How to Hire Employees in Mexico: A Guide for US Companies

To hire employees in Mexico as a US company, you have three practical paths: set up your own Mexican entity, use an Employer of Record (EOR) that employs the person on your behalf, or engage the person as an independent contractor. If you want a true employee and don’t have a Mexican entity, an EOR is usually the fastest option. Whichever route you take, Mexico’s Federal Labor Law sets mandatory benefits you must budget for.

Option 1: Your own Mexican entity

You incorporate a Mexican company, register it with the tax authority (SAT), social security (IMSS), housing fund (INFONAVIT) and the state payroll tax office, and run payroll locally.

• Best for: several employees, a long-term presence, or local sales.
• Downsides: setup time, ongoing accounting and legal compliance, and corporate obligations in Mexico.

Option 2: Employer of Record (EOR)

An EOR is a company with its own Mexican entity that legally employs your hire, runs payroll, withholds taxes and provides statutory benefits. You direct the work and pay the EOR a fee on top of the employment cost.

• Best for: one to a handful of employees, or testing the market.
• Check: how the provider complies with Mexico’s 2021 subcontracting reform, which restricts personnel subcontracting and requires specialized-services providers to register in REPSE. Ask the EOR for its legal structure in writing and confirm with Mexican counsel.

Option 3: Independent contractor

The person runs their own business, invoices you, and handles their own taxes and social security. It’s the simplest way to hire someone in Mexico, but only if the relationship really is independent. See independent contractors in Mexico.

Mandatory employee benefits in Mexico

Under the Federal Labor Law (LFT):

Item	Minimum
Aguinaldo (year-end bonus)	15 days’ salary, paid before December 20
Vacation	12 days after the first year, increasing with seniority (2023 reform)
Vacation premium	25% of vacation pay
Profit sharing (PTU)	Share of company profits per the LFT and annual rules
Social security	IMSS enrollment and contributions
Housing fund	INFONAVIT contributions (5% of the integrated salary base)
State payroll tax	Rate varies by state

Ask your EOR or payroll provider for an all-in cost estimate before you make an offer; the total depends on salary level and state.

Working hours: the 40-hour reform

A constitutional reform published in the Diario Oficial on March 3, 2026 reduces the maximum work week gradually: 48 hours in 2026, 46 in 2027, 44 in 2028, 42 in 2029 and 40 in 2030. Most software roles are already near 40 hours, but write hours and overtime rules into the contract.

Remote work

The LFT’s telework chapter (Chapter XII Bis) applies to employees who work remotely most of the time. It covers equipment, a share of costs such as internet and electricity, and the right to disconnect. An EOR should handle the required written terms.

Steps to hire an employee in Mexico

1. Pick the route: entity, EOR, or contractor.
2. Benchmark pay against the right market. See the Mexico software engineer salary guide.
3. Write the offer in gross monthly pesos (or state the currency clearly) and list the statutory benefits.
4. Sign a written employment contract with duties, hours, place of work (or telework terms) and salary. The EOR will issue it.
5. Onboard: tax ID (RFC), CURP and social security number from the employee; IMSS registration by the employer.
6. Set up IP and confidentiality: make sure the contract chain assigns IP to your company.

Contract types and probation

Under the LFT, employment is indefinite by default. Fixed-term or project-based contracts are allowed only when the nature of the work justifies them; a “one-year contract” renewed every year for an ongoing role is likely to be treated as indefinite.

Article 39-A allows a probation period of up to 30 days in indefinite contracts (or ones longer than 180 days), extendable to up to 180 days for management roles and for technical or professional roles. Probation must be in writing, the employee is still enrolled in IMSS and paid in full, and it can’t be repeated for the same person. Confirm the current wording in the official LFT text with your counsel or EOR.

How to compare EOR providers

EOR quotes are hard to compare because they bundle different things. Ask each provider:

1. Is the fee fixed or a percentage of salary? And what’s included: payroll, benefits administration, contract drafting, terminations?
2. What’s the all-in monthly cost for your specific salary and state, itemized (salary, aguinaldo accrual, vacation premium, IMSS, INFONAVIT, payroll tax, fee)?
3. How do they handle PTU (profit sharing) for employees on their payroll?
4. Who owns the IP? Ask to see the assignment clause from employee to EOR to you.
5. What happens if you terminate the service or the hire? Notice periods, severance handling and any exit fees.
6. Their REPSE and legal structure, in writing, as noted above.

Ending employment

Mexican law protects employees strongly. Dismissal without a justified cause listed in the LFT generally requires severance, which includes at least three months’ salary plus other amounts depending on the case. Budget for it and get legal advice before any termination.

Common mistakes

• Treating a full-time contractor as an employee in practice. Fixed hours, daily supervision and exclusivity can make the relationship employment under Mexican law.
• Forgetting the aguinaldo in the first December.
• Quoting net instead of gross. Clarify in writing.
• Ignoring the hours reform when planning multi-year budgets.

When to get help

This guide is general information, not legal advice; use Mexican counsel or a reputable EOR for your case. If what you need is senior engineering capacity rather than a new employee, Black Engine Technologies is a software engineering studio in Monterrey (UTC-6) with 12+ years of production work, and we take contract engagements with US teams. Send us a WhatsApp message to talk about it, or read how to hire nearshore developers.