Mexico is the second-largest economy in Latin America and is projected to be in the top 10 global economies by 2050. The opportunities for investment are endless, with an ever-growing selection of emerging industries offering good prospects for doing business. Depending on the nature of your business, you might find that hiring staff via a professional employer organization in Mexico is your best option.
Note that a law introduced in 2021 placed limits on some types of outsourcing in Mexico.
A professional employer organization (PEO) will hire overseas staff on behalf of a client, allowing that client to avoid establishing a local entity, while securing an international workforce in just the time it takes to find the right workers. The PEO firm will oversee all aspects of the onboarding and management of salaries, and as such will often be referred to as a PEO payroll company.
Mexico is one of the most popular destinations in Latin America for foreign investment, particularly from US investors. While the convenience of Mexico’s geographic proximity is one reason for that, the scale of its economy is another.
With a gross domestic product (GDP) exceeding $1 trillion (all figures in USD), Mexico has the second-largest economy in Latin America behind only Brazil and in 2019 attracted more than $29 billion in foreign direct investment (FDI) inflows.
Mexico is known as a major trade hub, with more than $1.7 billion in goods crossing its border with the United States each day, while major ports serve both the Pacific and Atlantic oceans, giving easy access to US ports on its west and east coasts, as well as to Asia-Pacific and Europe.
While Mexico is well-known for its large agricultural sector and industrial output, with a heavy concentration of manufacturing facilities along the border with the United States, the country is also home to a growing services industry, as well as hosting an increasingly influencial tech and innovation sector.
As such, whatever type of business you are doing, Mexico has the human capital available. However partnering up with a local provider with a good understanding of the market and all aspects of employment law in Mexico will help you secure the best talent while remaining in full compliance with the law. For that reason, hiring via a professional employer organization in Mexico might be your best option.
Why hire through a PEO in Mexico?
When you hire through a PEO in Mexico, you hand over responsibility for the management of the salaries and benefits of those workers, with the PEO firm also able to assist with their recruitment and drawing up and processing all legal documentation, such as contracts.
That is an attractive arrangement for anyone who only needs a small number of local respresentatives, handling sales or overseeing operations. It can also be a good arrangement when hiring a team for a short-term project — such as software developers delivering an individual project.
Hiring through a professional employer organziation in Mexico is also a good way of getting to know the market before making a deeper commitment through full company incorporation.
As well as the advantages in terms of time-saving and guaranteed compliance that come with hiring though a PEO firm in Mexico, another major bonus is the fact that the provider will have a well-established recruitment network and a good understanding of the local job market in terms of the best educational institutions and former employers to look for on candidate profiles.
Among the responsibilities that a PEO payroll company in Mexico will fulfill include:
- Drafting and executing employment contracts for hired employees
- Management of the whole hiring process, including initial interviews of candidates, onboarding, and managing all related documentation
- Calculating and paying salaries
- Guaranteeing all statutory benefits and leave
Real Life Example: A French company has three clients located in Mexico, and have been outsourcing this work to a Mexican service provider. Now, they are interested in expanding their operations by setting up a local legal entity. The company are looking to hire a local lawyer to work directly with the company’s clients, rather than outsource their work. Instead of establishing the local company straight away, they decide to work with a PEO service provider for six months while their client base is relatively small. The Mexican PEO service provider incorporates this Mexican lawyer onto their payroll, providing a ‘risk-free’ solution for the French company in regards to employment obligations. The employee is legally and officially registered by the PEO service provider whilst receiving instructions and reporting to the French Company. Once the company has a better understanding of the local market and has expanded their client base, they will set-up a local company and employee the lawyer with this newly formed company.
Regulations handled by a professional employer organization in Mexico
As part of PEO payroll company services, your professional employer organization in Mexico will oversee the following regulations and employee benefits:
- Working hours: Under Mexican law, the working week is a maximum of 48 hours long, with at least one full day of rest.
- Minium wage: Mexico has two minimum wages, based on geography, with a higher minimum wage in the northern region.
- Bonuses: Mexican employees are entitled to a ‘13th-month bonus’ known as ‘’Aguinaldo’, this must be paid by 20 December.
- Profit sharing: Companies in Mexico are obliged to share 10% of their net annual profits with their employees.
- Vacation: Employees are entitled to six days of paid vacation after one year of service, with that allowance increasing by two days per year up until the fifth year.
- Sick Leave: An employee receives 60% of their salary if they are unable to attend work for more than 3 days due to illness.
- Parenthood leave: Paid maternity leave in Mexico totals 12 weeks, starting six weeks before the due date. Paternity leave totals five days.
Biz Latin Hub can be your PEO / Employer of Record firm in Mexico
At Biz Latin Hub, we provide market entry and back-office services throughout Latin America and the Caribbean, with offices in 17 key cities around the region, meaning we are ideally placed to support multi-jurisdiction market entries.
Contact us today to find out more about how we can assist you.
If you found this article on finding a professional employer organization in Mexico of interest, you may want to check out the rest of our coverage of this North American country Or read about our team and expert authors.