Employment Law in Mexico

Contracts

In Mexico, employment contracts can be fixed-term or indefinite, depending on the nature of the job and the agreement between the employer and employee. Indefinite employment contracts must include benefits such as enrollment in the Mexican Social Security Institute (IMSS), contributions to the housing fund (INFONAVIT), retirement savings (AFORE), paid vacation, and year-end bonuses. Fixed-term employees are entitled to the same benefits as indefinite employees, provided the contract is justified by specific circumstances like project-based work or temporary replacements.

Mexico also has apprenticeship contracts, mainly for training, which are governed by the Federal Labor Law. Employers engaging apprentices are required to: 

• Provide structured training aligned with approved curricula 
• Pay apprentices a stipend in line with government regulations 
• Ensure apprentices work in a safe environment 
• Adhere to regular working hours as defined by labor standards

Termination and notice periods

In Mexico, labor laws do not mandate a specific notice period for termination; however, employers are required to provide severance pay in lieu of notice. In most cases, terminated employees are entitled to a warning and a fair hearing. Just cause for a dismissal includes the following:

• Dishonesty or violence
• Serious misconduct
• Insubordination
• Intentional damage to property
• Unjustified absences
• Other serious breaches of duty  

Employees terminated without just cause are entitled to severance pay, which includes three months’ salary, 20 days’ salary for each year of service, and a seniority premium of 12 days’ salary per year of service. As your Employer of Record (EOR) in Mexico, we can assist you in managing employee terminations by providing legal guidance and a personalized process to ensure compliance with labor laws and minimize legal risks.

Probation periods

In Mexico, probation periods are regulated by the Federal Labor Law, typically lasting up to 30 days in the private sector, and up to 180 days for managerial or specialized technical positions, with similar durations applicable in government roles.

Working hours and overtime

The standard workweek in Mexico is 48 hours, divided into eight-hour days. The legal daily maximum is:

• Day shift: 8 hours
• Night shift: 7 hours
• Mixed shift: 7.5 hours

Overtime is paid at 200% of the regular hourly rate for the first nine extra hours per week. Overtime beyond nine hours per week is paid at 300% and may result in fines for the employer.

Taxes

In Mexico, withholding tax is known as Impuesto Sobre la Renta (ISR) and is deducted by employers before paying salaries to employees. Employers must deduct ISR from employee salaries based on applicable income tax rates and submit it to the Mexican tax authorities.

Employer payroll contributions

Mexico’s social security system requires employer contributions that are dependent on the total number of employees, and these contributions cover pensions, medical care, disability insurance, and gratuity payments. In addition, workers’ compensation is financed by contributions from state governments, employers, and employees.