Employing in Mexico

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Expanding into
Mexico

Global expansion is a step to make for any business, regardless of what you wish to achieve. The opportunities that can come with an expansion can be both incredibly exciting as well as intimidating and confusing, especially when you consider all of the registration procedures that needs to be done and documentation required.

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Expanding to countries such as Mexico – which is characterized by a well-educated and talented workforce, multifaceted employment and tax laws, a robust infrastructure network linking to the rest of the Americas and beyond, and leading sectors in industry, manufacturing, and services – can bring both excitement to the possibilities, but also significant stress to ensuring the entity with the country’s rigorous legal structures and laws.

Ensuring compliance without the sufficient knowledge of the country’s laws also adds to the stress of getting your new entity off the ground and ready to test new markets. Going at it without the proper support can increase the costs, time and risks involved.

Each new markets bring new challenges, and these can be worked through more efficiently and cost-effectively with the support of an International Professional Employer Organization (PEO) such as Bradford Jacobs, especially through our Employer of Record (EOR) framework.

This can be best utilized when businesses are just beginning their expansion process and require more information before committing to incorporating an entity and fully establishing themselves in that market.

Country EOR Guide - Bradford Jacobs

Download our Guide to Mexico

Learn all about expanding into Mexico and see what we can do to make your expansion easier.

Download our Guide to Mexico

Learn all about expanding into Mexico and see what we can do to make your expansion easier.

Country EOR Guide - Bradford Jacobs

Hiring Staff
in Mexico

Hiring Staff
in Mexico

The Main Sectors of the Mexican Economy

The country focuses on the following key sectors, which all have a significant impact on the country’s economy:

In the past few decades the services sector has gained a more important role and has now become a dominant force for the Mexican economy. The services sector, or tertiary sector, employs 62% of the nation’s labor force and contributes a significant 60% to the GDP.
As a whole, Mexico’s industrial sector has benefited from the liberalization of trade. The industrial sector, which includes manufacturing, mining, oil, and gas, has contributes approximately 25% to 35% of Mexico’s GDP. The numbers have hovered around the same percentage for the past 35 years. From 2000 to 2020, industry averaged about 34% of Mexico’s GDP. Industry employs 26% of the nation’s labor force.

One of the country’s most significant manufacturers includes the automotive industry, as well as food, electronics, and oil.

Agriculture, which includes forestry, fishing, hunting, livestock production, and cultivation of crops, contributes a mere 3.9% to Mexico’s GDP.5 The share has remained below 4% for over 20 years. Nevertheless, agriculture, or the primary sector, plays a crucial role in indirect ways for the Mexican economy.

The primary sector has helped in strengthening trade ties with the United States as well as in alleviating poverty and creating jobs.

Agriculture provides employment to about 12% of the nation’s labor force. However, in rural areas, more than half of the population might be involved in agricultural activities.

In manufacturing, Mexico has the advantage of high labor productivity and free trade agreements with multiple nations. Rising wages in China also make Mexico a more attractive destination for manufacturing – and natural gas prices (tied to the U.S.) are helping the country boost its manufacturing. Manufacturing contributes 17.2% to the country’s GDP.
The countries electronic industry has experienced tremendous growth within the last ten years with the country having the world’s sixth largest electronics industry behind China, the US, Japan, South Korea, and Taiwan. The country is North America’s second-largest exporter of electronics, particularly to the US, having exported electronics worth approximately US$87.12 billion in 2021.
Although it serves mainly as an assembly manufacturer, in recent years the automotive industry has advanced to conducting independent research and development. Some of the most well-known car manufacturers like General Motors Co (GM), Ford Motor Co (F), Toyota Motor Corp (TM), Mercedes Benz (a subsidiary of Daimler AG), Honda Motor LTD (HMC), and Volkswagen Group have set up operations in Mexico.

The Main Sectors of the Mexican Economy

The country focuses on the following key sectors, which all have a significant impact on the country’s economy:

Calacas, Day of the Dead skull trinkets on market in Cabo San Lucas, Mexico
In the past few decades the services sector has gained a more important role and has now become a dominant force for the Mexican economy. The services sector, or tertiary sector, employs 62% of the nation’s labor force and contributes a significant 60% to the GDP.
As a whole, Mexico’s industrial sector has benefited from the liberalization of trade. The industrial sector, which includes manufacturing, mining, oil, and gas, has contributes approximately 25% to 35% of Mexico’s GDP. The numbers have hovered around the same percentage for the past 35 years. From 2000 to 2020, industry averaged about 34% of Mexico’s GDP. Industry employs 26% of the nation’s labor force.

One of the country’s most significant manufacturers includes the automotive industry, as well as food, electronics, and oil.

Agriculture, which includes forestry, fishing, hunting, livestock production, and cultivation of crops, contributes a mere 3.9% to Mexico’s GDP.5 The share has remained below 4% for over 20 years. Nevertheless, agriculture, or the primary sector, plays a crucial role in indirect ways for the Mexican economy.

The primary sector has helped in strengthening trade ties with the United States as well as in alleviating poverty and creating jobs.

Agriculture provides employment to about 12% of the nation’s labor force. However, in rural areas, more than half of the population might be involved in agricultural activities.

In manufacturing, Mexico has the advantage of high labor productivity and free trade agreements with multiple nations. Rising wages in China also make Mexico a more attractive destination for manufacturing – and natural gas prices (tied to the U.S.) are helping the country boost its manufacturing. Manufacturing contributes 17.2% to the country’s GDP.
The countries electronic industry has experienced tremendous growth within the last ten years with the country having the world’s sixth largest electronics industry behind China, the US, Japan, South Korea, and Taiwan. The country is North America’s second-largest exporter of electronics, particularly to the US, having exported electronics worth approximately US$87.12 billion in 2021.
Although it serves mainly as an assembly manufacturer, in recent years the automotive industry has advanced to conducting independent research and development. Some of the most well-known car manufacturers like General Motors Co (GM), Ford Motor Co (F), Toyota Motor Corp (TM), Mercedes Benz (a subsidiary of Daimler AG), Honda Motor LTD (HMC), and Volkswagen Group have set up operations in Mexico.

Commercial Laws in Mexico

  • Tax Administration Service (Servicio de Administration Tributaria, SAT) – the revenue service of the Mexican federal government.The government agency is a decentralized bureau of the Secretariat of Finance and Public Credit, Mexico’s cabinet-level finance ministry, and is under the immediate direction of the Chief of the Tax Administration Service. The SAT is responsible for collecting taxes, as well as applying fiscal and customs law, with the purpose of funding public spending in a proportional and equitable manner.Additionally, it is the bureau’s responsibility to generate and collect information necessary for the formation and evaluation of fiscal policy.
  • The Secretariat of Labor and Social Welfare – a Federal Government Department in charge of all social health services in the Mexican Republic. The Secretary is a member of the federal executive cabinet and is appointed by the President of Mexico. The Secretariat is in charge of:
    • Supervising the implementation of the regulations in Article 123 concerning labor
    • Achieving a balance between production factors and keeping with the appropriate legal regulations
By law, all employees must have a written contract. If the employee begins work before the contract is formally concluded they are considered to be working under the contract and cannot be deprived of statutory rights under the Labor Code. Employee contracts are usually indefinite and open-ended. Fixed-term contracts cannot exceed five years and can only be implemented in circumstances allowed by law.

When hiring new staff and drawing up their contracts, specific requirements from the Labor Code apply and must be considered:

  • Type of contract – fixed term or indefinite
  • Full contact and personal details of the employee
  • Indication whether the contract includes a trial or probationary period and any training programs
  • Type and location of work, hours, vacation allowance
  • Amount and frequency of salary payments, bonuses, holiday pay and any fringe benefits
  • Working hours and if they include shift work
  • Mandatory confirmation of the employee’s rights under privacy rules
  • Whether it is a ‘training contract’ to give the employee time to acquire required skills for the job
  • Contracts are usually drawn up in Mexico’s official language, Spanish, before any translation into the employee’s native language or one they understand
  • All contractual agreements between employer and employee must fall within provisions of the Federal Labor Law

For more information on labour contracts law in Mexico Download our Mexico Country Guide…

Income Tax: Mexico residents pay tax on the worldwide income they earn in a calendar year, which is the same as the tax year, January 1 until December 31. Returns should be filed and any due tax paid by April 30 of the following year. Most tax residents are required to file electronically after first obtaining their Advanced Electronic Signature (Registro Federal de Contribuyentes). Married couples do not file joint returns, but the highest earner can declare all their income.

Where residents or non-residents are paid by non-resident foreign companies, they must file a provisional monthly return with a payment equal to the withheld amount for that month. Payment must be made by the 17th of the following month.

Income taxes withheld by employers are remitted to the Tax Administration Service (SAT) at the Ministry of Finance and Credit (Secretaria de Hacienda et Credito Publico).

For more information on tax contributions and benefits in Mexico Download our Mexico Country Guide…

Commercial Laws in Mexico

Angel de la independencia in Mexico City
  • Tax Administration Service (Servicio de Administration Tributaria, SAT) – the revenue service of the Mexican federal government.The government agency is a decentralized bureau of the Secretariat of Finance and Public Credit, Mexico’s cabinet-level finance ministry, and is under the immediate direction of the Chief of the Tax Administration Service. The SAT is responsible for collecting taxes, as well as applying fiscal and customs law, with the purpose of funding public spending in a proportional and equitable manner.Additionally, it is the bureau’s responsibility to generate and collect information necessary for the formation and evaluation of fiscal policy.
  • The Secretariat of Labor and Social Welfare – a Federal Government Department in charge of all social health services in the Mexican Republic. The Secretary is a member of the federal executive cabinet and is appointed by the President of Mexico. The Secretariat is in charge of:
    • Supervising the implementation of the regulations in Article 123 concerning labor
    • Achieving a balance between production factors and keeping with the appropriate legal regulations
By law, all employees must have a written contract. If the employee begins work before the contract is formally concluded they are considered to be working under the contract and cannot be deprived of statutory rights under the Labor Code. Employee contracts are usually indefinite and open-ended. Fixed-term contracts cannot exceed five years and can only be implemented in circumstances allowed by law.

When hiring new staff and drawing up their contracts, specific requirements from the Labor Code apply and must be considered:

  • Type of contract – fixed term or indefinite
  • Full contact and personal details of the employee
  • Indication whether the contract includes a trial or probationary period and any training programs
  • Type and location of work, hours, vacation allowance
  • Amount and frequency of salary payments, bonuses, holiday pay and any fringe benefits
  • Working hours and if they include shift work
  • Mandatory confirmation of the employee’s rights under privacy rules
  • Whether it is a ‘training contract’ to give the employee time to acquire required skills for the job
  • Contracts are usually drawn up in Mexico’s official language, Spanish, before any translation into the employee’s native language or one they understand
  • All contractual agreements between employer and employee must fall within provisions of the Federal Labor Law

For more information on labour contracts law in Mexico Download our Mexico Country Guide…

Income Tax: Mexico residents pay tax on the worldwide income they earn in a calendar year, which is the same as the tax year, January 1 until December 31. Returns should be filed and any due tax paid by April 30 of the following year. Most tax residents are required to file electronically after first obtaining their Advanced Electronic Signature (Registro Federal de Contribuyentes). Married couples do not file joint returns, but the highest earner can declare all their income.

Where residents or non-residents are paid by non-resident foreign companies, they must file a provisional monthly return with a payment equal to the withheld amount for that month. Payment must be made by the 17th of the following month.

Income taxes withheld by employers are remitted to the Tax Administration Service (SAT) at the Ministry of Finance and Credit (Secretaria de Hacienda et Credito Publico).

For more information on tax contributions and benefits in Mexico Download our Mexico Country Guide…

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