Payroll compliance in Mexico
Latin America’s second-largest economy, Mexico, is also one of the region’s fastest growing; the country is predicted to become the world’s seventh-largest economy by 2050 (up from 15th today). This makes it a highly attractive country for investors and businesses alike. However, the country has one of the most complex business environments – ranking fourth in TMF Group’s 2022 Global Business Complexity Index – making compliance in areas such as payroll administration a challenging and time-consuming task.
There are two main pieces of labour legislation that cover payroll-related matters in Mexico: the Federal Labour Law and the Social Security Law. These laws regulate the terms and conditions of employment contracts, covering areas including wages, working hours, statutory holidays, paid vacation, labour unions, strikes and severance compensation.
- 2021 saw significant reform of labour laws in Mexico, following the implementation of the USMCA trade agreement. The changes included new rules around outsourcing, gender equality and labour democracy, along with the consolidation of several workers’ rights.
- The payroll cycle in Mexico is typically bi-weekly (or weekly), with employees being paid on the 15th and the last day of each month. There is a mandatory year-end bonus (known as Aguinaldo) of at least 15 days’ pay, which must be paid to employees no later than 20th December each year.
- There is a mandatory national minimum wage in Mexico, which varies by job role, category and region.
- Mexican Federal Labour Law mandates that 90% of a company’s workforce must be Mexican nationals (with exceptions for directors, administrators and managers).
- Mexico has different payroll-related rules and regulations in its northern border zone – a defined set of Mexican municipalities bordering the USA. Here, the minimum wage is set at a higher level and the requirement for 90% Mexican workforce does not apply, for example.
If you’re doing business in Mexico and are looking to learn more about Mexico’s labour laws, incorporation procedures, tax implications and compliance requirements, request a copy of our full country profile, Doing business in Mexico.
