Hiring Employees in Mexico: Contracts, Hours, Mandatory Benefits and Termination

Under the Federal Labor Law (Ley Federal del Trabajo, LFT), an employment relationship exists whenever a person performs personal, subordinated work for another in exchange for a salary, whatever the parties call the contract. If someone performs personal work for you, an employment contract and relationship are presumed. Calling a supervised full-time worker a "contractor" gives little protection.

Workers cannot validly waive earned wages, severance or other accrued benefits.

Where no collective bargaining agreement applies, working conditions must be put in writing, with at least two signed copies. The contract must include the identification of both parties (including the worker's CURP and RFC), the type and duration of the relationship, the services to be performed, the place of work, working hours, the form and amount of salary, payday, training, rest days and vacations, and the beneficiaries designated for unpaid wages if the worker dies.

Employment can be for a specific job or term, seasonal, for initial training, or indefinite. If the contract says nothing, the relationship is indefinite. Indefinite contracts, and contracts longer than 180 days, may include a probation period of up to 30 days. For managers and specialized technical or professional roles, the probation period can be up to 180 days. During probation, the worker receives full salary, social security and benefits.

At least 90% of the workers in each company or establishment must be Mexican. Technical and professional positions must be filled by Mexicans unless none are available in a given specialty. In that case foreigners may be hired temporarily, up to 10% of that specialty. Directors, administrators and general managers are exempt from this rule.

A reform published in the Federal Official Gazette (DOF) on 1 May 2026 set the maximum ordinary working week at 40 hours. Its transitory provisions phase the cut in on 1 January of each year: 48 hours in 2026, 46 in 2027, 44 in 2028, 42 in 2029 and 40 in 2030. The reduction may not be used to cut wages or benefits. Maximum daily shifts are 8 hours for day shifts (6:00 to 20:00), 7 for night shifts and 7.5 for mixed shifts. Continuous shifts include a break of at least 30 minutes.

Overtime is paid at double the ordinary rate, up to a weekly cap. The cap is 12 hours per week (up to four hours a day, on up to four days) once fully phased in, and the transitory schedule sets 9 hours for 2026 and 2027. Overtime beyond that cap may not exceed four extra hours a week and is paid at triple rate. Ordinary plus overtime hours may never exceed 12 in a day.

Workers get at least one paid rest day for every six days worked. Sunday work carries a premium of at least 25%. The 2026 reform also requires employers to record each worker's daily start and end times electronically. Under the reform's transitory provisions, the implementing rules take effect on 1 January 2027.

The minimum wage is the lowest amount a worker may receive in cash for a working day. It can be general or set for specific professions and geographic areas, such as the northern border zone. The rates are set each year by the National Minimum Wage Commission (Comisión Nacional de los Salarios Mínimos, CONASAMI), a tripartite body of workers, employers and government. The law requires that the annual adjustment never be below observed inflation. The law itself does not state the amounts, so check the current resolution published by CONASAMI in the DOF before setting salaries.

Christmas bonus (aguinaldo). At least 15 days' salary, paid before 20 December. Workers with less than a full year get a pro-rated amount.

Vacations. After one year of service, at least 12 working days of paid vacation. This increases by two days per year up to 20 days, and from the sixth year by two days for every five years of service. At least 12 days must be taken continuously. Vacations must be granted within six months after each anniversary and cannot be replaced by cash, except for the pro-rated amount when employment ends.

Vacation premium (prima vacacional). At least 25% of the salary for the vacation days.

Profit sharing (PTU). Workers share in the company's profits at the percentage set by the National Commission for Workers' Profit Sharing. The base is the company's taxable income under the Income Tax Law. Payment is due within 60 days after the date the annual income tax return is due. Directors, administrators and general managers do not participate. Each worker's share is capped at three months' salary or the average PTU received over the last three years, whichever is more favorable to the worker.

Every employee must be enrolled in the mandatory regime of the Mexican Social Security Institute (IMSS). The employer must register itself and its workers and report hires, terminations and salary changes within no more than five business days. It must keep payroll records for five years, and calculate and pay employer and employee contributions monthly by the 17th of the following month.

Employers must also register with the National Workers' Housing Fund Institute (INFONAVIT) and pay a contribution of 5% of each worker's salary into the worker's housing sub-account.

On income tax, the employer withholds tax from salaries every month as a provisional payment of the employee's annual tax. It calculates the annual tax and issues an electronic payroll receipt (a CFDI) to each employee when wages are paid.

Since 2021, Mexico has prohibited subcontracting of personnel, meaning one company supplying its own workers for another's benefit. Staffing agencies may recruit, select and train candidates, but the business that benefits from the work is the employer.

Subcontracting is allowed only for specialized services or works that are not part of the client's corporate purpose or main economic activity. The provider must be registered with the Ministry of Labor (STPS) in the public registry known as REPSE. The contract must be in writing and state the scope and the approximate number of workers. If the provider fails to meet its labor obligations, the client is jointly liable to those workers. Registration requires being up to date on tax and social security obligations and must be renewed every three years.

Mexico has no "at-will" employment. Either party may rescind the relationship at any time for a justified cause listed in the law, without liability. An employer dismissing for cause must give the worker a written notice stating the conduct and dates. The notice must be delivered in person at the time of dismissal or filed with the labor court within five business days. Without the notice, the dismissal is presumed unjustified.

A worker who considers the dismissal unjustified may, after mandatory pre-trial conciliation, seek reinstatement or three months' salary. If the employer cannot prove the cause, it also owes back wages from dismissal for up to 12 months, and then interest. In certain cases the employer may avoid reinstatement by paying the additional severance set by law. These include workers with less than one year of service, positions of trust (trabajadores de confianza), domestic workers and temporary workers. For indefinite contracts, this additional severance is 20 days' salary per year of service on top of the three months.

Permanent workers are also entitled to a seniority premium of 12 days' salary per year of service. It is paid on dismissal (justified or not), when the worker leaves for justified cause, and on voluntary resignation after at least 15 years. The salary base is capped under Articles 485 and 486.

SDV can draft bilingual employment contracts, handle IMSS and INFONAVIT registrations, run payroll with electronic receipts, calculate PTU, review your providers' REPSE compliance and plan the phased move to the 40-hour week. This guide is general information, not legal advice.