Employer of Record (EOR) in Mexico

An EOR in Mexico allows businesses to enter the market quickly and help maintain compliance with local laws, all while reducing the overhead costs of establishing a local entity. Atlas HXM offers a seamless EOR service that handles all aspects of employment for workers who already have valid authorization to work in Mexico from payroll processing to compliant administration.

Partner with Atlas HXM for a cost-effective, compliant solution to hire and manage your workforce in Mexico.

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Country InsightsMexicoEmployer of Record

Quick Overview of EOR in Mexico

Expanding into Mexico doesn't have to mean drowning in paperwork or hefty setup costs. With an Employer of Record (EOR), you can bypass the complexities of local regulations and quickly hire employees, all while maintaining compliance with Mexico's Federal Labor Law. From payroll processing and tax compliance to benefits management, an EOR takes care of the legal nitty-gritty like IMSS contributions and mandatory bonuses, so you can focus on growing your business without the need to set up a costly local entity.

The EOR model offers a low-risk, cost-effective alternative to setting up a subsidiary. Establishing a local entity in Mexico can cost anywhere from USD 5,000 to USD 15,000 plus the cost of maintaining human resources (HR), legal assistance, accountants and more. It can also become highly administrative. By partnering with an EOR, you can avoid these setup costs and enter the market faster, avoiding the overhead of a physical office. This is especially beneficial for startups, SMEs, and businesses testing new markets, who need to act quickly and comply with complex local regulations.

Disclaimer: The contents of this article is not legal advice and should be used for reference only. If in doubt, please seek independent legal advice from a lawyer in the relevant jurisdiction.

What You'll Learn Ahead:

  • Looking to hire in Mexico without the hassle and administrative burden of setting up a local entity? An EOR helps you onboard employees while maintaining compliance with payroll and local labor laws.

  • With a Direct EOR, you gain control, faster onboarding, and stronger compliance. It is ideal for businesses aiming to scale quickly.

  • On the other hand, an Indirect EOR may be more cost-effective but comes with slower processes and added complexity.

  • EOR service fees typically range from USD 300 to USD 800 per employee per month.

  • Atlas HXM offers a robust Direct EOR solution, providing smooth market entry, compliance, and seamless employee management: all in one platform.

How an EOR Works

At Atlas HXM, we provide EOR services that ensure your business remains compliant with Mexico's labor laws while you focus on growing your operations, free from administrative and legal burdens.

Candidate Selection

Atlas HXM does not recruit candidates, but will check the employment setup for compliance around new hires like validating right-to-work, reviewing contract terms against Mexican laws, and configuring payroll and statutory obligations correctly. EOR providers in Mexico, including Atlas HXM, can assist with work permit applications for foreign nationals. Anyone hired via EOR must either already hold valid work authorization or go through the proper visa application process.

Employment Contracts

Atlas HXM drafts and administers employment contracts in compliance with the Mexican Federal Labor Law. Clearly outlines key employment terms to reduce risk of future disputes, such as:

  • Job title and responsibilities

  • Salary, benefits, and working hours

  • Leave entitlements and notice periods

Payroll & Benefits Management

Payroll is processed in Mexican pesos (MXN), including:

  • Accurate tax withholdings and IMSS contributions

  • Statutory benefits such as 13th-month salary and vacation premiums

The EOR also helps maintain compliance with mandatory benefits, so employees are protected under Mexico's laws.

Work Permit Compliance

In Mexico, EOR providers can assist with work permit applications for foreign nationals. Atlas HXM manages compliant employment, payroll, IMSS, and statutory obligations in alignment with Mexican immigration regulations.

Ongoing HR Support

Provides HR support, including: Leave management and performance tracking, employee relations, and regulatory updates throughout the employee's tenure. This allows businesses to focus on core operations, while Atlas HXM handles ongoing compliance.

Costs & Pricing

EOR services in Mexico are typically billed as a platform/service fee in the range of USD 300–800 per employee per month. This fee covers administration such as compliant contracts, payroll processing, statutory filings, and HR administration for workers who already hold valid work authorization. This service fee is separate from the employee's salary, benefits, taxes, and visa-related costs, which vary by role and jurisdiction. By using an EOR, companies avoid the cost and overhead of setting up a Mexican entity, which can require USD 5,000–15,000 upfront before any operational spend.

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What to Choose: EOR vs PEO

EOR

Employer of Record

An EOR becomes the legal employer for your hires in a country where you do not have an entity. The EOR carries employer liability and handles compliant contracts, payroll, statutory benefits, tax filings, and labour-law adherence. You still direct the employee's work. This model suits companies expanding into Mexico without wanting to form a local entity or take on compliance risk.

PEO

Professional Employer Organization

A PEO provides outsourced HR services like payroll, benefits, HR admin, but only when you already have a local entity. You remain the legal employer, and the PEO shares administrative tasks without taking on employer liability. Suitable when you are already established in the country and are only looking to offload HR administration.

What's Best for You?

  • Choose an EOR when you want to hire in Mexico without setting up an entity and want a partner who absorbs employer risk.

  • Choose a PEO when you already operate locally and just want HR support.

Work Life in Mexico

Mexico's employment framework is designed to balance operational needs with employee protections. Here's what you need to know:

Employment Types:

  • Permanent: Ongoing employment with full statutory benefits.

  • Fixed-Term: Hired for a specific project or defined duration. There is no legal minimum or maximum length, but the employer must be able to justify why the role is temporary and tied to a defined project or timeframe (maximum one year).

  • Temporary: Short-term assignments; entitled to statutory benefits like leave and overtime.

Probation Periods: Probation periods are typically 30 days for most positions and up to 180 days for managerial, technical, or professional positions. These periods allow employers to assess employee suitability before offering permanent employment.

Working Hours & Overtime: In Mexico, the standard workweek is 48 hours maximum, with no more than 8 hours per day for day shifts and 7 hours for night shifts. Employees must receive a break after working 6 consecutive hours. Overtime is strictly regulated - the first 9 hours per week are paid at 200% of regular rate, and hours beyond that are paid at 300%. The EOR ensures that all overtime is calculated correctly and that employee work hours comply with local regulations.

Leave Entitlements

Leave Type

Eligibility / Duration

Payment / Notes

Annual Leave

12 days (1st year), increases by 2 days each year up to 20 days

Paid by employer; must be taken within 6 months

Maternity Leave

12 weeks (84 days)

Paid by Social Security Institute (IMSS)

Paternity Leave

5 working days

Paid leave for working fathers

Sick Leave

After employment begins

First 3 days paid by employer, then IMSS pays 60% or 100%

Public Holidays

All statutory holidays

Paid; handled by Atlas HXM

Vacation Premium

25% of vacation pay

Mandatory bonus added to vacation pay after the employee completes one year of service

Payroll & Benefits: Wages must meet minimum wage requirements (MXN 248.93 daily for 2024, MXN 374.89 in Northern Border Free Zone). Atlas HXM manages payroll in MXN, IMSS contributions, statutory benefits including aguinaldo (13th-month salary), vacation premiums, and profit-sharing where applicable. Supplemental benefits can include private health insurance, food vouchers, and transportation allowances.

Atlas HXM can help you manage these aspects and can help ensure that employees are supported and compliant with Mexico's labor laws while businesses can focus on operations without administrative burdens.

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What to Choose: Indirect vs Direct EOR

Direct EOR

The EOR owns the legal entities in the target country, coordinating all employment-related tasks directly. It offers faster onboarding, better compliance, and more control.

Best for: Businesses looking to scale quickly, expand long-term, or enter Mexico with compliance.

Indirect EOR

The EOR provider acts as an intermediary between the business and a third-party local entity. While it can be cheaper, it may result in delays and compliance complexity.

Best for: Small teams or short-term hires with less urgent compliance needs.

What's Best for You?

  • For Small Teams or Contractors: Indirect EOR could work, especially for temporary hires or testing a market.

  • For Scaling and Compliance: Direct EOR is the best choice. With Atlas HXM, you'll have control, faster entry, and streamlined compliance.

Taxes & Compliance

Mexico operates on a calendar-year tax system, running from January 1 to December 31. Employers must submit monthly tax returns and payments by the 17th of the following month, annual income tax returns for individuals by April 30th, and corporate tax returns by March 31st. Monthly payroll tax obligations, including income tax withholdings and social security contributions, must be paid by the 17th of the following month.

Category

Details

Employer Payroll Tax

IMSS contributions: 20.4%–25.75% (risk category dependent)

INFONAVIT contributions: 5% of salary

SAR contributions: 2% of salary

State payroll taxes: 2%–3% of payroll

Employee Payroll Tax

Residents: progressive income tax 1.92%–35%

Non-residents: 15%–30% on Mexican-source income

Employee IMSS contributions: 2.375% of salary

INFONAVIT contributions: 5% of salary

Pension System

Retirement at 65 with 1,250 weeks of contributions

Guaranteed pension based on minimum wage

Family allowances: 15% for spouse, 10% per child

New Welfare Pension Fund guarantees 100% of last salary

Women's Welfare Pension for ages 63-64

VAT & EOR Costs: Mexico applies a 16% Value Added Tax (IVA) on most goods and services, including EOR services. EOR services are generally subject to VAT, either included in quoted fees or added separately. Businesses may claim VAT credits if registered and meeting requirements.

Atlas HXM handles tax compliance, including progressive income tax calculations, IMSS contributions, year-end filings, and expatriate tax arrangements, ensuring businesses remain compliant with local laws while minimizing administrative burden.

Termination

For dismissals with cause, employers must document the specific conduct and dates, but Mexican labor law does not require giving advance notice to the employee. Mexico does not have at-will employment - terminations must be for just cause or the employer must pay constitutional compensation. Severance pay varies based on contract type and reason for termination, ranging from wages for half the service period (short fixed-term) to 20 days of salary per year of service (indefinite term contracts). The EOR helps ensure proper handling of terminations, including severance calculations, final wages, and required documentation.

Visas & Work Permits

In Mexico, foreign nationals planning to work for more than 180 days must obtain appropriate work authorization such as a temporary resident visa with work permission or permanent resident visa depending on their situation.

EOR providers, including Atlas HXM, can assist with work permit applications for foreign nationals. To be employed through an EOR, the employee must either already hold valid authorization or go through the proper visa application process. Once authorization is in place, Atlas HXM can employ the individual under the EOR model and then manage payroll, IMSS, benefits, and compliant employment administration.

5 Things to Look for in an EOR Provider

  1. Local expertise and knowledge of Federal Labor Law, IMSS contributions, and Mexican regulatory requirements.

  2. Advanced technology for payroll, reporting, and HR system integration.

  3. Experience in your industry and handling work permit management.

  4. Strong compliance track record and relationships with government agencies and legal advisors.

  5. Global presence to support multi-country expansion, with verified security and compliance standards (ISO 27001/27017/27018, GDPR).

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Atlas HXM provides direct EOR services, managing payroll, compliance and benefits efficiently. Our unified platform automates HR, payroll, and compliance tasks, while offering premium employee support, global benefits, and access to 9,000+ learning courses. Recognized by Everest Group PEAK Matrix 2025 and NelsonHall NEAT Assessment 2025, Atlas HXM combines compliance, technology, and global expertise.

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FAQs

Can an EOR in Mexico manage employees who need work authorization?

Yes. Atlas HXM can assist with work permit applications for foreign nationals and then employ and manage the worker under the EOR model, including payroll, IMSS, benefits and compliant administration.

What are the mandatory benefits I must provide to employees in Mexico?

Mandatory benefits include IMSS coverage, aguinaldo (13th-month salary), vacation premium (25% of vacation pay), profit-sharing (if applicable), and various leave entitlements.

What is the typical probation period?

Usually 30 days for most positions, up to 180 days for managerial, technical, or professional roles, and must be in the employment contract.

How is severance calculated in Mexico?

Severance depends on contract type and termination reason: 20 days of salary per year of service for indefinite contracts, or constitutional compensation of 3 months' salary plus 20 days per year for unjustified dismissals.

What are the IMSS contribution rates for employers?

Employer rates range from 20.4% to 25.75% depending on risk category, plus 5% INFONAVIT and 2% SAR contributions.

Can employees work overtime without limits in Mexico?

Overtime is strictly regulated with payment at 200% for the first 9 hours per week, 300% beyond that, and limited to 3 hours per day for a maximum of 3 consecutive days.

         

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