Payroll & Employment Guide Mexico

Every employee in Mexico must enter into an individual employment contract with their employer. The contract must outline the terms and conditions of employment, such as salaries, working hours, benefits, and other essential details.

Notice periods: No statutory notice period (may be defined in employment contracts).

Termination of employment: Not at will - reasons must be justified.

Employers in Mexico are required to provide mandatory employment benefits in compliance with the country’s labour laws. Many of them also offer extra benefits to stay competitive in the job market. Understanding both of them is essential to attracting and retaining talent.

• Mandatory benefits: Christmas bonus, healthcare, and social security.
• Common perks: Meal vouchers, transport reimbursements.
• Leave policies: Paid annual leave, sick leave, maternity/paternity leave.

Mexico has a comprehensive tax framework, where employers are responsible for withholding and reporting income tax and contributing to social security and other schemes and funds.

A person is a tax resident of Mexico if they live there or have their centre of vital interests there (e.g. most income or work is in Mexico). Leaving residency requires notifying tax authorities 15 days in advance; residency continues.

Mexican citizens moving to tax havens remain tax residents for the year of notice plus five more years, unless a treaty says otherwise.

Personal income tax: The personal income tax rates for resident individuals are as follows:

• 0.01–8,952.49 MXN: 1.92% on excess
• 8,952.50–75,984.55 MXN: 171.88 MXN + 6.40%
• 75,984.56–133,536.07 MXN: 4,461.94 MXN + 10.88%
• 133,536.08–155,229.80 MXN: 10,723.55 MXN + 16%
• 155,229.81–185,852.57 MXN: 14,194.54 MXN + 17.92%
• 185,852.58–374,837.88 MXN: 19,682.13 MXN + 21.36%
• 374,837.89–590,795.99 MXN: 60,049.40 MXN + 23.52%
• 590,796.00–1,127,926.84 MXN: 110,842.74 MXN + 30%
• 1,127,926.85–1,503,902.46 MXN: 271,981.99 MXN + 32%
• 1,503,902.47–4,511,707.37 MXN: 392,294.17 MXN + 34%
• 4,511,707.38+ MXN: 1,414,947.85 MXN + 35%

Withholding and contributions: Here are the withholding rates in Mexico:

• Dividends: 10%
• Interest: Individuals receiving interest from loans, financing, or other financial operations via fintech platforms must pay 20% ISR on the interest earned.
• Capital gains: Individuals who sell stocks through the Mexican Stock Exchange are subject to a 10% tax on their net gains for the year.

Tax allowances and non-taxable benefits: N/A

Deductions and tax reliefs:

• Overall deduction cap (2025): Lower of 15% of income or 5× UMA (max MXN 206,368)
• Charity: Up to 7% of prior year taxable income
• Medical & related expenses: Deductible if unpaid in cash; includes insurance and dependents
• Mortgage interest: Deductible, but subject to caps and a general limit
• Retirement savings: Deductible within set limits; withdrawals are taxable
• Education: Tuition deductible for dependents (MXN 14,200–24,500 per student/year); university excluded
• Personal allowances: Available for dependents; special 2026 exemption for eligible participants
• Tax debt relief (2026): Up to MXN 300M forgiveness program if conditions met (file returns, pay by Dec 31, 2026, fix issues, drop disputes)

Employers in Mexico must pay salaries as agreed and outlined in employment contracts. Wages must meet or exceed the minimum wage set by the government. Employers must also comply with additional obligations, such as providing end-of-year bonuses (aguinaldo) and others.

Salary payment deadline: Typically paid bi-weekly or monthly.

Taxes and contributions payment deadline: By the 17th of each month.

Payroll declarations deadline: By the 17th of the following month.

Payroll currency: MXN

Minimum wage (2026 Updates):

• Nationwide: Increases to MXN 315.04 per day.
• Northern border free zone: Increases to MXN 440.87 per day.

Mexico’s labour frameworks are governed by federal labour laws, which set out the key aspects of employment, including types of contracts, working hours, minimum wages, vacation entitlements, and termination procedures. Employers are expected to understand and follow these standards in order to stay legally compliant.

Total employment cost:

• Aguinaldo (Christmas Bonus): Equivalent to at least 15 days of salary
• Paid vacation days: At least 25%
• Social security contributions (IMSS): Percentages in one branch updated, resulting in a slight increase in employer costs.
• National Workers' Housing Fund (INFONAVIT): 5%
• State payroll tax: From 1% to 3%.

Minimum wage: MXN 315.04 per day

Probation period: Up to 180 days

With EOR services, you can legally employ workers in Mexico without opening a legal entity there. Your EOR will act as the official employer, handling responsibilities like:

• Legal employment and contracts
• Payroll processing
• Tax withholding
• Benefits administration
• Onboarding/offboarding employees

PEO services provide HR and administrative support for employers who already have established legal entities. With PEO, you remain the legal employer for your team in Mexico, while your provider manages operations like:

• HR and workforce administration
• Payroll and benefits management
• Compliance and local labour law guidance
• Employment contracts assistance

Native Teams provides you with payroll calculators that are adjusted to over 85 countries’ local labour laws. With our calculator, you can easily estimate net and gross salaries, contributions, and other mandatory deductions in Mexico.

Here is a list of public holidays in Mexico: