Mexico is Latin America’s second-largest economy and a close, time-zone-aligned talent market for North American companies. Its employment rules are changing fast. The minimum wage rose 13% on 1 January 2026 to MX$315.04 a day. A Federal Labor Law reform in force from 1 May 2026 cuts the maximum working week from 48 to 40 hours in steps from 2027 to 2030, with new overtime caps already in place. Electronic time recording becomes mandatory on 1 January 2027. Employers also face rising pension contributions each January, a new data protection law from March 2025 and strict subcontracting rules since 2021.
Currency: Mexican Peso (MX$ MXN)
Language: Spanish
Regulatory Authority: Secretaría del Trabajo y Previsión Social (STPS), IMSS, INFONAVIT, SAT and the Federal Center for Conciliation and Labor Registration (CFCRL)
Last updated: October 2026
MX$315.04 a day in the general zone and MX$440.87 a day in the Northern Border Free Zone, from 1 January 2026. Occupation-specific professional minimums also rose 13%.
A written contract in Spanish is required. Indefinite term is the default. Fixed-term or project contracts are valid only when the nature of the work requires them.
Up to 30 days, or up to 180 days for management and specialized technical or professional roles. It must be in writing and cannot be extended or repeated.
About 25–40% on top of gross salary, covering IMSS, INFONAVIT, retirement and state payroll tax, plus aguinaldo, vacation premium and profit sharing. Higher in percentage terms for low earners.
12 working days after the first year, rising by 2 days a year to 20 days in year 5, then 2 more days every 5 years. A vacation premium of at least 25% applies.
Up to 48 hours a week in 2026 (8 hours a day shift), with 1 paid rest day per 6 worked. The maximum falls by 2 hours each year from 2027 to 40 hours in 2030.
IMSS branches, 2% retirement (SAR), CEAV of up to 7.513% in 2026, 5% INFONAVIT and a variable work-risk premium, mostly capped at 25 UMA a day. State payroll tax of about 1–4% applies.
Progressive ISR withheld monthly by the employer, from 1.92% up to 35% on income above MX$425,642 a month. An employment subsidy reduces tax for low earners.
Double pay for the first 9 hours a week in 2026–2027 (rising to 12 by 2030), and triple pay for up to 4 more. Total daily hours may never exceed 12.
No at-will dismissal and no statutory notice. Unjustified dismissal usually costs 3 months' integrated salary, 20 days' salary per year of service and a seniority premium of 12 days per year.
The finiquito (unpaid wages, pro-rated aguinaldo, vacation and premium, PTU owed) is due on separation. Best practice is a signed release ratified before the CFCRL or Labor Court.
Aguinaldo of at least 15 days' salary is due before 20 December. PTU shares 10% of taxable profit with employees by 30 May, capped per employee at 3 months' salary or the 3-year average.
2025–2026 updates
Every employee needs a written contract in Spanish covering duties, place of work, hours, salary, payment dates, training and benefits. Without one, the employer bears the burden of proof in disputes. Indefinite contracts are the default; fixed-term or project contracts need a genuine reason. Probation must be agreed in writing. Register the employee with IMSS before the start date. Remote staff need a written telework agreement under NOM-037, covering equipment and the right to disconnect.
Register with SAT (RFC and e.FIRMA), IMSS, INFONAVIT and the state payroll tax office. Pay salaried staff at least every 15 days and issue a payroll e-invoice (CFDI) for every payment. Withhold ISR monthly and pay it by the 17th of the following month. Pay IMSS monthly and INFONAVIT and retirement contributions every two months. File the annual work-risk premium review in February and complete the year-end tax adjustment for employees.
Annual leave starts at 12 working days and grows with service, plus a vacation premium of at least 25%. IMSS pays 60% of salary from the 4th day of sickness. Maternity leave is 12 weeks, paid by IMSS when contribution conditions are met, and paternity leave is 5 working days paid by the employer. There are 7 mandatory paid holidays. Aguinaldo of 15 days’ salary is due before 20 December, and PTU profit sharing is paid by 30 May.
Mexico has no at-will employment. Dismissal needs a justified legal cause, and the employee must receive written notice stating the cause and date, or it must be filed with the Conciliation Center or Labor Court within 5 business days. Otherwise the dismissal is presumed unjustified. Negotiated exits typically pay 3 months’ integrated salary, 20 days per year of service, the seniority premium and the finiquito. Pregnant employees and those on IMSS disability have extra protection.
Since 2021, supplying staff to a third party is prohibited; only REPSE-registered specialized services outside the client’s core activity are allowed, so EOR arrangements need careful structuring. Employers must also have a NOM-035 psychosocial risk policy, internal work regulations filed with the CFCRL, a harassment prevention protocol with training, and safety and training commissions. Give employees a privacy notice under the 2025 data protection law and get express consent for sensitive data.
Download the full Mexico Payroll & Employment Guide 2026 (PDF)
For detailed hiring information, customised employment guidance or support with your Mexico hiring, please reach out to our team. We provide compliant employment contracts, payroll processing and tax remittance, social security registration and reporting, benefits administration, and onboarding and offboarding support. See our EOR pricing: flat from $349 per employee, per month.
FAQ
Yes. An Employer of Record such as StratEdge Global becomes the legal employer and handles contracts, payroll, IMSS and INFONAVIT contributions, tax withholding and compliance, while you direct the day-to-day work. Engagements are structured case by case under Mexico’s 2021 subcontracting rules.
Typically about 25–40% of gross salary. This covers IMSS, INFONAVIT, retirement and CEAV contributions and state payroll tax, plus the 15-day aguinaldo, the 25% vacation premium and PTU profit sharing. The CEAV employer rate rises every January until 2030.
No. Dismissal needs a justified legal cause and written notice. Otherwise, expect to pay 3 months’ integrated salary, 20 days per year of service, a 12-day-per-year seniority premium and pro-rated benefits, ideally under a release ratified before the Conciliation Center.
The maximum stays at 48 hours in 2026, then falls by 2 hours each year from 2027 to 40 hours in 2030, with no pay cuts allowed. New overtime caps already apply, and electronic time records are mandatory from 1 January 2027.
