Expanding a Business into Mexico

Expanding your business into Mexico

If you are planning on expanding your business into Mexico or starting a new project, our specialist Workforce Management team are sharing key Mexico employment information to help you get you started.

This guide covers an introduction to Mexico, Employment Laws and Regulations, Key Tax and Labour Authorities, Labour Contracts, Payroll, Employer Contributions, Types of Disabilities, Workday and Holidays, the Immigration Process, Employment Termination and Workforce Management Partners.

If you would like to download a PDF version of this guide, simply click the link below.

Download Mexico PDF Guide

Introduction To Mexico

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Mexico is the largest Spanish-speaking country in the world. It is among the 5 countries with the highest biodiversity in the world due to its privileged geographical location, its climate, and its diverse topography. With 33, it has the most UNESCO World Heritage site in the Americas.

The country is the eighth-largest tourist destination in the world and boasts a large industrial base. “From adventure sports to gastronomy, more and more tourists are going to Mexico to get to know what it has to offer.”

The Mexican Economy

It is the second-largest economy in Latin America and the fourteenth largest economy in the world. Goldman Sachs believe this will only increase, predicting Mexico’s economy to be the world’s eighth largest by 2050.

Mexico is part of 13 treaties with more than 45 countries, which gives it access to 61% of world GDP and more than 50% of world trade.

Mexico attracts the largest amount of Foreign Direct Investment (FDI) in Central and South America. It enjoys a strategic and active geographical location as a transit point between North America and Latin America.

Importance of Small and Medium sized Companies

Small or Medium Enterprises (SMEs) are a determining link in the chain of economic activity and are essential for regional and local development. 95.4% of companies across the country are SMEs. Their contribution is 52% of GDP. In addition, they represent 72% of the jobs in Mexico.

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Mexican Population Characteristics

Mexico has a population of 135 million people, making it the most populous Spanish-speaking country in the world. About 1/5 of the population lives in or near Mexico City (the capital) and the neighbouring State of Mexico, which together have 25.1 million people.

It has a predominantly young population, compared to other industrialized countries. In the last census, in 2015, more than 55% of the population was under 30 years old.

Although the majority of the population speaks Spanish, more than 7 million Mexicans also speak one of the 62 indigenous languages in the country. Maya and Nahuatl are the most widely spoken. The states with the highest percentage of speakers of indigenous languages are Oaxaca, Chiapas and Yucatan.

Economic Opportunities in Mexico

Mexico is a leading commercial destination due to the availability of cheap labour. Costs are a fraction of the United States and English proficiency is common among educated professionals.

The average annual salary for an engineer in the United States is $85,663 USD, while the average annual salary for a mechanical engineer in Mexico is the equivalent of $15,514 USD. This is just one of the many professions in which salaries are substantially lower, without compromising quality.

Key Sectors of the Mexican Economy

Mexico’s economy is diversified, including high-tech industries, oil production, mineral exploitation, and manufacturing. Agriculture represents 3.4% of Mexico’s GDP and employs more than 13% of the country’s labour force. Mexico is among the world’s largest producers of coffee, sugar, corn, oranges, avocados, and limes.

The banking sector is also growing rapidly and represents an opportunity for investors. The government has expressed its desire to modernize the country’s infrastructure, including hospitals and transportation, and is seeking to attract more foreign direct investment.

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Talent in Mexico

25% of university students graduate in science, technology, or engineering; the eighth-highest percentage in OECD countries and the sixth with the majority of engineering graduates worldwide.

Guadalajara, the Mexican Silicon Valley

Guadalajara, the second-largest city in Mexico, is known as “the Mexican Silicon Valley” for constituting the most important technological cluster in the country, recognized worldwide for its highly developed software industry.

The state government has invested in infrastructure to turn Guadalajara into an international technology centre. Technology giants like IBM, Oracle, HP, and Motorola have been established for several years in this city.

To date, the city’s exports have exceeded $20 billion, and this figure is expected to increase in the coming years. Telecom and computer equipment from Guadalajara accounts for about a quarter of Mexico’s electronics exports.

All of this is based on technological talent: Guadalajara has an excellent engineering school, the University of Guadalajara, which graduates more than 10,000 highly qualified engineers every year.

Technological Ecosystem

Mexico has one of the best start-up ecosystems in Latin America. In the last year, it has established itself as one of the most outstanding countries in the field of innovation in fintech, the financial technology sector.

With more than 350 successful start-ups, it is the largest ecosystem in the region and one of the main drivers of financial innovation in Latin America. The Mexican start-up sector is currently 2.5 times larger than that of Colombia, the third in the region with 124 new companies. In addition, start-ups in Mexico have a lower failure rate: 12% compared to the 14% in Brazil.

Facilities for Foreign Investment

Mexico offers extremely favourable advantages for foreign investment. The procedure for establishing a new company in Mexico is particularly agile and efficient. Another example is the series of subsidies, renewed and improved day by day, aimed at promoting the exchange of goods and services with other nations. However, complicated taxes and compliance can make the administration of a company quite complex. Working with trusted partners is essential to avoid major risks, to find out more visit our Workforce Management section further down in the guide.

Business Culture of Mexico

It always starts with a little chat. The average Mexican business executive spends most of their time discussing general issues, waiting for the last moments of conversation to raise the issue at hand.

Lunch is the main meal of the day for Mexicans. It is a free time to talk to friends and family and work often stops between 1:30 pm - 4:00 pm. However, business lunches are an essential to establish a personnel relationship, so it is important to attend.

Mexico has a culture that enjoys negotiations. Trust plays a very important role in establishing relationships. This can sometimes be even more important than competence or professional experience. When the negotiations are over, be sure to go back to the little talk a little before you leave and always say goodbye.

Deals are often closed in bars. There is a saying that goes: “with alcohol comes sincerity.” That is why deals are often closed in bars, after one (or several) rounds of tequila.

Mexican Gastronomy: Regional, Street, and Hipster Food

Mexican food has some of the best known and loved dishes in the world. Mexican cuisine varies by region due to local climate, geography, and ethnic differences among indigenous inhabitants.

There are seven culinary regions in Mexico, each with its own unique dishes: The North, the North Pacific Coast, El Bajio, the South Pacific Coast, the South, the Gulf, and Central Mexico.

Considering its uniqueness and influence on the cultural and social facets of Mexican society and the world, the United Nations Educational, Scientific and Cultural Organization, UNESCO, arranged a special honor. In 2010, Mexican
cuisine was placed on the Representative List of the Intangible Cultural Heritage of Humanity.

Street food, or “garnachas” have existed since pre-Hispanic times: the Aztecs ate them at the Tlatelolco market. From the typical taqueria (taco stand) to the mobile food stall, the streets of Mexico are smorgasbords of culinary delicacies.

Mexico’s extensive culinary tradition is increasingly combined with innovation, with many cutting-edge chefs reinventing and projecting it into the future. Standout innovators such as Enrique Olvera, Daniela Soto-Innes, Francisco Ruano or Jorge Vallejo place Mexico as one of the most important gastronomic destinations in the world.

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Summary of Mexico

Year 2021
Country Mexico
Capital Mexico City
Num. Of states / Provinces 32 states
Principal cities Mexico City, Guadalajara, Monterrey
Language Spanish and 67 indigenous languages
Local currency Mexican Peso (MXN)
Major religion Catholic
Date Format DD-MM-YYYY
Thousands separator format 999,999,999.99
Country code +52 1
Time zone Pacific Standard Time - PST (UTC -8) Tijuana
Mountain Standard Time – MST (UTC -7) Hermosillo
Central Standard Time – CST (UTC -6) Mexico City
Eastern Standard Time – EST (UTC -5) Cancun
Population 135,250,000
Border countries North: United States of America, South: Belize and Guatemala
Surface area 1,960,189 Km2 (Due to its territorial extension, Mexico occupies the fourteenth place worldwide.)
Fiscal year January 1st - December 31st
VAT % 16%
Minimum wage $185.56 Mexican Pesos per day in the North Border- Free Zone
$123.22 Mexican Pesos per day in the rest of the Country
Tax Payer Identification Number RFC by its acronym in Spanish “Registro Federal de Contribuyentes”, translated to English Federal Taxpayer Registration
Current president Andrés Manuel López Obrador

Employment Laws and Regulations in Mexico

If you’re considering expanding your business operations into Mexico, it is important to be aware of some of the unique aspects of Mexico employment law, including the following key employment laws: 

Political Constitution of the United Mexican States (Constitución Política de los Estados Unidos Mexicanos - CPEUM)
The supreme law that governs the economic, social, and political life in Mexico.

Federal Labor Law (Ley Federal del Trabajo - LFT)
The supreme labor law in Mexico. Only the Constitution is above it, in which the right to work was enshrined in its article 123, which states: “Everyone has the right to a decent and socially useful work […]”

Income Tax Law (Ley de Impuestos sobre la Renta - LISR)
The tax with the greatest impact on companies and employees is the ISR.

The tax is on profit obtained by carrying out a professional activity and the income from said activity.

The tax is calculated on an annual basis, and monthly contributions have to be made towards the stipulated amount.

Social Security Law (Ley del Seguro Social - LSS)
The purpose of the Social Security Law is to guarantee the right to health, medical assistance, protection of livelihood, and social services necessary for individual and collective well-being, as well as the granting of a pension.

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Key Tax and Labour Authorities in Mexico

Laws Brief Description
Secretary of Finance and Public Credit (SHCP) The department responsible for proposing and controlling the Federal Government’s economic policy regarding the financial, fiscal, expenditure, income and public debt sector.
Also, it is responsible for raising taxes from businesses and individuals, and distributing said funds throughout the government.
Mexican Social Security Institute (IMSS) An institution of the federal government that provides benefits and social welfare programs to people outside of the workforce by age or disability, for employers, and for currently employed persons. Combines public health and
economic welfare programs under one agency.
Institute of the National Housing Fund for Workers (INFONAVIT) An agency that provides direct contributions towards the purchase of home, matching funds paid by a given worker as a deduction from their paycheck, while employers also make a contribution. It manages the resources of the National Housing Office, which is funded by employer contributions.
Participation in this program is completely optional for the employee, but mandatory for employers (in such case as the employee has chosen to participate).
National Commission of the Retirement Savings System (CONSAR) An administrative body of the Ministry of Finance and Public Credit whose fundamental task is to regulate the Retirement Savings System, consisting of individual-owned accounts.
Essentially a national pension system. Contribution to this fund is mandatory.
Institute of the National Fund for Workers’ A financial institution of the Mexican government created to enable the purchase of home improvements, furniture, etc. through subsidized low-interest loans eventually paid back via withholding from the worker’s paycheck.


Labour Contracts in Mexico

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Individual employment contracts is one by virtue of which a person is obliged to give another a valuable labour or service in exchange for a salary. The lack of the document does not deprive the worker of the rights derived from relevant labour standards.

The hiring of children under 15 years of age is illegal. Those who are under 18 must have concluded the equivalent of a middle school education. People under 18 cannot work in a situation where their health, security, or morality can be at risk. The minimum age to provide any work in Mexico is 15. Those over 15 and under 16 need authorization from their parents or guardians. People over 18 can work without authorization from anyone else.

Type of Contracts in Mexico

The labour relations may be for a specific task or period of time, seasonal or indefinite, and, where appropriate, may be subject to testing or initial training.
Unless stated otherwise, the relationship will be assumed to be for an indeterminate period.

Contract for an undetermined time
Article 39, LFT

It is considered an indeterminate work relationships when an agreement exceeds 180 days. In this case, a trial period may be stablished, which may not exceed 30 days, with the sole purpose of verifying that the worker meets the requirements and knowledge necessary to achieve the work requested.

It is important to clarify that the probationary period may be extended up to 180 days, only in the case of management, managerial positions and other persons exercising management or administration functions.

Contract for specific work or time
Article 37, LFT
A fixed-term contract can only be stipulated when required by the nature of the work to be provided or when it is intended to temporarily replace another worker.
Recruitment for initial training
Article 39 B, LFT
The law considers that there is period for initial training when a worker is obliged to provide subordinate services under the direction and command of the employer, while the worker acquires the knowledge or skills necessary for the activity for which they are going to be hired.
When the trial or initial training period is over and the employment relationship continues, it is considered for an indeterminate period.
Trial Period Contract
Article 39 A, LFT
In the case of trial periods that will be 30 and up to 180 days, for administrative, technical, or specialization work, at the end of their period, if the employer may decided to terminate the employee at no obligation to them.
Contract for work relationship by season
Article 39 F, LFT
A seasonal contract may be used when the activities do not require the provision of services all week, month or year. It should be clear that workers who provide services under their modality have the same rights and obligations as workers for an indefinite period, in proportion to the time worked in each period.
To avoid abuses in the use of these new figures, the contracts must be established in a written agreement and the trial and training periods will be determined.

Basic Requirements

The information that the contract must contain is established in Article 25 of the Federal Labour Law:

  • Name, nationality, age, sex, marital status, Unique Population Registration Code, Federal Taxpayers Registry and address of the worker and employer.
  • If the employment relationship is for work or time determined by season, initial training or for an indefinite period and, if applicable, if it is subject to a trial period.
  • The service or services that must be provided.
  • The place or places where work should be provided.
  • The form and amount of the salary.
  • Other working conditions, such as days of rest, vacations and other days that have been agreed by the worker and the employer.

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Payroll in Mexico

The payroll is one of the most important documents within a company, since there is a control of all the withholdings, at or about legal minimums, of the salary of the employees. From their operation, the final amount that a worker will receive and the amount that the company will invest in a given period is obtained.

Legal Benefits in Mexico

Work benefits are additional benefits provided through a worker as a condition of their labour relationship. The benefits are established in a contractual relationship and will be independent of salary, they may consist of an economic, cultural, or medical nature.

The law establishes mandatory benefits that every employer must grant to their employees, the others will be agreed by mutual agreement in the individual work contract.

Minimum Wage The amount in theory, covers fundamental expenses to provide the employee with a decent life.
Article 5, 82 and 101, LFT
The compensation that an employer is obliged to pay its workers for the work they have done during a set period.
• Regular employees have to be paid biweekly.
• Manual laborers need to be paid weekly.
• No salary can be less than the minimum.
• The salary in cash must be paid precisely in legal currency.
• Pay must be equal for the same work, regardless of sex or nationality.
Article 76, LFT
Workers who have more than one year of service are entitled to an annual period of paid vacation:
1 Year of service: 6 Days
2 Years of service: 8 Days
3 Years of service: 10 Days
4 Years of service: 12 Days
5-9 Years of service: 14 Days
10-14 Years of service: 16 Days
...and so on.
Vacation Bonus
Article 79 and 80,
Workers will be entitled to a bonus of no less than 25% of their regular salary which they would have earned during the vacation period.
If the employment relationship ends before the year of service is completed, the worker will be entitled to a remuneration proportionate to the time of services rendered
Christmas Bonus
Article 87, LFT
The workers will be entitled to an annual bonus that must be paid before the twentieth day of December, equivalent to at least fifteen days of salary.
If terminated before the day in which the bonus is due, the employee is entitled to the proportion of the bonus accrued up to that point in the year. (Eg. If fired in August, they are entitled to 8 months’ contribution to the bonus)
Social Security
Article 15, 38, 56 and 58, LSS

Social security will provide the employee with medical, surgical, pharmaceutical, and hospital services.

The mandatory regime includes the insurance for:

• Occupational risk
• Illness and maternity
• Disability and death
• Retirement and currently working elders
• Day care and social services

Superior Benefits

Examples of work benefits are:

• Food service
• Transport service
• Private health insurance
• Meal vouchers
• Gas vouchers
• Savings funds
• Productivity bonus

Employer Contribution or Labour Cost

The employer contribution is the total cost of contribute to the state for having employees. They are not recoverable for the employer.

Social Security The employer is obliged to register the worker with the Social Security Institute, and pay the corresponding contribution.
These payments assure employees have access to various forms of state support in the event of injury, unemployment, or other circumstances.
State Tax Each state of the federation has a tax on salaries for personal work, which varies by state. On average the state tax is 3% of the total income of the worker.
Federal Tax A fee that employers must cover for any transaction that corresponds to an employment relationship. Failure to comply may result in fines or penalties.


Types of Disabilities

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In the Federal Labour Law it is established in Article 473 that occupational hazards are accidents and diseases to which the workers is exposed in the course of performing their duties. Employers must pay the corresponding compensation, depending on whether said injury resulted in death or simply temporary or permanent inability to work. Their responsibility will still exist even if the employee was hired through an intermediary.

A work accident is any organic injury or functional disturbance that can be shown immediately or later on, or can cause death or grievous during the activities of the employee’s work. This includes accidents that may occur when the worker moves directly from their home to the place of work or vice versa.

Occupational disease is any pathological stat derived from the continued performance of work in a hazardous environment that has exposed them to a contagion, carcinogenic, or otherwise harmful environmental factor.

Disabilities caused by occupational hazards will generate compensation, which must be paid directly to the worker, in cases of mental disability the payment must be made to the person or persons in whose care it is left, and in the case of death of the worker it will be paid to their beneficiaries.

Temporary Disability

Loss of faculties or aptitudes that partially or totally precludes a person from performing their work for some time.

Permanent Partial Disability

The decrease of the faculties or aptitudes of a person to work at full capacity.

Total Permanent Disability

The loss of faculties or aptitudes of a person that makes it impossible to perform any job for the rest of their lifetime.

Other Type: Maternity Leave

A working mother enjoys the following rights during and after her pregnancy:
• During work they will not have to do activities that require considerable effort or that can be of any risk for her health or that of the baby.
• They will have a leave of 6 weeks before delivery and 6 weeks after, with full remuneration according to their salary, without fear of termination.
• In case of adoption of an infant, they will enjoy a six-week break with pay, after the day they receive him/her.
• They will have the right to return to their current job position, with no penalties to seniority.

Workday and Holidays in Mexico

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According to Article 58, LFT, the “workday” is the time during which the worker is available to the employer to lend their work.

The worker and the employer will set the duration of the workday, without exceeding the legal maximum of 8 hours per day or 48 hours per week.

For every six days of work the employee must enjoy at least one rest day.
During the continuous work day the worker will be granted at least one half hour break.

The work day may be extended due to extraordinary circumstances, never exceeding three hours a day or three times in a week, (Essentially “overtime”: Maximum 9 hours per week).


Type of Work Day Working Hours per Day Extra Hours Sundays
Day Shift 8 hours 100% over their
hourly salary
If the employee is working on Sunday (but still under 48 hours a week), they are owed a 25% bonus over their normal hourly wages.
If the work on Sunday is in excess of 48 hours for that week, then the employee is paid a 200% bonus on their Sunday wages (125% of normal hourly wages x 3)
Night Shift 7 hours
Mixed Shift 7 ½ hours


According to the Article 715 of the Federal Labor Law (LFT), business days are all days of the year except Saturdays and Sundays, mandatory rest days, and holidays indicated by the working days calendar and those in which the labour authorities indicated that the work is suspended (for natural disasters, etc.)

Mandatory Holidays in Mexico

New Year’s Day: January 1st

Day of the Constitution: 1st Monday February

Benito Juarez’s Birthday: 3rd Monday March

Labor Day: May 1st

Independence Day: September 16th

Day of the Mexican Revolution: 3rd Monday November

Presidential Election (every 6 years): December 1st (Presidential Election year)

Christmas: December 25th


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Imigration Process in Mexico

To obtain a work permit it is necessary to have a formal offer letter and employment contract in Mexico before arriving in Mexico to begin said work.

The employer in Mexico must make the petition directly to the National Institute of Migration (INM) in Mexico.

Subsequently, one must start the process of “Temporary residence visa, of a visitor with permission to perform paid activities” requested from the National Migration Institute for employment offer.

If the resolution is favourable, a visa authorization will be given to the employer.

Once the hiring company has received their authorization with their unique registration number for their process (NUT number), the employee will have to schedule an appointment to conduct an interview at a consulate at any country outside of Mexican territory.

On the day of the consular appointment the (prospective) employee must present:

• A visa application with all fields completed legibly. The signature must be the same as the passport.
• Copy of the initial authorization by INM.
• Original and copy of the valid passport.
• Original and copy of the offer of employment
• A color photograph with a white background, with the face visible and without glasses, measuring 32 millimeters x 26 millimeters or 39 millimeters x 31 millimeters.


Once the procedure is authorized, the visa will be delivered on the same day during business hours, otherwise, the INM representative has 10 business days to give you an answer on your visa, in accordance with the guidelines of Immigration Laws.

The visa does not guarantee admission to national territory. The admission to Mexico is subject to the approval of the immigration authorities and may be denied in the case of criminal convictions, etc.

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Employee Termination in Mexico

The worker or employer may terminate the employment relationship at any time, with just cause:

  • The worker has deceived their employer in a material way (expenditures, inventory, etc.).
  • The worker presents, a lack of integrity, a lack of honesty, acts of violence, threats, or insults, whether during or outside of working hours.
  • The worker intentionally causes property damage during the performance of work.
  • The worker commits immoral acts or harassment and or sexual harassments against their coworkers.
  • The worker reveals secrets or confidential information from the company.
  • More than three absences in a period of thirty days, without the employer’s permission or just cause.
  • The worker arrives at the work site in a state of intoxication.

An employer who dismisses a worker must give written notice clearly stating the conduct or behaviour that motivate the decision and the date or dates during which they were committed.

Without providing notice to the worker, the relevant government authorities will be able to provide the employee with grounds to successfully claim that the dismissal was unjustified.

Labour Termination Settlement

If the employer does not verify the cause of the termination it is considered a termination without cause. The worker will then have the right to be reinstated in their job position or to be compensated.

The employer will be exempt from the obligation to reinstate the worker, by paying the compensation:

1.         Three months of salary.
2.         20 days of salary per each year of service.
3.         Payment of overdue wages, if applicable.
4.         Vacation and Christmas bonuses accrued by the time of dismissal.

Mexican Workforce Management Partner

Expanding or launching a new business in a different country can be a complex and challenging task, so it is common for businesses to partner with specialist workforce management companies like ourselves to manage the process on their behalf. Here at Leap29 we provide support with:

• Mobilisation

• International Payroll and Tax

• Visa and Work Permit application services

• Medical Insurance Coverage

• Contract Management Services

To find out more, simply drop us an email at [email protected] or call us on +44 (0) 1625 537 555 and someone from our qualified team will get in contact as soon as possible.

Download Mexico PDF Guide