Employer of record in Mexico: the real cost in 2026

EOR, own company or contractor?

There are three ways to work with someone in Mexico. Each one fits a different case.

Employer of record

The EOR employs the person for you and runs the payroll. You need no Mexican company. But the subcontracting rules limit this model (see the next section).Federal Labour Act (LFT), SEP copy (PDF)Checked 2 Oct 2026

Your own Mexican company

A company has no legal minimum capital. A sociedad anónima needs at least 2 shareholders. A company with foreign investment registers in the National Foreign Investment Register within 40 working days, and it renews the registration each year. A foreign company that does business in Mexico on a regular basis needs an authorisation and a branch or an agency in Mexico.General Companies Act (LGSM), articles 62 and 89 (Orden Jurídico Nacional), Foreign Investment Act, articles 17, 32 and 35 (Orden Jurídico Nacional)Checked 2 Oct 2026

Contractor

A worker is a person who does personal work under the direction of another, for a salary. The law applies the same effects to any such relationship, whatever the contract says.Federal Labour Act (LFT), SEP copy (PDF)Checked 2 Oct 2026

The subcontracting rules and the REPSE

An EOR is the legal employer, but the person works for you. Since a reform in 2021, Mexico bans the subcontracting of personnel.

The ban

The Federal Labour Act bans the subcontracting of personnel: when a person or a company provides its own workers for the benefit of another. In that case, the law treats the company that benefits from the work as the employer.Federal Labour Act (LFT), SEP copy (PDF), Subcontracting reform decree (DOF, 23 Apr 2021)Checked 2 Oct 2026

Specialised services

A company can subcontract specialised services or works that are not part of its corporate purpose or its main economic activity. The provider must be in the public register of the Ministry of Labour (REPSE), and it renews the registration every 3 years. The contract must be in writing.Federal Labour Act (LFT), SEP copy (PDF), Subcontracting reform decree (DOF, 23 Apr 2021), STPS, the REPSE registerChecked 2 Oct 2026

Liability and fines

The client is jointly liable when the provider does not meet its duties to the workers. The fine for prohibited subcontracting is 2,000 to 50,000 UMA, for the provider and for the company that benefits.Federal Labour Act (LFT), SEP copy (PDF)Checked 2 Oct 2026

Tax effects

For income tax in Mexico, payments for the subcontracting of personnel are not deductible, and the VAT on them is not creditable.Subcontracting reform decree (DOF, 23 Apr 2021)Checked 2 Oct 2026

Employers of record

No official Mexican source names employers of record. In a usual EOR service, the person does work that is part of your main activity, under your direction. This is close to the subcontracting of personnel that the law bans. A REPSE registration covers each specialised service, and the rules do not have a general category for the supply of personnel.Federal Labour Act (LFT), SEP copy (PDF), STPS rules for the REPSE register (DOF, 24 May 2021), Changes to the REPSE rules (DOF, 21 Feb 2024)Checked 2 Oct 2026

The providers do not say the same thing. WorkMotion says that its Mexican entity holds a REPSE authorisation. Remote's terms say that it follows the rules on specialised services, but they give no REPSE number. Boundless says on its blog that an EOR that is the direct legal employer falls outside the REPSE. The other providers state no REPSE registration on their pages.

Ask each provider these questions before you sign:

• Is your Mexican company, or your partner, in the REPSE register? For which services? Can we see the registration number?
• Is the work of our hire part of our corporate purpose or our main activity? How does your service fit articles 12 and 13 of the Federal Labour Act?
• Who pays if the authorities find a subcontracting of personnel?

These rules are complex. Ask a Mexican labour lawyer how they apply to your case.

Sources: WorkMotion Mexico page, Remote local terms, Boundless blog, EOR services in MexicoChecked 2 Oct 2026

Employment rules

Minimum wage

MX$315.04 a day in the general zone, 13% more than in 2025. MX$440.87 a day in the northern border zone. Both apply from 1 January 2026.CONASAMI, minimum wages for 2026 (DOF, 9 Dec 2025), CONASAMI, the minimum wage increase for 2026Checked 2 Oct 2026

Working hours

At most 48 hours a week in 2026: 8 hours for a day shift, 7 for a night shift. The law cuts the week to 46 hours in 2027, 44 in 2028, 42 in 2029 and 40 in 2030, with no cut in pay. The employee gets 1 paid day of rest for every 6 days of work. An electronic record of working time becomes a duty from 2027.Decree on the 40-hour week, Federal Labour Act (DOF, 1 May 2026), Constitutional decree on the 40-hour week (DOF, 3 Mar 2026)Checked 2 Oct 2026

Overtime

In 2026, the first 9 hours of overtime a week pay double. Up to 4 more hours a week pay triple. A working day, with overtime, is at most 12 hours.Decree on the 40-hour week, Federal Labour Act (DOF, 1 May 2026)Checked 2 Oct 2026

Vacation

12 working days in the 1st year, plus 2 days each year up to 20 days in the 5th year. From the 6th year, 2 more days for every 5 years. The employee takes at least 12 days in a row, with a premium of at least 25% of the pay for those days.Federal Labour Act (LFT), SEP copy (PDF)Checked 2 Oct 2026

Aguinaldo

A year-end bonus of at least 15 days of salary, paid before 20 December. An employee who worked part of the year gets a part of it.Federal Labour Act (LFT), SEP copy (PDF)Checked 2 Oct 2026

Public holidays

In 2026: 1 January, 2 February, 16 March, 1 May, 16 September, 16 November and 25 December, plus the days of federal and local elections. Work on a holiday pays double, on top of the normal pay.Federal Labour Act (LFT), SEP copy (PDF)Checked 2 Oct 2026

Probation

At most 30 days, or 180 days for managers and for specialised technical or professional work. It applies only to open-ended contracts and to contracts of more than 180 days.Federal Labour Act (LFT), SEP copy (PDF)Checked 2 Oct 2026

Dismissal

The law sets no notice period. The employer gives a written notice that states the cause. A dismissal without justified cause costs 3 months of salary, and in some cases 20 days of salary for each year of service. A seniority premium of 12 days for each year applies too, on a salary of at most twice the minimum wage.Federal Labour Act (LFT), SEP copy (PDF)Checked 2 Oct 2026

Maternity and paternity leave

12 weeks of maternity leave: 6 weeks before and 6 weeks after the birth. IMSS pays 100% of the last daily base if the mother has 30 weeks of contributions in the last 12 months. Otherwise, the employer pays. Fathers get 5 working days of paid leave.Federal Labour Act (LFT), SEP copy (PDF), IMSS, Social Security Act (LSS) (PDF)Checked 2 Oct 2026

Profit sharing (PTU)

The employer shares 10% of its taxable profit with its workers. Each worker gets at most 3 months of salary, or the average of the last 3 years if that is higher. A new company does not share profit in its first year.Federal Labour Act (LFT), SEP copy (PDF), Sixth Commission on profit sharing (DOF, 18 Sep 2020)Checked 2 Oct 2026

Payroll and taxes

The employer, or the EOR, registers with IMSS. It reports each new employee, each change of salary and each departure within 5 working days. It pays IMSS each month by the 17th of the next month. It pays the retirement and old-age contributions every 2 months. Employers with 5 or more workers use the IMSS payment system (SUA).

The employer withholds income tax (ISR) and pays it by the 17th of the next month. It issues an electronic payroll receipt (CFDI) at each payment. In Mexico City, it pays the payroll tax by the 17th of the next month.

IMSS and INFONAVIT use a daily base, the SBC. It includes the salary, the aguinaldo, the vacation premium and most other payments, up to 25 UMA a day. The UMA is MX$117.31 a day from 1 February 2026. The employee pays IMSS shares too: 2.375% of the base, plus 0.40% on the part above 3 UMA.

The employer's old-age rate rises each year until 2030. In 2027, the top rate is 8.603%.

Sources: IMSS, Social Security Act (LSS) (PDF), IMSS, the SUA payment system (PDF), Income Tax Act (LISR), articles 2, 96 and 99 (Orden Jurídico Nacional), Mexico City Tax Code 2026, articles 156 to 159 (PDF), INEGI, the 2026 UMA values (DOF, 9 Jan 2026), Pension reform decree, transitory article 2 (DOF, 16 Dec 2020)Checked 2 Oct 2026

Payroll in Mexico: an EOR or a local payroll company?

A local payroll company calculates the pay, the tax and the contributions, and it files the returns. It does not employ the person. Your company stays the legal employer, with all the duties of an employer under Mexican law.

IMSS registration

IMSS registers a company set up abroad when it has an establishment in Mexico. The company gives its apostilled company documents, a tax number (RFC) and an electronic signature.IMSS, registration of an employer (IMSS-02-001-C)Checked 2 Oct 2026

Doing business in Mexico

A foreign company that does business in Mexico on a regular basis needs an authorisation, and a branch or an agency in Mexico.Foreign Investment Act, articles 17, 32 and 35 (Orden Jurídico Nacional)Checked 2 Oct 2026

Income tax

When the employer does not withhold income tax, the employee pays it each month. A place of business in Mexico can create a taxable presence (a permanent establishment) for a foreign company.Income Tax Act (LISR), articles 2, 96 and 99 (Orden Jurídico Nacional)Checked 2 Oct 2026

We found no official route for a foreign company without an establishment in Mexico to register with IMSS. A payroll company can run the payroll of your Mexican company or branch. Without one, the choice is an EOR, with the limits of the subcontracting rules. Ask a tax adviser about a permanent establishment.

Sources: IMSS, registration of an employer (IMSS-02-001-C), Foreign Investment Act, articles 17, 32 and 35 (Orden Jurídico Nacional), Income Tax Act (LISR), articles 2, 96 and 99 (Orden Jurídico Nacional)Checked 2 Oct 2026

Benefits

The law requires IMSS, INFONAVIT, the state payroll tax, the aguinaldo, the vacation with its premium, and profit sharing.

Other benefits, such as food vouchers, private medical insurance or a savings fund, depend on the contract. Some of them count in the IMSS base. Ask your provider what it includes.

Sources: IMSS, Social Security Act (LSS) (PDF), INFONAVIT Act, article 29 (Orden Jurídico Nacional), Federal Labour Act (LFT), SEP copy (PDF), Mexico City Tax Code 2026, articles 156 to 159 (PDF), Jalisco Revenue Act 2026, article 13 (PDF)Checked 2 Oct 2026

How hiring through an EOR works

1. Compare providers and ask for quotesAsk for the monthly fee in Mexico, the deposit or the severance accrual, the exchange rate and the notice period of the EOR contract. Ask about the REPSE and the subcontracting rules.
2. Agree the employment termsAgree the monthly salary, the start date, the benefits and the probation period with the candidate. The salary must meet the minimum wage of the zone.
3. The EOR signs the contractThe EOR becomes the legal employer. It registers the employee with IMSS within 5 working days.
4. The EOR runs the payrollEach pay period, the EOR pays the salary and withholds the income tax and the employee's IMSS shares. It pays IMSS, INFONAVIT, the tax and the payroll tax. It pays the aguinaldo before 20 December.
5. You manage the daily workYou set the tasks and the goals. The EOR handles the employment administration.

Sources: IMSS, Social Security Act (LSS) (PDF), Federal Labour Act (LFT), SEP copy (PDF)Checked 2 Oct 2026