How to Hire in Mexico in 2026

Mexico has emerged as the premier destination for companies looking to expand their remote teams and access world class talent in Latin America. With a labor force of 61.8 million people, the second largest tech ecosystem in the region valued at $17.3 billion, and cost savings of 40% to 67% compared to U.S. hiring, Mexico offers unmatched opportunities for businesses seeking skilled professionals. This comprehensive guide covers everything you need to know about how to hire in Mexico, from exploring hiring methods and understanding labor laws to setting up a local entity. Whether you are a startup hiring your first Mexican contractor or a growing company establishing a local presence, this resource will help you navigate the Mexican market efficiently and compliantly in 2026.

What Are the Key Statistics About Mexico?

Mexico is one of Latin America’s largest and most dynamic labor markets. Here are the essential facts you need to know before hiring in Mexico.

• Language: Spanish is the official language, though English proficiency varies significantly by sector. While Mexico ranks #103 globally in English proficiency, professionals in IT average scores of 559 and those in Strategy and Project Management average 627, indicating strong bilingual capabilities in business sectors.
• Time Zone: Mexico operates in GMT 6 (Central Standard Time), though this varies by region, providing excellent overlap with U.S. business hours for real time collaboration.
• Population: The country has approximately 132.5 million people, with a median age of 29.6 years, making it the youngest workforce in North America.
• Major Talent Hubs: Mexico City, Guadalajara, Monterrey, and Tijuana are the primary centers for skilled professionals. Mexico City hosts 48% of the country’s startups and 67% of its unicorns.
• Internet Penetration: Over 70% of the population has internet access, with extensive high speed connectivity in urban areas where 87.86% of the population resides.
• Labor Force: The Economically Active Population reached 61.8 million workers in mid 2025, with a labor force participation rate of approximately 59.91% and a historically low unemployment rate between 2.6% and 3.0%.
• Education: Mexico has a 95% literacy rate with approximately 130,000 STEM graduates entering the workforce annually. In 2023 to 2024, 5.2 million students were enrolled in higher education across more than 3,100 institutions.

Why Should You Hire in Mexico in 2026?

Mexico offers a unique combination of cost effective labor, a massive skilled workforce, economic stability, geographic proximity to the United States, and a thriving tech ecosystem that makes it one of the best hiring destinations in Latin America.

Is Hiring in Mexico Cost Effective?

Hiring in Mexico provides significant cost savings of 40% to 67% compared to the United States. Salaries for software developers, engineers, and other tech professionals are substantially lower while maintaining high quality output. The total cost of employment, including all mandatory contributions, runs between 36% and 50% above base salary, which remains highly competitive compared to U.S. hiring costs.

Does Mexico Have a Skilled Workforce?

Mexico boasts one of the largest and most educated workforces in Latin America. With 61.8 million workers and over 130,000 STEM graduates entering the workforce annually, companies have access to an estimated 563,000 to 700,000 software developers. Mexico’s technical talent pipeline is anchored by world class institutions including Tecnológico de Monterrey (ITESM), consistently ranked among the top universities in Latin America for engineering and business and ranked 5th globally for undergraduate entrepreneurship. Universidad Nacional Autónoma de México (UNAM) is the largest university in Latin America and the national leader in graduate output, with over 350,000 students. Other leading institutions include Instituto Politécnico Nacional (IPN), a cornerstone of technical and manufacturing education, and Universidad de Guadalajara, which produces large scale tech specialists in Jalisco. Women now account for 53% of bachelor’s degree graduates and have surpassed men in master’s degree completions for the first time.

Is the Mexican Economy Stable?

Mexico has one of the most stable economies in Latin America, with GDP growth projected between 1.0% and 1.5% for 2026. Foreign Direct Investment reached $36.9 billion in 2024 and continues to track strongly. Inflation is projected to decline to approximately 3.4% by the end of 2025, providing a more stable environment for wage planning. The IT services market alone is valued at $21.28 billion in 2025 and projected to reach $37.28 billion by 2030.

What Government Support Is Available for Foreign Companies?

Mexico’s position under the USMCA (United States Mexico Canada Agreement) provides unique advantages for U.S. companies. The agreement includes provisions for digital trade, cross border data flows, and intellectual property protection, making Mexico an ideal nearshore destination with strong legal frameworks aligned to U.S. business practices.

The IMMEX (Maquiladora) program offers duty free temporary imports of raw materials and equipment for export oriented operations, which has been instrumental in attracting over $30 billion in annual foreign direct investment. For tech companies, this can translate to reduced operational costs for hardware, equipment, and infrastructure.

The government has also implemented the Nearshoring Decree (Plan Mexico), which allows accelerated depreciation of 41% to 91% of new fixed assets and a 25% additional tax deduction for workforce training expenses in technical and digital skills. Key target sectors include semiconductors, automotive and electromobility, medical devices, and electrical equipment.

Additional initiatives include PROSOFT (software industry development program), which provides grants and tax incentives for technology companies, and the National Digital Strategy aimed at positioning Mexico as a global digital hub.

How Does Geographic Proximity Benefit Collaboration?

Mexico’s close geographic proximity to the United States makes it an ideal location for nearshoring, with 49% of U.S. companies now nearshoring IT and software development to Mexico or Canada. The country shares time zones with much of the U.S., facilitating real time collaboration including daily standups and synchronous communication. Nearshoring is expected to create 2 to 4 million new jobs in Mexico by 2030.

How Strong Is Mexico’s Tech Ecosystem?

Mexico is the second largest tech ecosystem in Latin America after Brazil, valued at approximately $17.3 billion and projected to grow at a 10.6% annual rate through 2030. The country hosts 1,083 active tech startups, with notable unicorns including Kavak, Clip, Bitso, and Clara. Approximately 60% to 61% of all venture capital investment in Mexico goes to Fintech, driven by the massive unbanked population and regulatory support via the Fintech Law.

Guadalajara has earned its reputation as Mexico’s Silicon Valley, anchored by the Guadalajara Creative Digital City (Ciudad Creativa Digital) initiative. This government backed technology district hosts major tech companies including Intel, IBM, Oracle, HP, and Bosch, alongside a thriving startup ecosystem. The tech sector in Guadalajara generates $21 billion annually, employs over 125,000 professionals, and recorded a 16.8% annual growth rate in its startup ecosystem in 2025.

What Types of Talent Can You Hire in Mexico?

Mexico offers a highly educated and diverse talent pool across technology, design, customer support, sales, marketing, finance, engineering, and many other industries. The following salary ranges reflect annual compensation in USD based on 2025 to 2026 market data. Salaries in high growth sectors have increased 15% to 25% over the past two years, driven by competition from U.S. remote work options.

What Tech Talent Is Available in Mexico?

Mexico’s tech sector employs an estimated 563,000 to 700,000 software developers, with the most in demand skills including AI and Machine Learning (96% of companies report integrating AI into their strategies), cybersecurity (with a shortage of 260,000 skilled workers nationally), and cloud infrastructure (expected to reach 58% adoption by 2026). Generative AI course enrollments surged 356% in 2025. The TecNM (National Technological Institute of Mexico) recently launched seven new degree programs focused on semiconductors, artificial intelligence, and data science to address workforce shortages in these high growth areas.

• Software Developer (Junior): $24,000 to $36,000 per year. Entry level developers with foundational knowledge in programming languages such as JavaScript, Python, or Java.
• Software Developer (Mid Level): $40,000 to $55,000 per year. Developers with 3 to 5 years of experience capable of working independently on complex features and contributing to architectural decisions.
• Software Developer (Senior): $55,000 to $75,000 per year. Experienced developers who can lead projects, mentor junior team members, and make critical technical decisions. Senior and Lead roles typically command a 30% to 50% premium over mid level figures.
• Full Stack Developer: $45,000 to $62,000 per year. Versatile developers proficient in both frontend and backend technologies, capable of building complete web applications.
• Mobile App Developer: $40,000 to $56,000 per year. Specialists in iOS, Android, or cross platform development using frameworks like React Native or Flutter.
• DevOps Engineer: $48,000 to $72,000 per year. Professionals skilled in cloud infrastructure, CI/CD pipelines, and automation tools such as AWS, Docker, and Kubernetes.
• QA Automation Engineer: $35,000 to $50,000 per year. Quality assurance specialists responsible for automated testing to ensure software reliability.
• Data Scientist: $55,000 to $85,000 per year. Advanced analysts with expertise in machine learning, statistical modeling, and programming languages like Python and R. High demand in Fintech and Retail sectors.
• Cybersecurity Engineer: $50,000 to $75,000 per year. Security professionals who protect systems and data from threats, conduct vulnerability assessments, and implement security protocols.
• AI and Machine Learning Engineer: $82,200 to $102,300 per year for senior positions. Specialists in artificial intelligence and machine learning applications.

What Creative Professionals Can You Hire in Mexico?

Mexico has a vibrant creative community with professionals skilled in digital design, branding, and multimedia production.

• Graphic Designer: $18,000 to $30,000 per year. Designers who create visual content for marketing materials, social media, and brand assets using tools like Adobe Creative Suite.
• UI/UX Designer: $30,000 to $48,000 per year. Specialists focused on user interface design and user experience research to create intuitive digital products.
• Video Editor: $18,000 to $36,000 per year. Professionals skilled in editing footage, adding effects, and producing polished video content for marketing or entertainment purposes.
• Motion Graphics Designer: $24,000 to $42,000 per year. Creatives who combine graphic design with animation to produce engaging visual content for videos and advertisements.
• Content Creator: $15,000 to $28,000 per year. Versatile professionals who produce written, visual, or video content for social media platforms and digital marketing campaigns.

What Customer Service Talent Is Available in Mexico?

Mexico has established itself as a premier nearshore destination for customer service operations, with strong concentrations of bilingual professionals particularly in Tijuana for technical and customer support roles.

• Bilingual Customer Service Representative: $12,000 to $18,000 per year. Frontline support staff who handle customer inquiries via phone, email, or chat. Salaries vary by shift and technical complexity.
• Technical Support Specialist: $15,000 to $24,000 per year. Support professionals with technical knowledge who assist customers with product related issues and troubleshooting.
• Customer Success Manager: $24,000 to $42,000 per year. Relationship focused professionals who ensure customer satisfaction, drive retention, and identify upselling opportunities.
• Call Center Team Lead: $18,000 to $30,000 per year. Supervisors who manage customer service teams, monitor performance metrics, and ensure quality standards are met.

What Sales and Marketing Professionals Can You Find in Mexico?

Businesses can access talented sales and marketing professionals to support growth initiatives and market expansion throughout Latin America and beyond.

• Sales Development Representative: $18,000 to $28,000 per year (plus commission). Entry level sales professionals responsible for lead generation, prospecting, and qualifying potential customers. Requires high English fluency.
• Account Executive: $24,000 to $42,000 per year (plus commission). Sales professionals who manage the full sales cycle from initial contact to closing deals.
• Digital Marketing Specialist: $18,000 to $32,000 per year. Marketers skilled in SEO, SEM, social media marketing, and online advertising campaigns.
• Marketing Manager: $36,000 to $55,000 per year. Strategic leaders who develop and execute marketing plans, manage budgets, and oversee marketing teams.
• Social Media Manager: $15,000 to $28,000 per year. Specialists who create content, manage social media accounts, and engage with online communities to build brand presence.
• SEO Specialist: $18,000 to $32,000 per year. Professionals focused on improving website visibility and organic search rankings through technical and content optimization.
• Copywriter: $15,000 to $28,000 per year. Writers who craft compelling marketing copy, blog posts, email campaigns, and advertising content.

What Finance Professionals Are Available in Mexico?

Mexico produces qualified finance professionals who can support accounting, bookkeeping, and financial analysis functions for international companies.

• Bookkeeper: $12,000 to $20,000 per year. Professionals who maintain financial records, process transactions, and reconcile accounts.
• Accountant: $18,000 to $32,000 per year. Certified professionals who prepare financial statements, manage tax compliance, and oversee accounting operations.
• Financial Analyst: $28,000 to $45,000 per year. Analysts who evaluate financial data, create forecasts, and provide recommendations to support business decisions.
• Finance/Accounting Manager: $30,000 to $55,000 per year. Senior finance professionals who oversee accounting departments, ensure regulatory compliance, and manage financial reporting. Requires US GAAP or IFRS knowledge.

What Administrative Talent Can You Hire in Mexico?

Administrative professionals in Mexico provide essential support for day to day business operations at competitive rates.

• Virtual Assistant: $12,000 to $20,000 per year. Remote professionals who handle administrative tasks such as scheduling, email management, travel arrangements, and research.
• Executive Assistant: $18,000 to $32,000 per year. Senior administrative professionals who support executives with complex scheduling, communication, and project coordination.
• Project Manager: $32,000 to $55,000 per year. Professionals who plan, execute, and oversee projects to ensure they are completed on time and within budget.
• Operations Manager: $38,000 to $65,000 per year. Leaders who optimize business processes, manage teams, and ensure operational efficiency.
• Human Resources Specialist: $18,000 to $30,000 per year. HR professionals who handle recruitment, onboarding, employee relations, and compliance with labor regulations.
• Recruiter: $15,000 to $28,000 per year. Talent acquisition specialists who source, screen, and hire candidates for open positions.
• What Engineers Can You Hire in Mexico?

Mexico’s universities produce engineers and technical professionals across various disciplines, particularly in manufacturing and industrial sectors central to the automotive and aerospace industries.

• Civil Engineer: $24,000 to $42,000 per year. Licensed engineers who design, plan, and oversee construction and infrastructure projects.
• Mechanical Engineer: $24,000 to $42,000 per year. Engineers who design and develop mechanical systems and products.
• Electrical Engineer: $24,000 to $45,000 per year. Professionals who design and maintain electrical systems and equipment.
• Industrial Engineer: $20,000 to $38,000 per year. Engineers focused on optimizing processes, improving efficiency, and reducing waste in manufacturing and operations.
• Manufacturing Engineer: $24,000 to $42,000 per year. Specialists who design and improve manufacturing processes in Mexico’s robust manufacturing sector.
• What Should You Consider When Planning Salaries in Mexico?

Salaries in Mexico City tend to be higher than in secondary cities, though the Mexico City ecosystem is cited as being 347% stronger than Monterrey’s. Bilingual professionals who speak both Spanish and English typically command a premium of 20% to 35% above standard rates. Specialized skills in high demand areas such as AI, cybersecurity, or cloud computing may require salaries at the higher end of the ranges. Over the past three years, salaries in high growth sectors have increased at double the rate of national inflation. Approximately 70% of Mexican employers report difficulty finding talent with specific digital and technical skills, and in advanced manufacturing the probability of facing performance issues due to talent gaps is 160% higher than in other sectors. Nearly 50% of young professionals are estimated to lack the soft skills or specific technical applications required for roles generated by the nearshoring boom.

What Is the Total Cost of Hiring an Employee in Mexico?

The total cost of employment in Mexico is estimated to be between 36% and 50% above the base salary. This employer burden is composed of mandatory social security contributions, housing funds, retirement savings, and state level payroll taxes.

What Are the Statutory Employer Contributions?

The primary social security mechanism is the IMSS (Mexican Social Security Institute). Employer contributions are complex and vary based on the employee’s salary level and the company’s risk classification.

Social Security (IMSS): 20.0% to 25.0% of the Integrated Daily Wage (SDI), covering healthcare, disability, life insurance, retirement, and childcare services.

Housing Fund (INFONAVIT): 5.0% of the Integrated Daily Wage.

Retirement Fund (SAR): 2.0% of the Integrated Daily Wage.

State Payroll Tax (ISN): 1.0% to 4.0% of total gross payroll, varying by state. Mexico City charges 4%.

The Integrated Daily Wage (SDI) is a fundamental concept in Mexican payroll, defined as the base salary plus the proportional daily value of mandatory benefits such as the Christmas bonus (Aguinaldo) and the vacation premium.

What Mandatory Benefits Must Employers Provide?

The Federal Labor Law (Ley Federal del Trabajo) mandates several benefits that must be accounted for in any hiring budget.

Aguinaldo (Christmas Bonus): A minimum of 15 days’ salary, payable by December 20th each year. Many employers offer more than the minimum to remain competitive.

Vacation Days: Following the Vacaciones Dignas reform effective 2023, workers are entitled to 12 days after one year of service, increasing with tenure. This was doubled from the previous 6 days.

Vacation Premium: A 25% surcharge on the salary paid during vacation days.

Profit Sharing (PTU): Companies must distribute 10% of their taxable annual profits among employees, capped at three months’ salary or the average of the last three years’ PTU, whichever is lower. This is typically paid by May 30th each year.

What Additional Benefits Are Common in Competitive Roles?

Standard Federal Labor Law benefits are no longer sufficient to attract top tech or business talent. Employers must offer superior benefits to compete with both local unicorns and U.S. remote work options. Common additions include food vouchers (vales de despensa) usually at 10% of salary, savings funds, and private health insurance, which is highly valued due to limitations of the public IMSS healthcare system.

Where Are the Major Talent Hubs in Mexico?

The Mexican labor market is a collection of specialized regional hubs, each with distinct industrial focuses and cost profiles.

What Makes Mexico City the Multi Sector Powerhouse?

Mexico City is the undisputed leader in the tech and business ecosystem, hosting 48% of the country’s startups and 67% of its unicorns. The city is home to 526 startups with significant concentration in Fintech and E commerce. UNAM and IPN, the two largest talent producers in the country, are located here. The CDMX ecosystem is cited as being 347% stronger than that of Monterrey. Monthly cost of living for a single professional ranges from $1,200 to $1,500, with one bedroom city center rent between $500 and $800.

Why Is Guadalajara Called Mexico’s Silicon Valley?

Jalisco’s capital has transitioned from electronics manufacturing to advanced software and R&D. The city is home to 105 startups (10% of national total) and major R&D centers for Intel, HP, IBM, and Bosch. The Guadalajara Creative Digital City (Ciudad Creativa Digital) initiative has anchored the government backed technology district. The tech sector generates $21 billion annually and employs over 125,000 professionals. The startup ecosystem recorded 16.8% annual growth in 2025. ITESO and Universidad de Guadalajara are central to the local talent pipeline. Monthly cost of living ranges from $1,000 to $1,300, with rent between $400 and $650.

What Role Does Monterrey Play in the Mexican Economy?

Located in Nuevo León, Monterrey is the primary hub for advanced manufacturing and logistics, central to the automotive and aerospace industries. The city ranks 2nd nationally for startups and has become a growing fintech hub. It is home to major automotive tech R&D centers and traditional industrial giants like FEMSA and Grupo Bimbo, as well as expansion of Tesla’s supply chain. Tecnológico de Monterrey is headquartered here. Monthly cost of living ranges from $1,100 to $1,400, with rent between $450 and $700.

What Makes Tijuana a Strategic Border Hub?

Tijuana serves as a critical nearshore extension for the Southern California tech corridor. It is the leading hub for medical device manufacturing and cross border logistics, with the strongest concentrations of bilingual professionals in technical and customer support roles.

What Other Cities Are Emerging as Talent Centers?

Querétaro has emerged as a center for aerospace engineering talent and advanced manufacturing, attracting significant foreign investment in recent years. The city offers monthly costs of living between $900 and $1,200, with rent between $350 and $550.

What Are the Three Ways to Hire in Mexico in 2026?

Businesses have three main options when hiring in Mexico: engaging contractors, utilizing Employer of Record (EOR) services, or forming a local legal entity. Each approach has its own advantages, compliance requirements, and cost considerations.

How Do You Hire Contractors in Mexico?

Hiring contractors is often the quickest way to onboard talent, especially for short term or project based work. Contractors operate as self employed individuals, managing their own taxes and benefits.

Advantages

• Flexibility makes this approach perfect for short term projects or roles with variable workloads
• Cost effective since there is no need to offer benefits like health insurance, pensions, or paid time off
• Simplicity with minimal paperwork and no need for a local legal entity

Disadvantages

• Compliance risks exist since misclassifying employees as contractors can result in legal and financial penalties
• Limited control compared to full time employees
• Lack of benefits may not attract top talent seeking stability and comprehensive packages

Key Consideration: You must draft a detailed contract that defines the scope of work, payment terms, and confidentiality clauses. Following the 2021 subcontracting reforms, companies must comply strictly with Mexican labor laws that distinguish between contractors and employees to avoid misclassification issues.

How Do Employer of Record (EOR) Services Work in Mexico?

An Employer of Record (EOR) serves as the legal employer of your Mexican staff, allowing you to hire full time employees without setting up a legal entity. The EOR manages payroll, taxes, benefits, and compliance on your behalf.

Advantages

• Compliance assurance ensures adherence to local labor laws, taxes, and benefits regulations
• Quick onboarding enables fast hiring without navigating complex legal and administrative processes
• Reduced administrative burden as the EOR handles all HR, payroll, and benefits administration

Disadvantages

• Service fees include a monthly fee per employee, increasing operational costs
• Less direct control since the EOR acts as the legal employer, requiring certain decisions to go through them

Key Consideration: Using an EOR is ideal for testing the Mexican market or for companies looking to hire a small number of employees. It provides flexibility and compliance without the need for local incorporation.

How Do You Set Up a Legal Entity in Mexico?

Setting up a local entity in Mexico gives you full control over hiring employees directly and managing your operations. This option is ideal for businesses planning a long term presence in the country.

Advantages

• Full control allows you to directly manage hiring, payroll, benefits, and employment terms
• Brand presence helps build a stronger local reputation in the Mexican market
• Long term strategy makes this approach ideal for businesses planning to scale operations and hire a large workforce

Disadvantages

• Time consuming since establishing an entity can take four to eight weeks and requires compliance with legal, tax, and registration processes
• Higher costs include upfront registration, legal fees, and ongoing compliance expenses
• Complexity requires navigating Mexico’s legal and regulatory environment, including tax filings and labor laws

Key Consideration: You will need to register the business, obtain a Tax Identification Number (RFC) from the SAT (Servicio de Administración Tributaria), register with IMSS for employee benefits, register with INFONAVIT for housing fund contributions, and comply with ongoing financial reporting and tax obligations.

What Labor Laws Govern Hiring in Mexico?

Mexican labor laws are governed by the Federal Labor Law (Ley Federal del Trabajo) and are designed to protect the rights of employees. Employers must comply with these laws, which cover aspects such as minimum wage, working hours, paid vacation, and social security.

What Types of Employment Contracts Are Recognized in Mexico?

Mexican labor law recognizes several types of employment contracts, each suited to different employment needs.

Indefinite Term Contract: This is the default contract type in Mexico, as employment contracts are assumed to be indefinite unless specified otherwise. It offers job security and stability with no set end date.

Fixed Term Contract: This contract is suitable for temporary roles or projects with a defined duration. It must specify the reason for the fixed term and the expected end date.

Seasonal Contract: This contract is designed for roles that are only required during specific periods, such as harvest seasons or holiday retail.

Trial Period Contract: Employers can include a trial period of up to 30 days (or 180 days for management positions) to evaluate new employees before confirming permanent employment.

Key Consideration: Contracts must be in writing and include details such as job description, salary, benefits, working hours, and termination conditions. It is important to define the contract type properly to avoid potential legal issues.

What Are Employee Rights and Benefits in Mexico?

Mexican labor laws grant employees various rights and benefits that employers must respect, including regulated working hours, paid leave, parental leave, severance pay, and mandatory bonuses.

What Are the Working Hour Requirements?

The standard workweek in Mexico is 48 hours, typically spread over six days. Day shifts are limited to 8 hours, mixed shifts to 7.5 hours, and night shifts to 7 hours. Overtime is permitted but must be paid at double the regular hourly rate for the first 9 hours per week and triple thereafter. Employers should monitor the potential reduction of the statutory work week from 48 to 40 hours, which is currently a subject of intense political debate in the Mexican Congress.

How Much Paid Leave Are Employees Entitled To?

Employees are entitled to paid vacation that increases with tenure. Following the Vacaciones Dignas reform effective January 2023, employees receive 12 days of paid vacation after one year of service, doubled from the previous 6 days. This increases by 2 days for each subsequent year up to year five, and then by 2 days for every 5 years of service thereafter. Employees also receive a vacation premium of at least 25% of their salary during vacation days.

What Parental Leave Is Available in Mexico?

Female employees are entitled to 12 weeks of paid maternity leave, with 6 weeks taken before delivery and 6 weeks after. This leave is paid through social security. Fathers are granted 5 days of paid paternity leave following the birth of their child.

What Is the Aguinaldo?

The Aguinaldo is a mandatory Christmas bonus that all employers must pay. It equals at least 15 days of salary and must be paid before December 20 each year. Employees who have worked less than a full year are entitled to a proportional amount based on the time they have worked. Many employers offer more than the minimum to remain competitive.

What Is Profit Sharing (PTU)?

Profit Sharing, known as PTU (Participación de los Trabajadores en las Utilidades), requires companies to distribute 10% of their pre tax profits to employees annually. This distribution must be made by May 30 each year. PTU is calculated based on the number of days worked and the salary earned by each employee during the fiscal year, capped at three months’ salary or the average of the last three years’ PTU.

What Severance Pay Is Required When Terminating Employees?

Employees terminated without just cause are entitled to severance pay that includes three months of salary (indemnización constitucional), 20 days of salary per year worked (prima de antigüedad), plus any accrued vacation, vacation premium, and proportional Aguinaldo.

What Is the Minimum Wage in Mexico for 2026?

Effective January 1, 2026, the general minimum wage in Mexico will increase to $315.04 MXN per day, reflecting a 13% total increase. In the Northern Border Free Zone, the rate will rise to $440.87 MXN per day. This aggressive minimum wage policy reflects the government’s commitment to real wage recovery, though it also increases the baseline for all compensation structures.

What Are the Public Holidays in Mexico?

Employees are entitled to paid time off for official public holidays. Employees who work on mandatory rest days are entitled to triple pay for that day.

• January 1: New Year’s Day (Año Nuevo)
• First Monday of February: Constitution Day (Día de la Constitución)
• Third Monday of March: Benito Juárez’s Birthday (Natalicio de Benito Juárez)
• May 1: Labor Day (Día del Trabajo)
• September 16: Independence Day (Día de la Independencia)
• Third Monday of November: Revolution Day (Día de la Revolución)
• December 1 (every six years): Presidential Inauguration Day
• December 25: Christmas Day (Navidad)

How Do You Navigate Taxes and Legal Compliance in Mexico?

Understanding Mexico’s tax regulations and legal requirements is essential to ensure compliance and avoid potential penalties.

What Corporate Taxes Apply in Mexico?

Corporate Income Tax: The standard corporate income tax rate in Mexico is 30% of taxable profits.

Value Added Tax (IVA): Mexico’s VAT is 16%, applied to most goods and services. Some items, such as food and medicine, may be exempt or subject to a 0% rate.

What Employment Taxes Must Employers Withhold?

Employers are responsible for withholding income tax (ISR) from employees’ salaries based on progressive rates ranging from 1.92% to 35%, depending on income levels. Employers must also remit deductions for social security, housing fund, and retirement contributions on behalf of employees.

What Is the Subcontracting (Outsourcing) Reform?

Following the 2021 reforms, the outsourcing of core activities is prohibited. Companies can only subcontract specialized services that are not part of their main economic purpose.

REPSE Requirement: All specialized service providers must be registered with the Ministry of Labor (REPSE). Clients are jointly liable for the social security and tax obligations of the provider’s employees. The cost of non compliance, including fines and joint liability, often exceeds the savings of informal arrangements.

What Are Mexico’s Data Protection Requirements?

Mexico has strict regulations for protecting employee data, governed by the Federal Law on Protection of Personal Data Held by Private Parties (LFPDPPP). Employers must obtain consent before collecting personal data, provide a privacy notice explaining how data will be used, implement security measures to protect data from unauthorized access, and allow employees to access, correct, or delete their personal information.

How Do You Set Up a Company in Mexico?

For businesses seeking a long term presence in Mexico and the ability to hire employees directly, establishing a local legal entity is a necessary step.

What Types of Business Entities Are Available?

Sociedad Anónima (S.A.): This is a corporation structure suitable for larger businesses, requiring a minimum of two shareholders and a board of directors.

Sociedad de Responsabilidad Limitada (S. de R.L.): This is a limited liability company ideal for smaller businesses, with simpler governance requirements and liability limited to capital contributions.

Sociedad Anónima Promotora de Inversión (S.A.P.I.): This is a flexible corporate structure designed for startups and companies seeking investment, offering more flexibility in governance and shareholder rights.

What Is the Registration Process?

The registration process includes obtaining authorization for the company name from the Ministry of Economy (Secretaría de Economía), drafting and notarizing the bylaws (acta constitutiva) before a Mexican notary public, registering with the Public Registry of Commerce (Registro Público de Comercio), obtaining a Tax Identification Number (RFC) from the SAT, registering with IMSS for employee benefits, registering with INFONAVIT for housing fund contributions, and opening a corporate bank account.

The entire process typically takes four to eight weeks. Working with local legal or accounting firms can help navigate the complexities and ensure compliance with regulations.

What Is the Teletrabajo Law and How Does It Affect Remote Work?

Remote work in Mexico is no longer an informal arrangement but a strictly regulated legal framework. Nearly 60% of tech professionals operate in hybrid or fully remote settings, and 58% of talent acquisition specialists have moved to virtual first recruitment.

Under the Teletrabajo Law, if more than 40% of an employee’s work is done off site, the employer must provide tech equipment, pay a portion of electricity and internet costs, and respect the employee’s right to disconnect outside of working hours. A rising trend involves Mexican professionals working remotely for U.S. companies while residing in Mexico, allowing firms to leverage significant labor cost savings without timezone lag.

How Does Mexico Compare to Other Hiring Markets?

For global organizations, the decision to hire in Mexico is often a comparison against other LATAM countries or offshore destinations.

How Does Mexico Compare to Other Latin American Countries?

Mexico offers monthly costs per developer averaging $4,500 to $7,000, with low to moderate English proficiency nationally but high proficiency in tech sectors, and excellent timezone overlap with the U.S. Brazil offers similar costs of $4,000 to $6,500 with moderate timezone overlap. Argentina offers costs of $5,000 to $7,500 with high English proficiency but moderate timezone overlap. Colombia offers the most competitive costs at $3,500 to $5,500 with moderate English proficiency and high timezone overlap.

How Does Mexico Compare to Offshore Markets?

Compared to India and the Philippines, Mexico offers 40% to 60% savings versus U.S. costs while offshore markets offer 60% to 80% savings. However, Mexico provides real time collaboration including daily standups, while offshore markets require asynchronous communication with 10 to 12 hour time differences. Mexico offers high cultural fit due to shared history and business practices with the U.S., while offshore markets offer moderate fit with westernized BPO culture. Mexico has specialized talent depth particularly in Fintech and automotive, while offshore markets offer massive generalist and support talent pools.

Frequently Asked Questions

Can you hire employees in Mexico without setting up a local entity?

Yes, you can hire employees in Mexico without establishing a local entity by using an Employer of Record (EOR) service. The EOR acts as the legal employer and handles all payroll, taxes, benefits, and compliance obligations on your behalf, allowing you to onboard Mexican talent quickly while remaining fully compliant with local labor laws.

What is the minimum wage in Mexico in 2026?

Effective January 1, 2026, the general minimum wage in Mexico is $315.04 MXN per day, reflecting a 13% increase. In the Northern Border Free Zone, the rate is $440.87 MXN per day. Employers must ensure all employee salaries meet or exceed the applicable minimum wage for their region.

How many vacation days are employees entitled to in Mexico?

Following the Vacaciones Dignas reform effective January 2023, employees are entitled to 12 days of paid vacation after completing one year of service, doubled from the previous 6 days. This increases by 2 days for each subsequent year up to year five, and then by 2 days for every 5 years of service thereafter. Employees also receive a vacation premium of at least 25% of their salary during vacation days.

What is the Aguinaldo and when must it be paid?

The Aguinaldo is a mandatory Christmas bonus that all employers must pay to employees in Mexico. It equals at least 15 days of salary and must be paid before December 20 each year. Employees who have worked less than a full year are entitled to a proportional amount based on the time they have worked.

What is Profit Sharing (PTU) and how does it work?

Profit Sharing, known as PTU, requires companies to distribute 10% of their pre tax profits to employees annually. This distribution must be made by May 30 each year and is calculated based on the number of days worked and the salary earned by each employee. PTU is capped at three months’ salary or the average of the last three years’ PTU, whichever is lower.

What are the mandatory employer contributions in Mexico?

Employers must contribute 20% to 25% of the Integrated Daily Wage to IMSS for social security, 5% to INFONAVIT for housing, 2% to SAR for retirement savings, and 1% to 4% of gross payroll for state payroll tax depending on location. The total cost of employment is estimated to be between 36% and 50% above the base salary.

What is the difference between an EOR and a PEO in Mexico?

An Employer of Record (EOR) becomes the full legal employer of your workers in Mexico and assumes complete responsibility for payroll, taxes, and compliance. A Professional Employer Organization (PEO) operates as a co employer, sharing employer responsibilities with your company. EOR services are typically better suited for companies without a local entity, while PEO arrangements often require an existing legal presence.

How long does it take to set up a company in Mexico?

The company formation process in Mexico typically takes four to eight weeks, depending on the type of entity and complexity of the registration. This timeline includes obtaining name authorization, notarizing bylaws, registering with various government agencies including SAT, IMSS, and INFONAVIT, and opening a corporate bank account.

What are the risks of misclassifying workers as contractors in Mexico?

Misclassifying employees as independent contractors can result in significant legal and financial penalties. Following the 2021 subcontracting reforms, all specialized service providers must be registered with REPSE, and clients are jointly liable for the social security and tax obligations of provider employees. Your company may be liable for back payment of benefits, social security contributions, profit sharing, severance pay, and substantial fines.

What is the Teletrabajo Law and how does it affect remote workers?

The Teletrabajo Law regulates remote work in Mexico. If more than 40% of an employee’s work is done off site, employers must provide tech equipment, pay a portion of electricity and internet costs, and respect the employee’s right to disconnect outside of working hours. Nearly 60% of tech professionals in Mexico now operate in hybrid or fully remote settings under this framework.

What skills are most in demand in Mexico’s tech sector?

The most in demand skills include AI and Machine Learning (96% of companies report integrating AI), cybersecurity (with a national shortage of 260,000 skilled workers), and cloud infrastructure (expected to reach 58% adoption by 2026). Generative AI course enrollments surged 356% in 2025, reflecting the rapid growth in this area.

How much of a salary premium do bilingual professionals command?

Bilingual professionals who speak both Spanish and English typically command a premium of 20% to 35% above standard rates. While Mexico ranks #103 globally in overall English proficiency, professionals in IT and Strategy sectors score significantly higher, with IT professionals averaging 559 on the EF English Proficiency Index.

What is the IMMEX program and how can it benefit foreign companies?

The IMMEX (Maquiladora) program offers duty free temporary imports of raw materials and equipment for export oriented operations. For tech companies, this can translate to reduced operational costs for hardware, equipment, and infrastructure. The program has been instrumental in attracting over $30 billion in annual foreign direct investment to Mexico.

What government incentives are available for companies hiring in Mexico?

The Nearshoring Decree (Plan Mexico) allows accelerated depreciation of 41% to 91% of new fixed assets and a 25% additional tax deduction for workforce training expenses. The PROSOFT program provides grants and tax incentives for technology companies. Northern Border municipalities offer reduced Income Tax and VAT rates for qualifying operations.

What is the labor informality rate in Mexico and why does it matter?

The informal employment rate in Mexico remains between 54% and 55%. Informal workers lack access to social security (IMSS) or legal protections. For formal employers, the challenge is not a lack of workers but a scarcity of formalized talent with requisite technical certifications and experience in structured corporate environments.

Conclusion

Mexico has positioned itself as the premier destination for companies seeking to hire skilled remote talent in Latin America. With its massive workforce of 61.8 million, cost savings of 40% to 67% versus U.S. hiring, world class universities like Tecnológico de Monterrey and UNAM, and a tech ecosystem valued at $17.3 billion, Mexico offers unmatched opportunities for businesses looking to expand. The nearshoring boom is expected to create 2 to 4 million new jobs by 2030, though the window of easy hiring is closing as global competition for Mexico’s best engineers and professionals reaches an all time high.

To succeed in this market, organizations must adopt a compliance first approach ensuring rigorous adherence to REPSE subcontracting rules and the Teletrabajo laws. Standard Federal Labor Law benefits are no longer sufficient to attract top talent, so employers must offer competitive benefits including private medical insurance and food vouchers. Finally, companies should match their hiring strategy to specific regional hubs, focusing on Guadalajara for electronics engineering, Mexico City for Fintech and large scale BPO, and Monterrey for manufacturing and automotive sectors.

Whether you are testing the waters with contractors, using an EOR for compliance, or setting up a legal entity for long term growth, strategic investment in competitive compensation, training, and local ecosystem integration will be the hallmarks of successful hiring in Mexico for the remainder of the decade.