How EORs in Mexico Handle Social Security, Payroll, and Taxes
Expanding to Mexico offers international companies access to top-tier talent at a competitive cost—but local labor laws, tax rules, and social security (IMSS) obligations can be complex. That’s where Employer of Record (EOR) services in Mexico become essential.
If you’re wondering how a Mexico-based EOR handles payroll, taxes, and IMSS contributions, here’s what you need to know.
1. Payroll in Mexico: What’s Different?
Unlike other countries, payroll in Mexico involves more than just gross salary. Employers must factor in:
- Daily or monthly wage structures
- Mandatory bonuses (aguinaldo)
- Vacation premiums
- Overtime and statutory holidays
- Profit sharing (PTU)
An experienced EOR in Mexico manages payroll calculations in full compliance with local labor law (Ley Federal del Trabajo). This includes automatic tracking of tenure, paid leave entitlements, and severance liabilities.
By using a payroll-compliant EOR, international companies can avoid the risks of misclassification or underpayment.
2. IMSS Contributions: Social Security Made Simple
The Instituto Mexicano del Seguro Social (IMSS) oversees public health insurance, disability, maternity leave, and retirement benefits for formal employees. Employers are required to:
- Register each employee with IMSS
- Pay monthly employer and employee contributions
- File regular reports to maintain compliance
An EOR handles IMSS taxes in Mexico by calculating and submitting the correct amounts on behalf of the foreign company. These contributions often represent 20% to 30% of the employee’s salary depending on position and salary range.
This ensures that your remote workforce is legally protected and you, as the employer, are shielded from penalties.
3. Tax Compliance Without a Mexican Entity
Foreign companies that hire directly in Mexico risk violating tax and labor laws if they don’t establish a legal entity. An EOR provides a legal framework so that you can:
- Hire workers legally
- Avoid establishing an S.A. de C.V. or local subsidiary
- Stay compliant with ISR (income tax), VAT, and payroll taxes
Your Mexico-based EOR handles all tax withholdings, employer contributions, and filings with SAT (Servicio de Administración Tributaria) and IMSS.
This model is particularly attractive to tech companies, eCommerce brands, and startups testing the Mexican market.
4. Transparency Through Payslips and Reports
Top EORs in Mexico provide real-time payroll documentation, including:
- Itemized payslips (recibos de nómina)
- Employer tax filings
- IMSS payment confirmations
- Monthly and annual payroll summaries
This level of transparency ensures you maintain oversight, even while outsourcing critical back-office functions.
Final Thoughts
Managing payroll and IMSS taxes in Mexico is complicated—but it doesn’t have to be your burden. A reliable payroll Mexico EOR ensures legal compliance, accurate tax contributions, and proper employee registration.
Whether you’re hiring a single remote worker or building a full team in Mexico, EOR services make it easy to expand without legal or fiscal headaches.
Need help navigating payroll, IMSS, and compliance in Mexico? Global Touch supports international companies with turnkey EOR solutions across Latin America.
Contact us to learn how we can simplify your expansion.
