MexicoMexico is the nearshoring default for US startups: shared timezones, easy travel, and a deep engineering market that has only gotten deeper as US companies moved work south. The two things that surprise founders are the aguinaldo (a mandatory Christmas bonus every employee gets in December) and severance: Mexico has no at-will employment, and letting someone go without cause costs three months of salary plus 20 days per year of service.
Here's the whole picture.
Quick facts
| Mexico | |
|---|---|
| Currency | Mexican Peso (MXN) |
| Standard work week | 48 hours, 6 days |
| Payroll frequency | Biweekly (quincenal) |
| Employer statutory cost | ~25-35% on top of gross salary |
| Minimum wage | MXN 315.04/day |
| Probation | Up to 3 months |
| Notice period | None (severance-based system) |
| 13th month pay | Mandatory aguinaldo, minimum 15 days' salary |
| Employees paid in | MXN, required by law |
First decision: contractor or employee?
Plenty of US startups start with Mexican contractors, and for an independent engineer with multiple clients it works. But Mexico reformed its outsourcing rules in 2021 specifically to crack down on companies disguising employees as something else, and enforcement culture followed.
The line is the same as everywhere: fixed hours, exclusive work, and day-to-day direction make someone an employee under the Ley Federal del Trabajo regardless of the contract label. Reclassification means back social security, aguinaldo, vacation premium, and profit sharing, plus penalties. If you'd be uncomfortable with them taking a second client, they're probably an employee, and the fix is converting them through an employer of record (EOR) or your own Mexican entity.
Paying contractors in Mexico
The compliance side is light:
- Collect a W-8BEN before the first payment, so you generally don't issue a 1099. Confirm your setup with your accountant.
- Sign a real contract with scope, rate, IP assignment, and termination terms, written with Mexican law in mind. Ask contractors for their RFC (tax ID) and confirm they invoice properly on their end.
- Pay in USD or MXN, their choice. Contractors can invoice in USD, and given peso volatility, many prefer it. Bank wires cost $25-45 each, hide an FX spread in the rate, and take days.
Shor pays Mexican contractors over local rails, same-day, in MXN or USD, with a flat disclosed 2% FX margin and a $19/month per-contractor fee. Contracts, W-8BEN collection, and invoicing are built in.
Hiring full-time employees
Employer-side statutory contributions on top of gross salary:
| Contribution | Rate (employer side) | Notes |
|---|---|---|
| IMSS (Social Security) | ~20% | Of the contribution base salary; varies by wage mix |
| INFONAVIT (Housing) | 5% | National housing fund |
| SAR (Retirement) | 2% | Retirement savings contribution |
| State payroll tax | ~3% | Varies by state (roughly 1-4%) |
Headline employer load: roughly 25-35% on top of gross salary. On top of contributions, three cash benefits are baked into Mexican employment: the aguinaldo (minimum 15 days of salary, paid before December 20), a 25% vacation premium on top of vacation pay, and PTU profit sharing (10% of pre-tax profits distributed to employees, where applicable to the employing entity). Statutory rates change, so confirm current figures with your accountant.
One 2026 change to have on your radar: Mexico's pension reform keeps raising the employer-side retirement contribution (cesantía en edad avanzada y vejez) every January through 2030, with the top wage band moving from 6.42% to 7.51% in January 2026. SAT also republished the income tax withholding tables for 2026, as it does each year. Net effect: employer cost creeps up annually, and your payroll provider needs to be on the current tables.
Mexican payroll also runs on CFDI de nómina, electronic payroll receipts stamped with the tax authority for every pay period. If a provider can't show you CFDIs, payroll isn't compliant. Employees must be paid in MXN.
Leave and benefits
- Annual leave: 12 days in year one, increasing with tenure, plus the 25% vacation premium
- Sick leave: up to 52 days at 60% pay through social security
- Maternity leave: 12 weeks at full pay, state-funded
- Paternity leave: 5 days, paid
- Public holidays: ~7 mandatory days
Beyond statute, competitive offers in Mexico commonly add private medical insurance, food vouchers, a transportation allowance, and performance bonuses.
Ending employment
Mexico skips notice periods and goes straight to money:
- Without-cause severance: 3 months of salary (the constitutional indemnity) plus 20 days of salary per year of service
- Seniority premium: 12 days of salary per year of service, capped at twice the minimum wage
- Final settlement: accrued salary, prorated aguinaldo, and prorated vacation premium
For-cause termination requires documented grounds and due process, and disputes land in labor courts that favor employees. Price a potential exit into the hiring decision, and never terminate in Mexico without a legal check first.
Documents we'll collect from your employee at onboarding
RFC (tax ID), CURP (national ID number), and a Mexican bank account for salary. Statutory setup covers IMSS enrollment, INFONAVIT registration, and the SAR/AFORE retirement account.
What it costs through Shor
- Contractors: $19/month each, same-day MXN or USD payouts
- Full-time employees (EOR): $299/month each, IMSS, INFONAVIT, aguinaldo, CFDI payroll, and filings handled
- Your own Mexican entity: we run payroll on top of it for less than EOR, in the same dashboard
No setup fees, no annual lock-in, and the FX margin is a flat disclosed 2%. The pricing calculator shows the full Mexico math including every statutory line.
Next steps, depending on where you are: the EOR pricing comparison puts published provider prices side by side, and EOR vs. your own entity has the breakeven math for when a local entity starts to win. To see Mexico against the rest of our coverage, the reference tables compare employer costs, notice periods, and public holidays across every country here. Already with another provider? Switching EOR providers covers the traps worth planning around.
FAQ
Can I pay Mexican employees in USD? No. Salary must be paid in MXN to a Mexican bank account. Contractors, however, can invoice in USD.
What is the aguinaldo? Mexico's mandatory Christmas bonus: a minimum of 15 days of salary, paid before December 20 every year, prorated for partial years. Many employers pay more. Budget it monthly rather than discovering it in Q4.
How expensive is it to let someone go in Mexico? Without cause: 3 months of salary plus 20 days per year of service, plus the seniority premium where it applies. There's no cheap exit, which is why probation periods and careful hiring matter more here than in at-will markets.
What does an employer of record in Mexico cost? With Shor, $299/month per employee, plus the statutory employer contributions (roughly 25-35% of gross salary) that any employer in Mexico pays. Deel and Remote charge $599-699/month for the same coverage.