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Country Playbook
Region: Americas
Country: Mexico
August 2015
Any US tax advice contained herein was not intended or written to be used, and cannot be
used, for the purpose of avoiding penalties that may be imposed under the Internal Revenue
Code or applicable state or local tax law provisions.
These slides are for educational purposes only and are not intended, and should not be relied
upon, as accounting advice.
This material has been prepared for general informational purposes only and is not intended to
be relied upon as accounting, tax, or other professional advice. Please refer to your advisors for
specific advice.
Region – Americas
Country – Mexico
1. Country Currency/Abbreviation
Mexican Peso - MXN
2. Tax Year Designation
Calendar – Year Start 1/1; Year End 12/31
3. Minimum Pay Frequency
Minimum pay frequency for manual workers is weekly. The minimum pay
for all other workers is twice monthly.
4. National Minimum Wage
MXN - Region A: $70.10 per day; Region B: $66.45 per day
5. Workday/Workweek
Work schedules between 6:00 A.M. to 8:00 P.M. are regulated to a
maximum of 48 of hours per week. Work schedules between 8:00 P.M. to
6:00 A.M. are regulated to a maximum of 42 hours per week.
6. Overtime Considerations
Employees can work a maximum of 3 OT hours per day and a maximum of
3 days per week. Overtime rate is double the normal standard rate. Hours
worked over the maximum of 9 OT hours per week are paid at triple the
regular wage rate.
7. Employment Contracts *
Employment contracts are required in Mexico and companies can face
monetary penalties by not complying with this regulation.
8. Social Security Program *
Mexico has a social security program that requires an employer
contribution equal to an approximate rate of 15% of gross payroll.
9. Income Tax Withholding *
Income tax withholding is required on a monthly basis and is set by the
state (region) of employment.
10.
Unemployment Taxes *
N/A
11.
Termination Notes *
Employees terminated without "justified" causes are eligible for
statutory severance.
12.
Other Special Payroll Considerations *
 The Mexican year end employee document (W2 equivalent) is called
Form 37.
 Employers are required to contribute at least 2% of the employee’s
wages to a pension plan managed by a bank in the employee’s
name.
13.
Summary Analysis/Recommendation
Country Labor Climate:
In Mexico, the labor climate is heavily weighted towards favoring
employees. The burden of proof regarding the status of an
employee is held by the organization. Without sufficient proof, all
labor relationships are considered employment relationships. Due to
recent legislation, failing to accurately classify a labor relationship as
employee-employer will result in hefty fines plus restitution to the
“employee.”
Employment Status Recommendation:
The decision tree should be used as a foundation for determining
employment status, but if there is any ambiguity BU should refer to
the following characteristics. Independent contractors should be
registered with the tax authority as an independent service provider.
Without this designation, an independent contractor status should
not be a consideration.
Independent Contractor Payments:
When making payments to the contractor, the organization must
ensure the payments are made to a recognized permanent business
of Mexico.
Recommendation:
1. If a contractor status decision is made, there is low risk in making
payments to an independent contractor in Mexico as long as
those payments are made to a recognized permanent business.
Employee Payments:
When making the determination of risk and cost of establishing an
internal payroll program, numerous factors must be taken into
consideration. Within this document, sections denoted with an
asterisk “*” are some of the basic components of that analysis.
Once an individual is identified as an employee, there are many
requirements inherited by the employer. Those requirements range
from social benefit programs to employer related taxes directly
attributed to headcount. Factors such as risk of being out of
compliance, the capital cost associated with being in compliance,
and additional administrative costs to establish and maintain the
programs associated with the requirements are key components of
determining the best solution for paying employees.
Recommendation:
1. Due to the extensive requirements related to payroll processing
in Mexico, the recommendation is to seek a 3rd party vendor to
administer this program.
2. If possible, the best solution is to contract with an in country
staffing entity that will hire employees and own employeremployee requirements for a negotiated fee.