Payroll and Benefits Guide Mexico

Last updated: May 10, 2023

Mexican Peso (MXN)
Employer Taxes
36.1 – 44.73%
Payroll Frequency
Employee Costs
Mexico City
Date Format
Fiscal Year
1 January- 31 December



Employer Payroll Contributions

24.95% – 33.58%

Social Security contributions (IMSS) (maximum annual contribution 195,235 MXN)




National Housing Fund (INFONAVIT)

36.1% – 44.73%

Total Employment Cost


Employee Payroll Contributions

2.775% Total Employee Cost


Social Security contributions (IMSS) (maximum annual contribution 25,656 MXN)


Retirement/Old age insurance


Employee Income Tax


Up to 8,952.49


8,592.50 – 75,984.55


75,984.56 – 133,536.07


133,536.08 – 155,229.81


155,229.81 – 185,852.57


185,852.58 – 374,837.88


374,837.89 – 590,795.99


590,796.00 – 1,127,926.84


1,127,926.85 – 1,503,902.46


1,503,902.47 – 4,511,707.37


Over 4,511,707.38

* Most Mexican states levy a relatively low tax on salaries and other income earned by employees, which is payable by the employer. For example, Mexico City imposes a 3% payroll tax.

Employer taxes


Employee taxes


Minimum Wage


The national minimum wage in Mexico is 207.44 MXN per day; however, this can differ by job role and category.
The Northern Border Zone has a different minimum wage of 312.41 MXN per day; the Border zone is a defined set of municipalities in Mexican states bordering the USA.




Payroll Cycle

The payroll cycle is semi-monthly, and employees are generally paid on the 15th and the last day of each month.

13th Salary

A 13th-month salary payment is mandatory in Mexico; this is a bonus payment paid by December 20th (Aguinaldo). The Aguinaldo is calculated as 15 working days of salary, plus an allowance, based on a 365-day year.

Working Hours


The standard working hours in Mexico are 48 hours per week, 8 hours per day. However, there are three work shifts stated in Mexico federal labor law:

  • Day shifts comprise 48 hours per week (between 6 am to 8 pm)
  • Night shifts comprise 42 hours per week (between 8 pm to 6 am)
  • Mixed shifts comprise 45 hours per week
  • The maximum weekly and daily working hours can differ as stipulated in employment contract/collective bargaining agreements


All work above the standard mandated shift is paid as overtime and regulated by the employment contract/collective agreements. 3 overtime hours a day can be worked providing it is not done for more than 3 consecutive days. Managers might be exempt from overtime pay and limitations.

The payment of overtime is based on two considerations which determine whether overtime hours need to be paid at double or triple paid hours. These considerations are the total number of overtime hours worked during the working week and the number of hours worked during a single day after a regular shift.
The first nine overtime hours during the week are to be paid at 200% of the regular salary rate; every hour after that is to be paid at 300% of the regular salary rate.

The first three hours after a normal shift are considered double hours; every hour after that is deemed to be triple regardless of the number of overtime hours worked during the week.

Working Week



Paid Time Off

Paid leave in Mexico is outlined in the employment contract as a minimum of 12 days paid holiday per year, plus an additional two days per year of service, following completion of 1-year service. Following the completion of 5 years of service, two additional days are added every five years as detailed in the table below. Unused leave can carry over for 6 months.

A vacation premium must be given at an extra 25% pay for each day of leave.

Vacation Days
Public Holidays

Public Holidays

7 public holidays.

Sick Days

Paid by Social Security (IMSS). Eligible employees are entitled to up to 52 weeks of paid sick leave at 60% of the regular salary when verified by IMSS affiliated medical authorities. If it is a work-related injury, the employee is entitled to 100% of the regular salary.

Maternity Leave

All female employees are entitled to 12 weeks of paid maternity leave, which the employee must take six weeks before the birth and six weeks after that. The maternity pay is calculated at full pay, capped at 25 times daily UMA, and covered by the IMSS. The application for maternity leave must be supported by a medical certification issued by an IMSS approved clinic or a private medical institution.
Female employees are also entitled to six weeks of paid adoption leave after the child (a minor) is handed to them.



Paternity Leave

The father is entitled to mandatory paid paternity leave of 5 days.

Parental Leave

There is no additional parental leave in Mexico.

Other Leave

There is no statutory additional leave in Mexico.


Termination Process

At-will employment does not exist in Mexico, and termination at-will clauses are only applicable to the employee. Therefore, employers may not terminate employment relationships without just cause. The Mexican Federal Labor Law stipulates a closed list of reasons and sets the procedure to terminate an employee at any time without incurring liability. The list of reasons can be found below:

  • False statements about work qualifications
  • Breach to the disobedience or honesty principles
  • Vandalism
  • Sexual harassment
  • Alcoholism in the workplace
  • Revealing company secrets
  • Refusing to comply with safety procedures
  • Four unexcused absences in 30 days

Notice Period

There are no statutory minimum notice periods in Mexico; however, federal labor law states that should the circumstance dictate, the company must provide the employee with notice in writing within 30 days of knowing about the misconduct. The written notice must explain the grounds for dismissal, or the labor board must issue a termination notice. Two weeks notice is commonly be given as courtesy where there is ‘termination without cause’ or resignation.

Severance Pay

In Mexico, terminating an employee without reasonable cause requires severance. The severance payment should comprise three times the regular monthly salary figure plus an additional 20 days’ pay for every year of service thereafter for those employees with more than 15 years’ service.

Voluntary resignation & termination with cause: Workers with 15+ years service  receive a seniority premium of 12 days pay for each year of service.

Probation Period

The probation period in Mexico for permanent employees is optional and is commonly 90 days.

Common Benefits


  • Internet allowance
  • Cell phone allowance
  • Meal vouchers are provided by the Employer through a card (usually around 2600 MXN per month)
  • Wellness/fitness allowance
  • Computer allowance



Any foreigners coming to work in Mexico will need to apply for a work permit and resident visa.
The National Institute of Immigration oversees all immigration in Mexico and issues work visas.
Mexico has a temporary and permanent visa; the employee should apply for both jointly with the prospective employer. A temporary resident visa is for foreign nationals who want to live in Mexico for more than 180 days. In addition to the Mexico work permit, people with a temporary resident visa can live and work in the country for up to four years with a Mexico work visa.
After completing four years of service (with the same company), a foreigner may apply for a permanent resident visa.

Remote Working


The Mexican Government passed federal labor laws on teleworking, which applies to any worker who performs paid work activities at least 40% of the time outside the employer’s workplace, either at home or another location chosen by the employee. The contract should state if the employee is performing work outside the employer’s workplace in order to be eligible for teleworking benefit.

Employers must provide, install, and maintain the necessary working equipment and training needed by the employee to perform the work and,
Pay for any appropriate telework-related cost, and record teleworking arrangements in a written agreement.



The standard rate of VAT in Mexico is 16.00%.

Papaya Global offers full Mexico PEO services for companies not wishing to open a local entity

Stay up to date on payroll & employment law changes

Version History

January 1, 2021
Minimum wage rose to 141.70 MXN per day and to 213.39 MXN in the Free Economic Zone of the Northern Border
Employee income tax rates were adjusted.
April 19, 2022
Minimum wage rose to 172.87 MXN per day and to 260.34 MXN in the Free Economic Zone of the Northern Border
January 9, 2023
Paid leave in Mexico has been updated.

Questions & Answers

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Ben B.
Ben B.
2 years ago

If a new mother wants to extend maternity leave beyond 3 months, does the government continue to pay her salary?

Alex Margolin
Alex Margolin
2 years ago
Reply to  Ben B.

If a mother extends her maternity leave, the government will continue to pay at a rate of 50% for an additional 60 days.

Peter Winn
Peter Winn
2 years ago

Is it standard practice to grant a vacation bonus to employees? If so, what is the standard amount.

Alex Margolin
Alex Margolin
2 years ago
Reply to  Peter Winn

Hi Peter,

It is a common practice and a very strong expectation in Mexico that employees will receive a 25% bonus for at least 6 days of their vacation.

Matt Teumer
Matt Teumer
2 years ago

Can payroll payments to employees be made by a payment service provider on behalf of the employer?

Emily Kuhnert
Emily Kuhnert
2 years ago
Reply to  Matt Teumer

Hi Matt, thank you for your question. In large, yes, it is possible.

2 years ago

Hi, We have a travel related business in Mexico and we have be shut down by the government due to unpaid Social Security for employees. We have been closed/struggling for 1 year due to Covid and no tourism and no income, but we have continued paying our employees with loans and credit cards. However, we owe 1 year of employee Social Security payments to the government. I was told that if we can not pay the past Social Security debt and ‘release’ our employees, that the employees will lose ALL their pension they’ve earned for the last 22 years they have worked for us. They will have no retirement monthly pension coming in from what we have paid toward their retirement. This doesn’t seem right. Is this false information?

Emily Kuhnert
Emily Kuhnert
2 years ago
Reply to  Patricia

Hi Patricia, this is out of the scope of things that we cover and do not offer legal advice. We recommend that you seek legal counsel in Mexico to understand how you as a company are liable.

VilCap, Inc
VilCap, Inc
2 years ago

Are employers required to provide health insurance in Mexico? Our company currently provides health insurance stipends to staff to purchase private health insurance plans. Is this common and/or allowed? If allowed, how is it taxed?

Emily Kuhnert
Emily Kuhnert
2 years ago
Reply to  VilCap, Inc

Hi, employers are not required to provide health insurance. If this is offered as an allowance, then it is treated as a salary component and is taxed as such with the regular payroll.

VilCap, Inc.
VilCap, Inc.
2 years ago

If employees incur business expenses on behalf of the company, can the employees receive reimbursement via the payroll company as a non-taxable element of their paycheck?

Alex Margolin
Alex Margolin
2 years ago
Reply to  VilCap, Inc.

Employees can be reimbursed for expenses tax-free in Mexico as long as they provide a detailed electronic invoice (not a paper invoice) in the name of the company (not the employee) and the total is under a certain limit, usually 2,0000 MXN. It must be invoiced as an expense for the company, not a form of income for the employee. The electronic invoice should include the company’s name and tax ID number, the amount of the expense, the payment method, and date of the expense, and should in either PDF and XML format. The expense should be made by credit card or e-transfer.

1 year ago

In case of a dispute with the termination fee, who is responsible for covering it, me as a customer or Papaya? is there any kind of deposit? Thank you!

Erez Greenberg
Erez Greenberg
1 year ago
Reply to  joaquin

The customer/client is responsible for any termination cost and there is no deposit.

1 year ago


How does mileage reimbursement in Mexico work for an employee? Is there are part which is tax-free and a part that will be taxed?

Erez Greenberg
Erez Greenberg
1 year ago
Reply to  Mervin

Milage reimbursement in Mexico is subject to taxes.

Trisha Jenks
Trisha Jenks
1 year ago

At what rates is PTO or vacation paid to the employee. Is it the rate based on 48 hours per week or 56 hours per week considering the rest day.

Erez Greenberg
Erez Greenberg
1 year ago
Reply to  Trisha Jenks

Employees should be paid their normal salary while on vacation, as well as a 25% vacation bonus (Prima).

1 year ago

If a worker in Mexico does not show up for work, can his/her pay be discounted?

Erez Greenberg
Erez Greenberg
1 year ago
Reply to  JB1

If there is clear evidence that the employee did not show up to work, yes, it can be done. Discounts can only be applied to full days.

1 year ago
Reply to  Erez Greenberg

Thank you for your response.

1 month ago

Do new employees not get Vacation until they reach their 1 year anniversary? If so, what do new employees do if they need to take time off?

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Payroll and Benefits Guide
in Mexico

What’s covered in this guide:

  • Employer/employee contributions
  • Minimum wage
  • Working hours
  • Visa requirements

And more...

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All questions are answered by our in-house compliance department working in conjunction with our local in-country partner for this specific country

Public Holidays Calendar

Mexico 2023
Day Date Holiday Notes
Sunday Jan-1 New Year’s Day
Monday Feb-6 Constituition Day
Monday Mar-20 Benito Juárez’s birthday
Monday May-1 Labour Day
Saturday Sep-16 Independence Day
Monday Nov-20 Mexican Revolution
Monday Dec-25 Christmas Day