If you are planning on doing business in Mexico and interested in streamlining your in-house operations, outsourcing your payroll could be one good option. Because when you choose payroll outsourcing in Mexico, you hand over a significant administrative task to a provider, who will also guarantee your compliance with all local regulations.
While certain types of outsourcing in Mexico were barred in 2021, that mainly concerns professional employer organization (PEO) services, which are based on a provider hiring staff on a client’s behalf.
SEE ALSO: Corporate Restructuring in Mexico Could Benefit Your Business
Payroll outsourcing is one of the services that a PEO firm will offer that has not faced restrictions since that change came into effect. That is why a PEO provider is also sometimes referred to as a PEO payroll company.
It is worth noting that a PEO can also be known as an employer of record (EOR), and while some providers establish definitions to distinguish between PEO and EOR, they are effectively the same.
If you would like to know more about how we can assist you with payroll outsourcing in Mexico, have questions about PEO services in the country, or would like to explore other back-office support options, contact us today.
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What is payroll outsourcing in Mexico?
Payroll outsourcing in Mexico involves contracting a provider to manage the payroll of a group of employees, who are often based in a different location to the main base of operations of the client.
Payroll outsourcing forms a natural part of PEO services, which entails the outsourcing of every aspect of the recruitment and management of staff, however it can be adopted as a standalone service.
Some of the main tasks a payroll outsourcing provider will undertake include:
- Timely payment of salaries and tax responsibilities
- Proper undertaking of calculations related to those and other payments
- Production and distribution of payslips
- Information management and tracking related to all of the above
Is payroll outsourcing in Mexico right for you?
Mexico is one of the most popular destinations for foreign investment in Latin America, thanks in part to the sheer size of its economy – the second largest in the region by GDP, behind only Brazil – as well as the fact that it shares a 1,954 mile (3,145 kilometer) border with the United States.
That means companies based in Mexico have easy access to the biggest economy in the world, while US and Canadian investors are just a stone’s throw away from their overseas interests. Meanwhile, investors based in Europe enjoy the benefits of regular and inexpensive travel to the country, with a high volume of routes between Mexico City and major European cities.
Mexico has also made significant efforts to encourage foreign investment, and in 2021 tax incentives for businesses based in the country’s northern and southern border areas were extended for at least another four years.
Mexico is well-known for its manufacturing sector and agricultural output, while the services sector accounts for 60% of this North American country’s GDP. Meaning that facilities for manufacturing are widely available, while the country has an abundance of skilled human capital available at competitive rates to call upon.
That includes a fast-growing tech sector, with the city of Guadalajara considered one of Latin America’s “new Silicon Valleys” and alone home to almost 80,000 IT professionals.
However, doing business in Mexico can come with some pitfalls for foreign investors – namely an unfamiliar regulatory regime and a significant language barrier to anyone who does not speak a good level of Spanish.
For that reason, finding a local partner who offers payroll outsourcing in Mexico with a track record of assisting foreign investors can be particularly useful. Because they will be able to eliminate communication barriers and be aware of every administrative and regulatory hoop you will need to jump through with regard to staff in Mexico.
Get an idea of hiring costs with a payroll calculator
If you are considering payroll outsourcing in Mexico ahead of a potential market entry and would like to get a general idea of the costs of hiring, you can use a payroll calculator.
It is important to note that this will only provide a good guide regarding the costs associated with hiring, which will be a more complex calculation based on a broad range of variables. However, it will be able to give you some insight into the tax burden and overall expense involved in hiring.
It will also allow you to compare costs in other jurisdictions, in the event that you are also considering other markets to enter.
One example is the Biz Latin Hub payroll calculator, which provides information on hiring costs related to all of the markets in Latin America and the Caribbean where the company has offices.
The Biz Latin Hub payroll calculator will allow you to run calculations based on:
- The country where staff are being hired
- The expected salary for each employee
- Your prefered currency (be that US dollars or the local currency, if the chosen country is not one of Latin America’s dollarized economies).
Biz Latin Hub provides payroll outsourcing in Mexico
At Biz Latin Hub, we provide integrated market entry and back office services throughout Latin America and the Caribbean, with offices in 17 major cities around the region.
Our portfolio includes accounting & taxation, company formation, due diligence, legal services, and hiring & PEO, while our unrivaled reach means we are ideally placed to support multi-jurisdiction market entries and cross-border operations.
Contact us today to find out more about how we can assist you.
If you found this article on payroll outsourcing in Mexico of interest, you might want to check out the rest of our coverage of this North American market. Or read about our team and expert authors.
