSS employer rates for 2026: sickness and maternity fixed fee 20.40% of one UMA, plus 1.10% on SBC above 3 UMA, cash benefits 0.70%, pensioners’ medical 1.05%, disability and life 1.75%, childcare 1.00%, work risk 0.54355% (class I average premium for a new registration, LSS art. 73; an EOR uses its own premium). Retirement 2% and CEAV 3.150% to 7.513% by SBC band (2026 table under the 16 December 2020 pension reform, rising each January to 2030); INFONAVIT 5% (Ley del INFONAVIT art. 29). Payroll tax (Impuesto sobre Nóminas) 4% of all pay including aguinaldo and premium (Código Fiscal de la Ciudad de México art. 158); other states set their own rate, 3% in Nuevo León, Jalisco and the State of Mexico. Aguinaldo 15 days (LFT art. 87) and vacation premium 25% (LFT art. 80) are accrued monthly. Not included: profit sharing (PTU, 10% of taxable profit, LFT art. 117, paid from the legal employer’s profit, so under an EOR it comes from the EOR’s Mexican entity), and severance, which is owed only on dismissal. When we checked the IMSS factor tables in October 2026, IMSS had still not issued an official ruling on reading the CEAV bands, so payroll software applies the SUA 3.6.3 method shown here. Add the EOR fee and 16% VAT with the hiring budget calculator.
Price your hire, line by line
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Costs most calculators leave out
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Typically $0 to $2,000 depending on provider and country.
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Total employer cost, per employee per month
Monthly breakdown
Upfront and one-time costs
EOR or your own entity
Statutory rates current as of . Exchange rates indicative as of . Contribution ceilings, regional variation, employee age and collective agreements all shift the real figure. Use this to build a budget, then validate against a written quote.
Four ways to hire in Mexico
Since the 2021 outsourcing reform, the choice in Mexico decides who carries joint liability for IMSS, INFONAVIT and tax debts if the legal employer falls short. See how an EOR prevents misclassification.
Misclassification risk. The test is subordination: if you direct the work, set hours and supply tools, the relationship is employment whatever the contract says (Federal Labour Law arts. 20 and 21). A labour court can order severance, back aguinaldo and PTU, and IMSS can assess unpaid contributions with surcharges. Using an unregistered staffing firm to supply people adds fines of 2,000 to 50,000 UMA for both sides, MX$234,620 to MX$5,865,500 at 2026 values, and joint liability for the firm’s debts.
Statutory leave and benefits
Leave in Mexico grows with seniority: 12 days after the first year, 20 by year five, then 2 more every five years, and every vacation day carries a 25% cash premium.
Sources: Federal Labour Law (Ley Federal del Trabajo, LFT) as amended by the vacation reform published in the DOF on 27 December 2022 and in force from 1 January 2023, and by the hours reform of 1 May 2026; Social Security Law (Ley del Seguro Social, LSS). See how the aguinaldo compares with other countries in our 13th month pay by country table.
Termination and offboarding
Mexico has no at-will employment and no statutory notice: a dismissal is either for one of the causes in article 47 or it is unjustified, and that label decides the bill.
Federal Labour Law arts. 47 to 50: the 3-month indemnity, 20 days per year of service where reinstatement is refused, and back wages capped at 12 months, after which 2% monthly interest runs on 15 months’ pay (art. 48). The seniority premium is 12 days per year of service on a daily wage capped at twice the minimum wage, MX$630.08 in 2026, and is owed on any dismissal, justified or not (art. 162). Every exit also owes the finiquito: pro rata aguinaldo, unused vacation and its 25% premium. The law sets no payment day for the finiquito, so employers pay it on the last day. A worker has two months to claim unjustified dismissal (art. 518), and must first go to the Federal Centre for Conciliation and Labour Registration or a state conciliation centre before a labour court. Collective terminations for closure or lack of work pay 3 months plus the seniority premium (arts. 434, 436). Fixed-term contracts end on their date without indemnity only if the fixed term was lawful (art. 37). Compare these costs with other countries in our misclassification penalties by country research.
Work permits and foreign hires
Every foreign national needs a permit to work for a Mexican payer, and the employer must first hold an employer registration (constancia de inscripción del empleador) with the National Migration Institute (INM), so an EOR can sponsor only through its own Mexican entity.
From decision to first payroll in 4 weeks
Through an EOR most Mexico hires reach a first quincena payroll in three to four weeks; the slow parts are the worker’s RFC and the IMSS registration, which must be filed before day one.
Check REPSE status
Look up the EOR’s Mexican entity on the STPS REPSE register and confirm the registration covers the service and has been renewed within three years. Ask for its IMSS and SAT compliance opinions.
Set pay and state
Fix a gross monthly salary, the state of work (it decides payroll tax and the minimum wage zone), and benefits such as food vouchers or major medical insurance that Mexican candidates expect above the legal minimum.
Issue the contract
The EOR issues a Spanish-language indefinite contract under LFT art. 25, with the probation clause, schedule within the 48-hour limit (46 from 2027) and the 15-day pay cycle. Collect CURP, RFC, NSS and proof of address.
Register with IMSS
The EOR files the IMSS alta through IDSE before the start date, which also enrols the worker with INFONAVIT and the AFORE. A late filing leaves the worker uninsured and the employer liable for any medical costs.
Run first payroll
Salary is paid on the 15th and last day with a CFDI payroll receipt and ISR withheld. IMSS is due by the 17th of the next month, retirement and INFONAVIT every two months, and the payroll tax monthly.
Best EOR providers in Mexico
Four providers we have reviewed that employ in Mexico. Full scoring and the ranked list sit on the Mexico EOR page.
Formerly Velocity Global, with long Latin American experience and a published flat EOR fee. Ask whether the Mexican employing entity is Pebl’s own and holds REPSE.
Says it employs in Mexico through its own wholly owned subsidiary, so ask for its REPSE registration before you sign. Its $599 list price is the second highest of the four, after Papaya Global.
Published price of $459 on an annual contract ($499 month to month). Compliance add-ons and implementation fees can apply, so ask for the Mexico total including VAT.
Payroll-first platform that suits companies already running Mexican payroll through an entity and adding EOR hires. Papaya does not publish which countries run on its own entities, so confirm who employs in Mexico and whether that entity holds REPSE.
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All guides for hiring in Mexico
Hiring guides for other countries
Compare employer costs, dismissal rules and EOR options in 14 more countries. Each guide is checked against official sources.
FranceHiring guide, 41.5% employer cost
GermanyHiring guide, 22.5% employer cost
NetherlandsHiring guide, 27.4% employer cost
SpainHiring guide, 54.2% employer cost
United KingdomHiring guide, 15.9% employer cost
AustraliaHiring guide, 20.3% employer cost
IndiaHiring guide, 5.7% employer cost
PhilippinesHiring guide, 17.1% employer cost
SingaporeHiring guide, 17.2% employer cost
TaiwanHiring guide, 17.1% employer cost
Questions employers ask about hiring in Mexico
These are the Mexico questions where the answers still circulating online predate the 2021 outsourcing ban, the 2023 vacation reform or the 2026 hours law.
Is using an employer of record legal in Mexico after the outsourcing ban?
Yes, if the EOR’s Mexican entity is the real employer and holds a current REPSE registration with the labour ministry (STPS). The April 2021 reform banned supplying personnel to a client and allows only specialised services outside the client’s own business purpose. A foreign company with no Mexican entity has no corporate purpose in Mexico to overlap, which is why EORs keep operating. If you also own a Mexican company doing the same work, take local advice, because payments for personnel doing your own core work cannot be deducted for income tax or credited for VAT (Federal Tax Code art. 15-D) and both sides face joint liability.
Is the working week already 40 hours?
No. The maximum stays at 48 hours for all of 2026. The Federal Labour Law reform published on 1 May 2026 cuts it to 46 hours on 1 January 2027, then 44, 42 and 40 hours in 2030. Pay cannot be reduced to match the shorter week. From 1 January 2027 employers must also keep an electronic record of start and finish times, with fines of 250 to 5,000 UMA for failing to; the labour ministry (STPS) had not yet published the rules on scope and exceptions in October 2026. Contracts signed now for a 48-hour schedule will need a new schedule in January.
How many vacation days does a new employee get?
12 working days once the first year of service is complete, not 6. The table changed on 1 January 2023: 12 days in year one, 14 in year two, 16 in year three, 18 in year four and 20 in year five, then 2 more days for every five further years. Each vacation day also carries a premium of at least 25% of the daily wage. Many contract templates and payroll setups still use the pre-2023 table, so check yours before the first anniversary.
Do I owe profit sharing (PTU) if I hire through an EOR?
Not directly. PTU is 10% of the legal employer’s taxable profit, so under an EOR it is calculated on the EOR’s Mexican entity, which usually earns thin margins. Some EORs pass a PTU estimate through in their fee or invoice it each May, so ask. If you later form your own company, it pays PTU from its second year, capped per worker at three months’ salary or the average of the last three years’ PTU, whichever is higher.
Can I dismiss someone with one month’s notice?
No. Mexican law has no notice period for either side. A dismissal is justified only for a cause in Federal Labour Law article 47, proven by the employer and stated in a written notice. Anything else is unjustified and costs 3 months’ salary, usually plus 20 days per year of service and the seniority premium of 12 days a year. Most exits end in a negotiated settlement ratified at a conciliation centre, which protects the employer from a later claim.
Which payroll tax rate applies, 3% or 4%?
It depends on the state where the employee works, not where your EOR is based. Mexico City has charged 4% since 1 January 2025, with reductions for micro and small businesses and for new employers in their first year. Other states set their own rates, so a hire in Guadalajara or Monterrey is taxed by Jalisco or Nuevo León, both at 3% in 2026, as is the State of Mexico. When we built the cost cards in October 2026 we used Mexico City’s 4%, which is also the first option in the EOR cost calculator, where you can switch to another state.
Why is the IMSS cost higher than the rates suggest?
Because contributions are charged on the integrated daily salary (SBC), not the base salary. The SBC adds the daily share of the aguinaldo, the vacation premium and most cash benefits, so a 15-day aguinaldo and 12 vacation days raise it by about 4.9%. Food vouchers, savings funds and bonuses can add more. The SBC is capped at 25 UMA, MX$2,932.75 a day in 2026, which is why the senior cost card shows a lower percentage.
Ready to hire in Mexico?
Compare the providers that employ in Mexico on pricing, entity ownership and onboarding speed.