How to hire in Mexico from the US (2026): contracts, costs and labor law

There are three, and the choice decides who the legal employer is. With your own Mexican company you hire employees directly; with a provider of specialized services, the provider employs the people; with independent contractors nobody is an employee, as long as the work really is independent.

For the first route, foreign investors may own up to 100% of a Mexican company outside the sectors the law reserves or limits, and a company with foreign investment must register in the National Registry of Foreign Investments within 40 working days.[9] Registering the company as an employer with the IMSS is a free online procedure done with the company’s e.firma.[10] Whatever the route, anyone who does paid, personal and subordinated work for another person or company must be enrolled in the IMSS, whatever the employer’s legal form.[7]

Only in a narrow form, and the law has not caught up with the model. Since April 2021 the Federal Labor Law prohibits personnel subcontracting, meaning supplying one’s own workers for the benefit of another company.[4] Subcontracting is allowed only for specialized services or works that are not part of the client’s corporate purpose or predominant economic activity, and only from a provider registered with the Labor Ministry (STPS) in the REPSE registry.[4] The contract must be in writing and the client is jointly liable if the provider fails its obligations to the workers;[4] the same joint liability applies to IMSS contributions, and specialized providers must report their contracts to the IMSS every four months.[7]

The penalties fall on both sides. Personnel subcontracting, or subcontracting without registration, is fined 2,000 to 50,000 UMA, about MXN 234,620 to MXN 5.87 million at the 2026 value of the UMA, and the same fine applies to the company that benefits.[3][11] Providers register online with their e.firma, and the registry is public.[12] In June 2026 the STPS merged registration, renewal and cancellation into a single procedure, with an answer in five working days for providers with up to 10 workers and 15 for larger ones.[13]

What the law does not settle is the classic employer-of-record arrangement for a foreign client with no Mexican establishment, where the provider’s employees work full time under the client’s direction. We found no STPS guidance on that case. Before you sign with an employer of record in Mexico, ask for its REPSE registration, check it in the public registry, and get its legal position on articles 12 to 15 of the Federal Labor Law in writing.

When the work is personal and subordinated. The Federal Labor Law defines a worker as an individual who provides personal, subordinated work to another person or company,[4] and an employment relationship exists whenever that work is provided for a salary, whatever the contract is called.[4] The law also presumes an employment relationship between whoever provides personal work and whoever receives it, so the burden of proving independence falls on the client.[4]

If a contractor turns out to be an employee, the Federal Labor Law’s benefits apply, and the IMSS can fine the company 20 to 350 UMA for each failure to register as an employer or to enroll the worker.[7] A genuine independent professional, by contrast, does not take part in profit sharing[5] and may join the IMSS voluntarily.[7]

Practical warning signs that a contractor relationship is drifting into employment:

• You set their working hours and approve their time off.
• They work only for you, full time, with no other clients.
• They carry your company’s email, title and org chart, and report to a manager like staff.
• You pay a fixed monthly amount whatever they deliver.

None of these alone is the legal test, which is subordination; together they describe it.

For how this applies to a US company with no office in Mexico, and how the four main hiring countries compare, see Latin American labor law and US companies.

A written contract in at least two copies, one for each party, unless a collective agreement covers the job.[4] It must state the parties’ identity data, including their CURP and RFC; the type and duration of the relationship and any probation period; the services; the place of work; the working hours; the salary; the day and place of payment; training; and other conditions.[4] A missing written contract does not take away any of the worker’s rights and is held against the employer.[4]

At the end of a probation period the employer may end the relationship without liability if the worker does not meet the requirements, after considering the opinion of the joint productivity and training commission.[3] A bilingual contract spares you the translation if a dispute ever reaches a labor court.

Mexico is moving from 48 to 40 hours a week; our guide to the 40-hour reform covers it in detail. A constitutional amendment published on March 3, 2026 set the 40-hour week,[14] and the Federal Labor Law reform of May 1, 2026 phases it in, cutting the maximum ordinary week by two hours every January 1.[2]

Daily limits stay at 8 hours for day shifts, 7 for night shifts and 7.5 for mixed shifts.[2] Overtime is paid at double the hourly rate, at most 4 hours a day on 4 days a week once the transition ends; up to 4 more hours a week beyond the cap are paid at triple rate, and ordinary hours plus overtime can never exceed 12 hours in a day.[2] From January 1, 2027, employers must record each worker’s hours electronically, and failing to do so is fined 250 to 5,000 UMA.[2]

Workers get at least one paid rest day for every six days worked and a premium of at least 25% for Sunday work.[2] Work on a rest day is paid double on top of that day’s pay, and a continuous workday includes a break of at least 30 minutes.[4]

Since the 2023 reform, at least 12 working days of paid vacation after the first year, rising by two days a year to 20 in the fifth year and then by two days for every five further years.[4] Vacation is paid with a premium of at least 25% of the salary for those days.[4]

The worker must be able to take at least 12 consecutive days, vacation must be granted within six months after each year of service, and it cannot be swapped for cash except as proportional pay when someone leaves before completing the year.[4]

Seven a year, plus the days of ordinary federal and local elections and October 1 every six years when the presidency changes hands.[4] Work on a mandatory holiday is paid at double salary on top of the day’s pay.[4]

The dates follow the rules of article 74 applied to each year’s calendar.[4]

Two by law, and both reach every employee. The aguinaldo is at least 15 days of salary, paid before December 20, and pro rata for anyone with less than a full year.[4] Profit sharing (PTU) gives workers 10% of the company’s taxable income,[5] calculated under the Income Tax Law and paid within 60 days of the annual tax deadline.[4] For companies that filed their 2025 return by March 31, 2026, the deadline was May 30, 2026.[5]

Since 2021 each worker’s share is capped at three months of salary or the average received over the last three years, whichever is higher.[4] New companies are exempt in their first year of operation,[4] and independent professionals outside a subordinated relationship do not share in profits.[5]

In our example below, about a third of the salary: social security, the housing fund, the state payroll tax and the two mandatory bonuses. Contributions to the IMSS are calculated on the integrated contribution salary, which includes almost every payment for work, such as bonuses and premiums,[7] up to a ceiling of 25 UMA, or MXN 2,932.75 a day in 2026.[7][11]

Contributions are paid by the 17th of the following month, and for a worker on the minimum wage the employer also pays the worker’s share.[7] In Nuevo León, a proposal to raise the payroll tax to 4% for 2026 was dropped when the state Congress approved its budget.[21]

Example: an employee in Mexico City earning MXN 40,000 a month in 2026, first year, risk class I, no other benefits. The contribution salary is MXN 1,399.09 a day, after adding the aguinaldo and vacation premium to the daily wage. This is our arithmetic on the rates above, not a payroll quote (the Mexico cost guide has four salary levels); your provider’s figures will move with the risk class, benefits and calendar days.

At the Bank of Mexico’s FIX rate of October 30, 2026, MXN 18.7962 per dollar,[22] that is a salary of about USD 2,128 a month and a total cost of about USD 2,824, before profit sharing.

With a just cause from the list in article 47, or by paying what an unjustified dismissal costs. The just causes are a closed list, from dishonesty to more than three unexcused absences in 30 days, and the dismissal needs a written notice stating the conduct and dates, handed to the worker or filed with the labor court within five working days; without it, the dismissal is presumed unjustified.[4]

Any settlement must be in writing, itemize the facts and rights, and be ratified before a Conciliation Center or labor court; a waiver of earned wages or indemnities is void.[4] A dismissed worker has two months to sue, and most other labor claims prescribe in one year.[3] In 2025, INEGI counted 104,741 labor conflicts at the local level, 59.5% of them over dismissals, and 515,780 pre-judicial settlements reached in conciliation.[23]

With a written services contract and the contractor’s own tax registration. Mexican contractors must issue an electronic invoice (CFDI) for the income they receive,[8] and an invoice to a foreign client without a Mexican tax ID uses the generic RFC XEXX010101000, tax regime key 616 and CFDI use S01, with the client’s foreign tax ID and country of residence.[8] Before the first payment, verify the contractor’s RFC with the SAT and collect a Form W-8BEN for your US records; contractors can also download a Constancia de Situación Fiscal, the SAT certificate of their tax registration.[24]

Services used entirely abroad by a client with no establishment in Mexico are taxed at 0% VAT instead of 16%.[25] IT services such as software development and data processing get the 0% rate only under extra conditions, including using infrastructure and staff located in Mexico, and not if they are delivered through virtual private networks (VPNs).[25]

Many individual contractors use the Simplified Trust Regime (RESICO), open to annual income below MXN 3.5 million, which taxes income collected at 1% to 2.5% and requires monthly payments and an annual return.[26]

The rates are from the SAT’s December 2024 RESICO guide.[27] For payment, SPEI, the central bank’s peso transfer system, runs around the clock,[28] while domestic dollar transfers through SPID are open only to companies,[29] and the peso has floated freely since 1995.[30]

It depends on what is created and under which contract, so put intellectual property in writing every time.

Any transfer of economic rights must be in writing or it is void, and it must be paid and limited in time: five years by default, more than 15 only exceptionally, though software is exempt from those limits.[31] Moral rights, such as being credited, stay with the author and cannot be sold or waived,[31] and a transfer must be recorded in the public copyright registry to bind third parties.[31] Inventions by employees follow the Federal Labor Law:[32] inventions by people hired to do research belong to the employer, with extra compensation in some cases, while other employees keep their inventions and the employer has a right of preference.[4]

Consent and a privacy notice for the personal data of employees and contractors. A new Federal Law on the Protection of Personal Data Held by Private Parties was published on March 20, 2025 and replaced the 2010 law the next day,[33] and the regulator is now the Ministry of Anti-Corruption and Good Government.[33] Processing requires the person’s consent, express or tacit, unless an exception applies.[33] Before transferring data to a third party, in Mexico or abroad, the controller must share the privacy notice and the purposes the person accepted,[33] although some international transfers need no consent, such as those within the same corporate group or those needed to perform a contract.[33]

Yes, in four ways. Time zone: most of the country, including Mexico City, Guadalajara and Monterrey, is on central time (UTC−6) all year, Baja California is on northwest time, and only municipalities on the northern border change their clocks.[6] Payroll tax: 4% in Mexico City against 3% in Jalisco and Nuevo León.[18][19] Minimum wage: MXN 440.87 a day in the northern border zone against MXN 315.04 elsewhere.[1] English: EF’s 2025 index gives Monterrey 532 and Guadalajara 511 against 428 for Mexico City,[34] and Mexican respondents working in IT score 559, far above the national 440.[35]