Payroll in Mexico: employer costs, taxes & compliance (2026)

Running payroll in Mexico means handling two things every cycle: getting money to employees and settling obligations with the government. Each pay period you calculate gross salary, withhold income tax and the employee's social security contribution, add the employer's own social security contribution on top, and remit everything to the relevant authorities. All of that happens in Mexican pesos, on a semi-monthly schedule, so there are roughly 24 pay runs a year.

This guide walks through what employment actually costs in Mexico, how the pay cycle works in practice, what leave entitlements and termination rules mean for your payroll calculations, and when it makes sense to hand the whole thing to a specialist provider.

The gap between what an employee sees in their bank account and what you actually spend is wider than the gross salary line suggests. On top of gross pay, you carry employer social security contributions that add a meaningful chunk, think roughly a tenth of gross, though the exact rate is in the table below. Factor that in from day one when budgeting a new hire.

The total tax wedge sits at just over a fifth of labor costs when you combine employer contributions, employee contributions, and income tax. In plain terms, for every peso of value you pay out in employment, around a fifth goes to the state rather than the worker's pocket. It is not an outlier, but it is worth modelling carefully before you set a compensation package.

Mexico runs on a semi-monthly payroll cycle, so pay runs land twice a month, usually on fixed calendar dates. On top of regular salary, a thirteenth-month payment is mandatory, commonly called the aguinaldo, and it has to be factored into your annual cash-flow plan, not treated as a surprise at year end. The minimum wage floor is set in pesos per month, the current figure is in the table below, and it applies to every worker regardless of role, so check that no one's effective rate dips below it after any deductions.

On the leave side, employees are entitled to 12 days of annual leave and 9 public holidays, and holiday pay accruals need to be tracked and reflected in each payroll run, not settled ad hoc. Maternity leave runs for 12 weeks and paternity leave for 1 week, both of which affect how you handle payroll continuity for those employees. Termination is where the numbers get significant: there is no statutory notice period to fund, but severance can be the equivalent of roughly 22 weeks of pay, so any involuntary separation needs to be costed properly before you pull the trigger, not after.

If you do not have a legal entity in Mexico, you cannot run payroll there directly, and setting one up takes time and ongoing administrative effort. Even with an entity, payroll filings are in Spanish, contribution rates update, and the semi-monthly cadence leaves little room for error before the next run arrives. A global payroll provider or employer of record takes on the entity question, handles filings in the local language, and keeps your calculations current when rates change, which makes a real practical difference if Mexico is not your core market.