An employee of record in Mexico is a local entity with a cross-border reach that handles employment tasks, payroll design and implementation, and even the navigation of existing labor laws for companies not established in the country. 

The Employer of Record is a global expansion company, the hiring partner in Mexico that helps simplify the operations of foreign companies looking to expand to Mexico. Operations include simplifying HR, IT, and finance processes while the firm maintains solid control over the work done by its employees.

Google, Microsoft, Amazon, Walmart, and Ford, are some of the companies carrying out research and development in Mexico while enlisting the help of EORs. 

In this compilation, we take you through everything you should know as an emerging company looking to expand into Mexico and is on the lookout for the best employer of record to utilize for your business needs. 

Step-by-Step Guide to Hiring Through an EOR in Mexico

1. Deciding Between a Mexican EOR and Legal Entity

Businesses looking to expand into Mexico may explore the best approach to facilitate the ease of doing business in Mexico. They might choose to go by the way of employer of record services in Mexico or utilize a random legal entity. Irrespective of the choice that is made, there are some pros and cons involved.  

Employee of Record (EOR)Legal Entity 
Hiring Pros: It is easy for EORs to set up new hires quickly. All is done within 1-14 days, depending on the company involved. Pros: Legal entities support the large-scale expansion of new business entities in a new market. 
Compliance Pros: For EORs, you are assured of managing your work, helping take on liability, and providing localized employment contracts. 
Cons: With EORs, you cannot tailor certain policies and legal and HR processes to care for the needs of your business. 
Pros: Legal entities can effectively tailor certain policies and other legal and HR processes to your business’s needs. 
Cons: Legal entity compliance requires expert knowledge of Mexican laws, internal legal resources, and tax regulations, as the concerned company is responsible for legal and compliance infractions. 
Cost and Implementation Pros: You get to start hiring within days instead of months
It is also less time-consuming to set up. 
Cons: EOR becomes costlier as the number of hires increases.  
Pros: Legal entities are more cost-effective once you have hired enough employees in a foreign country. 
Cons: It takes up to six months to set up and requires registration fees. 
Payroll and BenefitsPros: With EORs, you quickly pay and insure employees around the world. The taxes are also filed for youCons: Legal entities have to manually keep track of statutory deductions and every employee’s entitlements for new hires. 

2. Onboarding Mexican Employees Through an EOR

EOR services in Mexico follow a stringent and labor-compliant process in onboarding employees. In this section, we outline the process of employee onboarding and integration, especially concerning employees in Mexico. 

A competent EOR oversees all legal and HR procedures when hiring employers in Mexico. It also acts as a broker in hiring talent due to its existing expertise and the legal framework that is already in place to help the client company align with the many labor laws and Mexico employment compliance. 

Most EOR service providers go through 4 simple steps: 

  1. Information about the client’s company. The first step regarding onboarding services in Mexico is for the client to inform the EOR of what or who is needed, and the specifications the EOR should be on the lookout for. 
  1. Build a Pipeline of Strong Candidates. To get the ideal candidate, the EOR, with the client company’s specifications in mind, starts off by building a pipeline of strong candidates with matching skills, previews their qualifications and background, and evaluates how they fit into the company’s plans in the long run. 
  1. Hire Talent Directly. After contacting the top candidates, the EOR consults with the client’s company and leaves the final hiring decision by communicating its decision to the company. After the company has made its decision, the EOR proceeds with employee documentation, payroll design, tax structures, and labor laws compliance. 
  1. Pay Fee Only When You’re Confident. EOR companies in Mexico are fond of deciding to allow clients to pay only when they are satisfied enough with the vetting process and the role of the EOR. A form of trust is ultimately built into the relationship and the possibilities for future collaborations are opened.  

3. Managing Payroll with an EOR

Payroll outsourcing is one of the major services provided by an employer of record (EOR) in Mexico. An EOR in Mexico should have an appreciable level of payroll expertise. HR tasks like employee records, leaves, and all other day-to-day administrative responsibilities are handled by the EOR. 

Payroll responsibilities, which include tax withholdings, calculating salaries, and tax deductions in line with Mexican Labor laws, are also fully catered for by the EOR. The necessary deductions are also done, calculating applicable work periods and expense reimbursements. 

Costs Involved in Hiring Through an EOR

Regarding employer of records and onboarding services in Mexico, the costs can vary greatly, depending on the range of services your EOR provides. Different EORs have different price points, and it is always important to consider how accruing such costs affects your business. 

Hiring an EOR is not about providing a number on the invoice; the total cost is not only the normal hiring fee; many advantages provided by the EOR are factored into the final cost. Advantages include flexibility, time savings, and accuracy the EOR provides for your business. 

Service fees for EORs can be structured to recur monthly or on a per-employee basis, or it is fixed such that there is a fixed price for all employees irrespective of their salary or location. EORs charge a few hundred dollars per month to over a thousand. 

Getting the actual figures is quite difficult, but we are certain hiring rates depend on the provider. It is important for companies to be aware that the service fees mentioned earlier is part of the taxes that are paid in addition to employee salary. 

Differences Between an EOR and PEO

Regarding workforce management in Mexico, clarifying the distinctions between an Employer of Record (EOR) and a Professional Employer Organization (PEO) and their roles in how global teams expand is important. The core elements of the two appear similar, but an employer of record (EOR) differs from a professional employer organization (PEO). 

An employer of record (EOR) is a core part of a company’s global expansion plan in terms of acting as a strategic partner to help get in contact with prospective employees, conduct background checks, hold interviews, set up payroll formats, compile employee information, and help to steady the ship to fall in line with existing labor laws. 

On the other hand, a professional employer organization is a co-employment arrangement that involves outsourcing the business’s payroll administration and human resources. This structure allows the concerned company to devote all its energy to daily employee management without worrying about administrative tasks like Payroll management. 

Data Security and Confidential Information Protection

It is important for a platform dedicated to solving such a crucial aspect of company business and championing such a vital move to expand the Mexican economy as far as workforce management is concerned to have the means to protect the sensitive information being shared with it.

Before choosing the EOR to represent your company’s interests, ensure that there are effective data protections in place, together with a competent and secure technology that eliminates data breaches and the potential to disclose private information.

Assistance with Mexican Payroll Records

Employee of Records in Mexico offers payroll services and positions themselves as an effective way to simplify payroll management for companies looking to expand into the country. EORs can do this due to their extensive knowledge of tax regulations, local laws, and the compliance requirements that allow foreign companies in Mexico to navigate these complexities.

Leveraging an EOR’s expertise is a growth hack that can be leveraged by companies looking to expand to Mexico. Tracking payroll costs, ensuring compliance with labor laws, and implementing effective systems and processes for payroll costs to help maintain the financial records 

List of Benefits for Mexican Employees

Mexico, employers of records are also involved in helping client companies reach their employees and provide them with as many statutory benefits as possible in line with Mexican labor laws. But how do EORs facilitate these obligations? 

EORs in Mexico are saddled with the responsibility of onboarding employees to the client’s company. In addition, they help administer benefits like; 

  • Bonuses
  • Health insurances 
  • General paid days off
  • Vacation premiums, etc.

 All of the aforementioned are crucial to improving the employee experience. Navigating the correct pay in a foreign country is tough enough, but doing that in a country like Mexico, with its many labor laws, requires top-notch expertise. 

Employer Costs for Full-time Employees in Mexico

Onboarding an employee in Mexico is no joke. There are so many taxes to pay, Payroll taxes, social security demands, employee bonuses, leave bonuses, sick bonuses, and a competent severance package amidst other expenses. Let’s give you a practical example; so you get an estimate of the cost of hiring in Mexico. 

If Miguel, a Mexican software developer, is employed with the total cost of employment being $120,823, in line with labor laws, the Gross salary is $100,000. At the same time, the employer pays up to $20,000 in taxes, the employee pays about $30,801 to the social security system, and the net salary remains in the range of $69,190. For more clarity, you could check out how to calculate the total employment costs here.  

Legal Compliance and Best Practices in EOR Engagement

In the dynamic world of the internet, and the changing patterns of work roles from the conventional onsite to remote work designs, and where hiring the best hands can be done from anywhere in the world, the importance of legal compliance cannot be overemphasized. 

EORS must comply and engage legally when interacting with the law and companies beyond the Mexican border. Operating a business in Mexico requires a deep understanding of the country’s highly regulated business landscape, as regulations influence the ease of business. 

Hence, a competent employee of record (EOR) is needed to keep your company on track. They help foreign companies with the ease of doing business as in;

  • Employment contracts
  • Fulfilling contractual obligations
  • Creating effective document management systems
  • Payroll designs
  • Tax management

And finally having to cope with regulatory changes, translating and understanding Mexican laws as applicable. 

Maximizing Efficiency and Employee Satisfaction with EOR

EORs have provided a great hack for globally expanding companies to overcome the challenges of hiring from other climes where great talents abound. The solutions are available, as this is an opportunity for growing startups in different sectors to hire in countries where they still need to be domiciled. 

If your business seeks to partner with an employer of record, how does this partnership maximize efficiency and guarantee employee satisfaction to bring you the much-needed results you want? Well, it is through these strategies. 

  • First, Onboarding is made seamless and issues-free for new hires. 
  • Effectively administers statutory and other additional benefits to employees. 
  • Compliance with local labor laws to prevent run-ins with the authorities. 
  • Helps to provide competent human resources support 
  • The Flexibility of work is assured
  • Employees are ultimately treated fairly and in line with local employment regulations. 
Author avatar
Article author
Vit Koval
Co-founder at Globy
A top Global Hiring voice on LinkedIn, co-founder of Globy, and host of Default Global. Using deep expertise in global hiring, remote work, and global business expansion to help companies excel worldwide with innovative strategies.

FAQ

What is an Employer of Record in Mexico?

An employer of record in Mexico is a strategic partner, a hiring partner, a legal assistant and an effective administrative and HR support for new businesses looking to expand to Mexico and hire and onboard Mexican employees. An Employer of record in Mexico is more like a voice/interest on the ground for a representative. 

What does it cost to use an EOR service in Mexico?

Using an EOR service in Mexico will cost you hundreds of dollars to thousands in expenses. This is, of course, based on the peculiarity and the number of services being offered to you. 

What’s the difference between an EOR and other hiring services?

An employer of record is more involved in helping to onboard employees and make hiring decisions, as well as external administrative and HR issues to foster employee satisfaction. Other hiring services are more like internal arrangements that combine many more services together and are more involved in the actual running of the company in the country. 

Does using an EOR change how new employees are welcomed in Mexico?

Yes, an EOR can act as the interface, a solid partner committed to enhancing the ease of doing business for foreign companies looking to come into Mexico, and this involves conducting background checks, improving the image of the concerned company, interacting with concerned government and legal authorities to ensure acceptance and permission to conduct business in Mexico. 

Can an EOR help with understanding Mexican work laws?

Yes, and EOR can help a company looking to come to Mexico to understand Mexican work laws, ensure proper translation, and ensure legal compliance to avoid pitfalls with the law.