Hiring & Firing in Mexico: HR Compliance and Employer of Record Guide (2026)

If you employ, or plan to employ, an international workforce in Mexico, this guide explains how to hire compliantly under Mexican labor law — contracts, payroll, benefits, working hours, termination and severance — and how an Employer of Record (EOR) lets you hire without setting up a local entity.

Last reviewed: June 2026. Covers the 2026 minimum wage, the 2023 vacation reform, the 2021 outsourcing (REPSE) rules, and the 40-hour workweek amendment enacted March 2026.

Hiring in Mexico at a glance. 2026

Category	Details
General minimum wage	MXN $315.04 / day
Northern Border minimum wage	MXN $440.87 / day
Standard workweek	48 hrs (falling to 40 by 2030)
Minimum paid vacation (year 1)	12 working days
Christmas bonus (aguinaldo)	15 days’ salary, min.
Profit sharing (PTU)	10% of taxable profit
Maternity / paternity leave	12 weeks / 5 days
Entity required to hire?	No — via an Employer of Record (EOR)

Employing people in Mexico without a local entity

When a company enters the Mexican market and needs to employ local nationals, the first question is how to make the hire legally. Mexico’s employment framework is statutory, employee-protective and centred on the principle of job stability, so getting the structure right from day one matters.

A Global Employer of Record (EOR) lets you outsource the legal employment of your Mexican workforce to a provider that becomes the on-paper employer. The EOR runs payroll, registers staff with social security, administers statutory and supplementary benefits, and carries the day-to-day employment compliance, while your team manages the work itself. You hire in Mexico, and across 190+ other countries, without incorporating a local entity, and you transfer misclassification and non-compliance risk to a specialist.

Why the EOR model changed in Mexico 

Since the 2021 outsourcing reform, leasing personnel for another company’s core work is prohibited. A compliant EOR works by being the direct legal employer of the worker, not by sub-contracting labour. Where the provider supplies specialised services, it must hold a valid REPSE registration.

Employment contracts in Mexico

Under the Federal Labor Law (Ley Federal del Trabajo, or LFT), an employment relationship is presumed to be indefinite unless the nature of the work justifies otherwise.

Indefinite-term contracts

The default and most common form, used for ongoing roles. A probationary period may be agreed (see below) where the relationship is expected to exceed 180 days.

Fixed-term and specific-work contracts

A defined term or a specific project can only be used where the nature of the work genuinely requires it — for example, temporarily replacing another worker or completing a discrete assignment that ends when the work is finished. Employers cannot use fixed terms simply to avoid job-stability protections.

Initial-training and seasonal contracts

The LFT also recognises seasonal arrangements and initial-training contracts, each subject to its own limits.

Collective bargaining agreements

Where a union is present, a collective bargaining agreement (contrato colectivo) is negotiated with the employer. A CBA can always improve on statutory minimums but can never waive constitutional or statutory rights, and it is periodically renewable.

Probationary periods

Probation is permitted where the employment relationship is expected to last more than 180 days. It is limited to 30 days for regular employees and up to 180 days for managerial, technical or specialised positions. During probation the employee receives full salary, benefits and social security.

Minimum wage in Mexico (2026)

Minimum wages are set annually by the National Minimum Wage Commission (CONASAMI) and take effect on 1 January. Mexico operates two zones: a general rate and a higher rate for the Northern Border Free Zone (a defined set of municipalities along the U.S. border). For 2026 the general wage rose 13% and the border wage 5%.

Daily minimum wage, effective 1 January 2026:

Zone	2025 (MXN/day)	2026 (MXN/day)	Change
General (rest of country)	278.80	315.04	+13%
Northern Border Free Zone	419.88	440.87	+5%

The minimum wage is a legal floor, not a market rate — most professional and skilled roles pay well above it. Note also that the minimum-wage increase cannot be used as the basis for reviewing salaries already above the floor.

Working hours and the 40-hour workweek reform

Mexico is moving from a 48-hour to a 40-hour standard workweek — one of the most significant labour changes in a generation.

Reform enacted March 2026. A constitutional amendment to Article 123 was published in the Official Gazette (DOF) on 3 March 2026, reducing the maximum workweek from 48 to 40 hours. The reduction is phased: it begins on 1 January 2027 and removes two hours each year until reaching 40 hours in 2030. Wages and benefits cannot be cut as hours fall, and the requirement of at least one rest day for every six worked is retained (the reform does not mandate a two-day weekend). Secondary changes to the Federal Labor Law — including an electronic time-recording duty from 2027 — follow this amendment.

Until the phase-in begins, the current statutory maximums still apply:

Shift	Hours per day	Hours per week
Day shift	8	48
Night shift	7	42
Mixed shift	7.5	45

Employees on a continuous shift are entitled to a break of at least 30 minutes. Overtime is paid at a premium, and work performed on a statutory public holiday is paid at 300% of the normal daily wage.

The 2021 outsourcing reform and REPSE

This reform reshaped how foreign companies can engage workers in Mexico, and it is the single most important rule to understand before choosing an EOR or staffing partner.

Effective 23 April 2021, an amendment to the Federal Labor Law prohibited the subcontracting of personnel — the practice of one company making its own workers available to perform another company’s core, substantive activities. Workers who carry out a company’s main business must be directly on that company’s payroll.

What remains permitted is the contracting of specialised services or works that are not part of the client’s corporate purpose or predominant economic activity (for example, a software firm hiring external cleaning or security). Any provider supplying such services must:

• Register in the REPSE (Registry of Specialised Service Providers), administered by the Ministry of Labour and Social Welfare (STPS);
• Renew that registration every three years and keep tax and social-security obligations current;
• State its REPSE number in the service contract.

The consequences of getting this wrong are serious. A company that engages an unregistered or non-compliant provider can lose the tax deductibility of the spend, face joint and several liability for the provider’s unpaid wages, taxes and social-security contributions, and incur fines that can reach into the millions of pesos.

What this means for hiring through an EOR. A compliant Employer of Record assumes the role of legal employer and puts the worker on its own payroll, so the relationship is direct employment rather than prohibited personnel-lending. When the engagement is structured as specialised services, confirm your provider holds a current REPSE registration and verify it before signing.

Statutory benefits and employer contributions

Mexico has a generous set of mandatory benefits. Together with social-security costs, these typically add roughly 30%+ on top of base salary.

Mandatory benefits

• Christmas bonus (aguinaldo): at least 15 days’ salary, payable by 20 December each year.
• Paid vacation and vacation premium: see the leave section; the premium is at least 25% of vacation pay.
• Profit sharing (PTU): employees with 60+ days of service share 10% of the company’s annual taxable profit. Since the 2021 reform, each employee’s PTU is capped at the higher of three months’ salary or the average of their PTU over the past three years — a cap the Supreme Court confirmed as constitutional in 2024. New companies are exempt in their first year, and the most senior officer is excluded.
• Social security (IMSS): all employees must be registered with the Mexican Social Security Institute (IMSS), which funds healthcare, maternity, disability and other benefits.

Employer payroll contributions

On top of salary, employers contribute to several funds based on the employee’s integrated daily wage:

• IMSS — social security (rate varies by branch and the employee’s risk class);
• INFONAVIT — the national housing fund, at 5% of integrated salary;
• SAR / retirement — at 2% of integrated salary;
• State payroll tax (ISN) — typically 2–3%, depending on the state.

Common non-mandatory benefits used to stay competitive include grocery/food vouchers (vales de despensa), a savings fund (fondo de ahorro) matched by the employer, meal provision (common along the U.S. border), and private medical insurance.

Paid leave and the vacation reform

The 2023 Vacaciones Dignas reform doubled the first-year vacation entitlement, the old six-day minimum no longer applies.

Since 1 January 2023 (amending Articles 76 and 78 of the LFT), employees earn at least 12 paid vacation days after one full year of service, rising by two days each year to 20 at year five, then by two days for every additional five years. At least 12 of the days must be taken continuously, and leave must be granted within six months of the service year ending.

Statutory paid vacation by years of service:

Years of service	Paid vacation days
1 year	12
2 years	14
3 years	16
4 years	18
5 years	20
6–10 years	22
11–15 years	24
16–20 years	26
21–25 years	28
26–30 years	30

A vacation premium (prima vacacional) of at least 25% of vacation pay is added each time leave is taken.

Sick leave

Sick leave is administered and paid by IMSS, not the employer. A worker obtains a certificate from an IMSS-affiliated physician; IMSS then pays a subsidy (generally 60% of the registered salary from the fourth day) for the duration determined, up to 52 weeks and extendable.

Maternity, paternity and adoption leave

• Maternity: 12 weeks (six before and six after birth), paid at 100% of the registered salary by IMSS for eligible employees. Up to four of the prenatal weeks can be transferred to the postnatal period with medical authorisation, and the postnatal period extends to eight weeks where the child has a disability or needs hospitalisation.
• Paternity: five paid working days on the birth or adoption of a child, paid by the employer.
• Adoption: six paid weeks for the adopting mother; five days for the adopting father.

Remote and hybrid work (NOM-037)

Teleworking is regulated by official standard NOM-037-STPS-2023. Where an employee works remotely more than 40% of the time, the employer must, among other duties, provide and maintain the necessary equipment, contribute to a proportional share of internet and electricity costs, address ergonomics and health, and respect a written reversibility clause allowing a return to on-site work.

Termination and severance in Mexico

Mexico’s job-stability principle means an employer can normally only end an employment relationship for just cause. There is no at-will employment.

Justified termination requires a specific statutory ground (Article 47 LFT), for example serious dishonesty or violence at work, more than three unjustified absences in a 30-day period, breaching safety rules, disclosing trade secrets, or attending work under the influence of alcohol or non-prescribed drugs. The parties cannot agree additional grounds beyond those in the law.

Notice

There is no notice period or payment in lieu. However, within 30 days of learning the facts that justify dismissal, the employer must give the employee a written notice setting out the causes and the effective date. Failing to do so can render the dismissal unjustified regardless of the underlying reason.

Severance for unjustified dismissal

If a dismissal is found to be unjustified (or the employer chooses to pay rather than reinstate), the statutory severance is:

Statutory severance components — dismissal without just cause:

Component	Amount
Constitutional indemnity	3 months’ salary (90 days)
Service indemnity	20 days’ salary per year of service
Seniority premium	12 days’ salary per year (capped at 2× the minimum wage)
Finiquito (always owed)	Accrued wages, proportional aguinaldo, vacation & 25% vacation premium, plus any PTU

On a justified termination or a resignation, the employee is generally owed only the finiquito; the seniority premium is also payable to employees with 15+ years of service. Disputes are heard by Mexico’s labour courts, preceded by mandatory conciliation.

Misclassification risk

Engaging workers as independent contractors to avoid employment obligations is one of the highest risk mistakes foreign companies make in Mexico.

Mexican authorities look at the substance of the relationship, not the label on the contract. If a person works under your direction, follows a set schedule, works mainly for one company, or uses company-provided tools, the law can treat them as an employee regardless of the agreement.

A finding of misclassification can trigger back wages, unpaid IMSS and INFONAVIT contributions, PTU liability, and the full statutory severance plus penalties. Employing through an EOR removes this exposure by ensuring every worker is correctly engaged as an employee from the outset.

Frequently asked questions

What is the minimum wage in Mexico in 2026?

As of 1 January 2026, the general daily minimum wage is MXN $315.04 and the Northern Border Free Zone rate is MXN $440.87. Rates are set each year by CONASAMI and take effect on 1 January.

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

An Employer of Record (EOR) becomes the full legal employer of your worker in Mexico and handles payroll, benefits and compliance, so you don’t need a local entity. A PEO only co-manages HR and payroll alongside you and generally requires you to already have your own Mexican entity. Because Mexico’s 2021 reform restricts personnel subcontracting, an EOR acting as the direct legal employer is usually the cleaner route for foreign companies hiring without incorporating.

Can you still use an Employer of Record in Mexico after the 2021 outsourcing reform?

Yes. The 2021 reform banned subcontracting personnel for a company’s core activities, but a compliant EOR acts as the direct legal employer and puts the worker on its own payroll. Where the provider supplies specialized services it must hold a valid REPSE registration, which the client should verify to avoid joint liability.

What is severance pay in Mexico for unjustified dismissal?

Three months’ salary (the constitutional indemnity), plus 20 days’ salary for each year of service, plus a seniority premium of 12 days’ salary per year (capped at twice the minimum wage), plus the finiquito of accrued wages, proportional Christmas bonus, vacation and vacation premium.

Is Mexico moving to a 40-hour workweek?

Yes. A constitutional amendment published on 3 March 2026 reduces the maximum workweek from 48 to 40 hours, phased from 1 January 2027 at two hours per year until reaching 40 hours in 2030. Wages and benefits cannot be reduced, and the one-rest-day-per-six-days rule remains.

How much does an employee cost on top of salary in Mexico?

Mandatory employer costs typically add roughly 30% or more on top of gross salary. They include social-security contributions to IMSS, the INFONAVIT housing fund (5%) and SAR retirement (2%), state payroll tax (about 2–3%), and statutory benefits such as the aguinaldo, the 25% vacation premium and profit sharing (PTU). The exact figure depends on the employee’s integrated daily wage and IMSS risk class.

How long does it take to hire someone in Mexico through an EOR?

With an Employer of Record, onboarding usually takes a few days to about two weeks once the candidate’s details, contract and documentation are ready. By comparison, incorporating a Mexican legal entity to employ directly can take several months.

Sources & legal basis

• Mexican Federal Labour Law (Ley Federal del Trabajo), including Articles 39-A, 47, 76, 78, 80, 132 and 170, and the 2021 subcontracting amendments (Articles 12–15).
• CONASAMI minimum-wage decree, effective 1 January 2026.
• Constitutional amendment to Article 123 reducing the workweek, published in the Official Gazette of the Federation (DOF), 3 March 2026.
• “Vacaciones Dignas” reform of Articles 76 and 78, in force 1 January 2023.
• Ministry of Labor and Social Welfare (STPS) — REPSE registry rules; Mexican Supreme Court ruling on the PTU cap (2024); official standard NOM-037-STPS-2023 on telework.

Note: This guide is general information, not legal advice, and reflects the law as understood in June 2026. Several reforms (notably the 40-hour workweek) are being implemented through secondary legislation that may change specific obligations. Verify current requirements against official Mexican government sources before acting.