How payroll, benefits, and paid time off work in Mexico
Expanding into Mexico is exciting for Canadian companies. The talent pool is strong, costs can be competitive, and cultural ties between our countries are growing. But hiring employees in Mexico comes with its own rules, especially when it comes to payroll, employee benefits, and paid leave laws.
If you’re used to Canadian labor regulations, the Mexican system will feel both familiar and different. This guide breaks down the essentials so you can hire confidently and stay compliant.
Payroll in Mexico: what employers need to know
1. Pay frequency and methods. Mexican law allows for different pay schedules depending on the type of employee:
Salaried employees (white-collar) are typically paid biweekly (quincenal) or monthly.
Hourly or daily workers (blue-collar) are usually paid weekly.
Payments must be made in Mexican pesos through a bank transfer to the employee’s registered account.
2. Minimum wage. The general minimum wage in 2025 is set nationally, with a higher rate for the Northern Border Free Zone (including cities like Tijuana and Reynosa). You must pay at least the applicable daily rate for a standard 8-hour day.
3. Payroll deductions and contributions. Employers must calculate and withhold:
Income tax (ISR) – based on progressive tax rates set by the SAT (Mexico’s tax authority).
Social security contributions – to the IMSS (Mexican Social Security Institute), covering healthcare, pensions, and disability.
Housing fund contributions – to INFONAVIT, which helps employees access mortgage financing.
On top of the employee deductions, employers also make employer contributions for social security, retirement, and housing. These can add 25–30% on top of gross salary in mandatory costs.
Employee benefits in Mexico: the legal basics
Mexican labor law mandates several benefits that you’ll need to budget for. These are non-negotiable and apply to all employees, regardless of role or contract type.
1. Christmas bonus (Aguinaldo). All employees must receive an annual Christmas bonus of at least 15 days of salary, paid no later than December 20. Many companies offer more than the minimum as part of competitive compensation packages.
2. Profit sharing (PTU). By law, companies must distribute 10% of taxable profits to employees each year, usually by May 30. New companies are exempt during their first year of operation.
3. Social security benefits. Through employer contributions, employees gain access to:
Public healthcare (IMSS)
Disability and life insurance
Retirement and pension funds
Childcare services for eligible parents
4. Additional perks (optional but common). Many employers add private health insurance, meal vouchers, savings funds, or performance bonuses to attract and retain talent in competitive markets.
Paid leave laws in Mexico
Mexico’s paid leave rules have evolved recently, and they’re more generous now than before.
1. Annual vacation. As of the 2023 reform, employees are entitled to:
Year 1: 12 working days of vacation
+2 days per year until year 5
After year 5, the increase is every five years
Vacation must be taken within six months of earning it, and employers must pay a vacation premium of at least 25% of the employee’s daily salary during vacation days.
2. Public holidays. Employees are entitled to 8–10 paid statutory holidays per year, such as New Year’s Day, Constitution Day, and Independence Day. If employees work on a holiday, they must be paid triple their regular rate for that day.
3. Sick leave. Sick leave is covered by the IMSS. Employees receive a percentage of their salary, depending on the illness type and length of absence, starting from the fourth day of incapacity.
4. Maternity and paternity leave
Maternity leave: 12 weeks of paid leave (6 before birth, 6 after), fully paid by IMSS.
Paternity leave: 5 working days of paid leave, paid by the employer.
Key compliance tips for Canadian employers
Work with a local expert or EOR. Mexican payroll rules are complex, and errors can be costly. Partnering with a reputable Employer of Record (EOR) like Bridg Global ensures correct calculations, filings, and payments.
Factor in total cost of employment. Beyond gross salary, budget for benefits, contributions, and paid leave. This can increase total compensation costs by 30–40%.
Keep records in Spanish. Employment contracts, pay slips, and filings must be in Spanish and compliant with local labor authorities.
Stay updated. Mexican labor laws change often, and reforms can affect vacation, benefits, or tax rates.
Why this matters for your business
Mismanaging payroll or benefits in Mexico can be a large financial risk, especially because Mexico’s labor legislation is very protective of the employees, so it is important that you find an EOR that will be a true partner, not just a service provider. Skilled professionals expect employers to respect local labor rights. Meeting or exceeding these standards not only keeps you compliant but also positions your company as a top employer in a competitive talent market.
At Bridg Global, we help Canadian companies hire in Mexico seamlessly, handling payroll, benefits, and compliance so you can focus on growing your team.
