Employer of record in Mexico: costs and rules for 2026
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A Mexican employee on MXN 740,000 a year (USD 40,000) costs the employer at least 31.2% more once IMSS and INFONAVIT social security, the 15-day aguinaldo, the vacation premium and Mexico City's 4% payroll tax are added, with the 7.513% cesantía y vejez retirement contribution the largest single line (LFT, LSS and secondary IMSS tables, checked October 2026). Published EOR list prices of $199 (Payoneer WFM, formerly Skuad) to $699 (Oyster) a month come on top. Where US companies go wrong is dismissal: Mexico has no at-will employment, so firing without a legal cause costs 3 months' salary plus back pay, and some EORs ask you to fund severance up front.
An employer of record in Mexico is a Mexican company registered with IMSS, INFONAVIT and the SAT that hires your worker under the Federal Labor Law, pays the aguinaldo and social security, and carries the dismissal liability, while you direct the day-to-day job.
- Employer cost on a sample salary
- 31.8%on top of gross pay
- Minimum annual leave
- 12 working days after year 1,…
- Public holidays
- 7 in 2026 (Jan 1, first…
- Currency
- MXN
On this page
What makes hiring in Mexico different
Mexico's cost comes less from one big tax than from a stack of mandatory benefits and social security lines, several of them tied to the UMA, a reference unit worth MXN 117.31 a day from February 1, 2026.
- Aguinaldo: at least 15 days of salary, paid before December 20 (LFT art. 87).
- Vacation premium: at least 25% on top of vacation pay. Vacation starts at 12 working days after year one and rises 2 days a year to 20 by year five, then 2 more every five years.
- PTU profit sharing: 10% of the employer's taxable profit, split among staff (art. 117).
- Rising retirement costs. Employer cesantía y vejez rates step up every January 1 until 2030; the 2026 top band is 7.513%. Contributions are capped at 25 UMA a day (MXN 2,932.75).
- State payroll tax. Mexico City charges 4% on total payroll with no cap (3% or 3.5% for micro and small employers, 3% in a new business's first year).
- Probation is 30 days, or up to 180 days for management and specialized technical roles (art. 39-A).
- No notice period. Dismissal needs written notice of the specific cause (art. 47), not a notice period.
- Shorter weeks are coming. 48 hours in 2026, then 46 (2027), 44 (2028), 42 (2029) and 40 (2030), with electronic time records from January 1, 2027.
The general minimum wage is MXN 315.04 a day (MXN 440.87 in the Northern Border Free Zone) from January 1, 2026, per Garrigues, because gob.mx could not be read. We have not confirmed the legal pay frequency, the PTU individual cap or the seniority premium from an official source.
Employment costs and rules in Mexico
| Item | Mexico |
|---|---|
| Employer social contributions | About 22.7% of salary for IMSS plus INFONAVIT at MXN 740,000 (mix of fixed and percentage items), plus state payroll tax (ISN) 4% in Mexico City; 26.9% of base salary together |
| What the employer pays | IMSS work risk: by claims rate, class I average premium 0.54355% (minimum 0.5%) unconfirmed today; Sickness and maternity fixed fee 20.40% of one UMA per day per worker; Sickness and maternity surplus 1.10% of SBC above 3 UMA; Cash benefits 0.70%; Pensioner medical 1.05%; Disability and life 1.75%; Day care and social benefits 1.00%; Retirement 2.00%; Severance in old age (cesantia y vejez) 2026 sliding scale by SBC: 3.150% (1.00 minimum wage), 3.676% (1.01 MW to 1.50 UMA), 4.851% (1.51 to 2.00 UMA), 5.556% (2.01 to 2.50), 6.026% (2.51 to 3.00), 6.361% (3.01 to 3.50), 6.613% (3.51 to 4.00), 7.513% (4.01 UMA and up); INFONAVIT housing 5.00%; State payroll tax ISN Mexico City 4% of total payroll (3% or 3.5% for micro and small employers, 3% for new businesses in year one) |
| Caps and ceilings | SBC capped at 25 UMA per day (25 x 117.31 = MXN 2,932.75 per day from Feb 1 2026) for IMSS and INFONAVIT. UMA 2026: 117.31 daily, 3,566.22 monthly, 42,794.64 annual, effective Feb 1 2026 (INEGI). SBC includes integration of aguinaldo and vacation premium. ISN has no cap |
| Employee contributions | About 2.8% of salary (IMSS only): surplus 0.40% above 3 UMA, cash benefits 0.25%, pensioner medical 0.375%, disability and life 0.625%, cesantia y vejez 1.125%; plus income tax (ISR) withholding |
| Minimum wage | MXN 315.04 per day general zone; MXN 440.87 per day Northern Border Free Zone (ZLFN); effective Jan 1 2026 (general +13%, ZLFN +5%) (secondary: Garrigues; gob.mx and DOF could not be fetched) |
| Mandatory bonuses | Aguinaldo at least 15 days of salary, paid before Dec 20 (LFT art. 87); vacation premium at least 25% of vacation pay (art. 80); PTU profit sharing 10% of taxable profit (art. 117; rate set by CNPTU), individually capped at 3 months of salary or the average of the last 3 years, whichever is more favorable (cap unconfirmed today) |
| Annual leave | 12 working days after year 1, rising 2 days a year to 20 by year 5, then +2 days every 5 years (LFT art. 76) |
| Public holidays | 7 in 2026 (Jan 1, first Monday Feb, third Monday Mar, May 1, Sep 16, third Monday Nov, Dec 25); Oct 1 only every six years and election days in election years (LFT art. 74) |
| Probation | 30 days; up to 180 days for management or specialized technical roles (LFT art. 39-A) |
| Notice period | No statutory notice period; dismissal requires written notice of the specific cause (LFT art. 47) |
| Severance | Unjustified dismissal: 3 months of salary plus 20 days per year of service in the cases of LFT art. 49/50, plus back pay; seniority premium of 12 days per year (art. 162, capped at 2x minimum wage) unconfirmed today |
| Payroll frequency | Weekly for manual workers; at most every 15 days for others (LFT art. 88, unconfirmed today) |
| Standard work week | 48 in 2026; reform cuts to 46 (2027), 44 (2028), 42 (2029), 40 (2030) |
| Sample salary used | MXN 740,000 per year (USD 40,000 at 18.52 MXN per USD, ECB cross rate Oct 15 2026) |
| Employer cost on that salary | 31.8% |
Checked October 16, 2026. Source type: mixed: official (UMA, LFT, LSS art. 25 and 28); secondary (IMSS 2026 rate table and cesantia y vejez schedule: idconline.mx and elcontribuyente.mx; minimum wage: garrigues.com; ISN: siemprealdia.co; 40-hour law dates: AMCP and cronica.com.mx). Sources are listed at the end of this page.
What an EOR charges to employ someone in Mexico
| Provider | EOR fee per employee per month | Deposit | Entity model (provider claim) |
|---|---|---|---|
| Payoneer Workforce Management | from $199 | None listed | Claims owned entities across APAC, MEA, Europe and the Americas |
| Pebl | $399 | Not listed | About 90% of employees on Pebl-owned entities |
| Playroll | from $399 | One month's salary per employee, refundable | No clear owned-entity claim |
| Rivermate | $319 to $639 | Not stated | Claims 38 owned entities |
| Multiplier | $459 (annual) or $499 (monthly) | Sized from costs, fees and notice period (method published, no fixed amount) | Claims owned entities in 160+ countries |
| Rippling EOR | Quote only (third-party reference: $499) | Not listed | Claims Rippling entities; no partner mention |
| Deel | $599 | Not stated by Deel | Claims owned entities in 130+ countries |
| Remote | from $599 | Waived for startups; otherwise not stated | Claims 100% owned entities in 90+ countries |
| Atlas | from $599 | Not published | Claims owned entities in 160+ countries |
| Papaya Global | from $650 | Refundable deposit, amount not stated | Uses in-country partners |
| Oyster | $699 | At least one month of total service cost, refundable (per its terms) | Owned entities and partners |
| Globalization Partners (G-P) | Quote only | Not stated | Information page claims 100+ wholly owned entities |
Source: each provider’s pricing page, checked October 16, 2026. Fees are the provider’s charge on top of salary and the employer contributions above. Some providers adjust prices by country.
What a MXN 740,000 hire really costs
The salary works out to MXN 2,027.40 a day. Because aguinaldo and the vacation premium are folded in, the IMSS contribution base (SBC) is higher, at MXN 2,127.38 a day, about 18.1 UMA. That puts the hire in the top cesantía y vejez band.
| Item | Working | MXN a year | USD a year |
|---|---|---|---|
| Base salary | MXN 2,027.40 a day | 740,000 | 39,956.80 |
| IMSS sickness and maternity, fixed fee | 20.40% of one UMA (117.31) a day x 365 | 8,735 | 471.65 |
| IMSS sickness and maternity, surplus | 1.10% of SBC above 3 UMA | 7,128 | 384.88 |
| IMSS cash benefits | 0.70% of SBC (MXN 776,493 a year) | 5,435 | 293.47 |
| IMSS pensioner medical | 1.05% of SBC | 8,153 | 440.23 |
| IMSS disability and life | 1.75% of SBC | 13,589 | 733.75 |
| IMSS day care and social benefits | 1.00% of SBC | 7,765 | 419.28 |
| Retirement (SAR) | 2.00% of SBC | 15,530 | 838.55 |
| Cesantía y vejez | 7.513% (2026 band for SBC above 4 UMA) | 58,338 | 3,150.00 |
| INFONAVIT housing | 5.00% of SBC | 38,825 | 2,096.38 |
| Aguinaldo | 15 days of salary | 30,411 | 1,642.06 |
| Vacation premium | 25% of 12 days of vacation pay | 6,082 | 328.40 |
| Mexico City payroll tax (ISN) | 4% of total payroll (740,000 + aguinaldo + premium) | 31,060 | 1,677.11 |
| Employer cost above salary | 31.22%, before the IMSS work-risk premium | 231,051 | 12,475.76 |
| EOR fee | $599 x 12 at 18.52 MXN per USD | 133,121.76 | 7,188.00 |
| Total cost to you | Salary + employer cost + fee | 1,104,172.76 | 59,620.56 |
| Per month | Total / 12 | 92,014.40 | 4,968.38 |
Rates: Ley Federal del Trabajo and Ley del Seguro Social (diputados.gob.mx), UMA 2026 (INEGI). The IMSS 2026 rate table and cesantía y vejez schedule come from secondary tables (idconline.mx, elcontribuyente.mx) because gob.mx could not be fetched. Peso amounts converted at 18.52 per dollar, an ECB cross rate for October 15, 2026; the fee line is the $599 Deel and Remote price from October 2026. PTU profit sharing excluded.
The key-facts box above shows 31.8%. That figure adds an IMSS work-risk premium at the class I average of 0.54355%, about MXN 4,221. The real rate depends on the employer's risk class and claims record, and we have not confirmed the 2026 figure from IMSS, so the table leaves it out.
Profit sharing (PTU) is not in the total because it depends on profit. Run other salaries through the employee cost calculator for other countries, or compare markets in the EOR cost index.
Severance and dismissal in Mexico
An unjustified dismissal costs 3 months of salary, plus 20 days per year of service in the cases set out in LFT articles 49 and 50, plus back pay. At this salary the 3-month part alone is MXN 185,000 (740,000 / 4). That exposure is why some EORs want money held in advance. In a January 2023 Hacker News thread (more than three years old), a buyer hiring in Mexico through Deel said they were "required to provide the mandatory severance up front" in escrow, and that a layoff took about a month. Ask any provider how big its Mexico deposit is and when it comes back.
EOR or a Mexican subsidiary
The social security, aguinaldo and payroll tax stay the same with your own company. The difference is MXN 133,121.76 ($7,188) a year per person in EOR fees, against registering with IMSS, INFONAVIT, the SAT and your state treasury, and paying PTU out of your own Mexican profit. The entity or EOR break-even page and the permanent establishment explainer cover the decision.
Mexican contractors and the misclassification risk
A contractor costs you none of the 31.22% above. If a labor court later finds the person was an employee, you face the aguinaldo, vacation premium and social security you skipped, and the dismissal rules apply when you end it. Use contractor management software only for real project work, or a contractor of record if you want a third party to own the classification.
Picking a Mexico EOR
Multiplier (79/100) and Oyster (64/100) top our ranking under the published scoring rules; see the full list of EOR providers.
- Multiplier: $459 per month if billed yearly, otherwise $499. Its deposit is set from costs, fees and notice periods and refunded within 60 days.
- Oyster: $699, no setup or termination fee. Trustpilot reviewers in October 2025 reported late payments in Mexico and contracts said to break Mexican law; details in our Oyster review.
- Deel and Remote list $599; read the Deel review for its two-year promo terms and the Remote review for its auto-renewing 12-month contract.
- Playroll takes one month's salary as deposit, MXN 61,666.67 here.
Ask which state payroll tax rate the quote uses, whether PTU is passed through, and whether the contract is already set for the 46-hour week in 2027.
Frequently asked questions
What does an employer of record in Mexico cost?
What is the aguinaldo in Mexico?
How much severance does Mexico require?
What are employer IMSS contributions in 2026?
When does Mexico move to a 40-hour week?
Sources (12)
- Pebl: Pebl EOR pricing (checked Oct 16, 2026)
- Playroll: Playroll pricing (checked Oct 16, 2026)
- Multiplier: Multiplier pricing (checked Oct 16, 2026)
- Deel: Deel pricing (checked Oct 16, 2026)
- Remote: Remote pricing (checked Oct 16, 2026)
- Oyster: Oyster pricing (checked Oct 16, 2026)
- Hacker News: Discussion: hiring in Mexico through Deel, severance held in escrow (January 2023, checked Oct 16, 2026)
- Trustpilot: Oyster reviews (checked Oct 16, 2026)
- European Central Bank: Euro foreign exchange reference rates (daily XML) (rates for Oct 15, 2026)
- inegi.org.mx/contenidos/saladeprensa/boletines/2026/uma/uma2026.pdf (checked October 16, 2026)
- diputados.gob.mx/LeyesBiblio/pdf/LFT.pdf (checked October 16, 2026)
- diputados.gob.mx/LeyesBiblio/pdf/LSS.pdf (checked October 16, 2026)
This page is general information, not tax, legal or accounting advice. Rules and rates change, so check the official source linked above before you file or sign a contract. Read our disclaimer.