How to Register a Foreign Company to Hire Employees in Mexico (Complete Guide)
Can a Foreign Company Hire Employees Directly in Mexico?
Foreign companies can hire employees in Mexico, but only if they complete the necessary registrations with Mexican authorities. Without a legal presence, direct hiring is not permitted.
Mexican authorities involved include:
- SAT (Tax Administration Service)
- IMSS (Social Security Institute)
- Infonavit (Housing Fund)
- Public Registry of Commerce
- State payroll tax authorities
Foreign companies must complete these processes before legally hiring workers.
Options for Hiring Employees in Mexico as a Foreign Company
Option A: Register a Legal Entity in Mexico
A foreign company may establish one of the following:
- S.A. de C.V.
- S. de R.L. de C.V.
- Branch Office (Sucursal)
Once established, the company can hire employees, run payroll, and fulfill labor obligations.
Option B: Use an Employer of Record (EOR)
An EOR allows you to hire employees without creating a Mexican legal entity.
The EOR becomes the legal employer and manages:
- Payroll
- Taxes
- Social security
- Contracts
- Compliance
This is the fastest and simplest method.
Requirements to Register a Foreign Company to Hire Personnel in Mexico
Step 1: Choose the Legal Structure
The most common structures are:
S.A. de C.V.
Suitable for medium and large operations.
S. de R.L. de C.V.
Preferred by many foreign companies for its flexibility.
Branch Office (Sucursal)
More complex and ties liability directly to the parent company.
Step 2: Prepare Incorporation Documents
These documents outline:
- Corporate purpose
- Ownership structure
- Capital
- Legal representative appointment
They must be formalized before a Mexican notary public.
Step 3: Register with the Public Registry of Commerce
This step grants your company legal recognition in Mexico.
Step 4: Obtain the RFC (Tax ID) from SAT
Foreign companies must obtain a:
- Tax ID (RFC)
- Fiscal representative
- Electronic signature (e.firma)
- Official tax mailbox
The RFC is necessary for payroll, taxes, and invoicing.
Step 5: Register with IMSS
You must register as an employer with IMSS to:
- Provide mandatory social security
- Register employees on day one
- Pay employer contributions
Step 6: Register with Infonavit
Registration is required to:
- Pay employee housing fund contributions
- Stay compliant with federal labor rules
Step 7: Register for State Payroll Taxes
Each state has its own employer registration.
Payroll tax rates typically range from 1%–3%.
Step 8: Set Up Payroll and Compliance Systems
Your company must implement systems for:
- CFDI payroll receipts
- Monthly SAT filings
- Social security reports
- Employment contracts in Spanish
- Internal labor regulations
Timeline for Registration
Timeframes vary, but generally:
- Entity formation: 3–6 weeks
- Tax registration: 1–2 weeks
- IMSS and Infonavit registration: 1 week each
- Payroll setup: 1 week
Costs of Registering a Foreign Company in Mexico
Typical cost categories include:
- Entity formation: $2,000–$5,000 USD
- Notary/legal fees: $1,000–$3,000 USD
- Ongoing accounting/payroll: $300–$1,000 USD monthly
- Payroll burden: 25%–35% above gross salary
The Simplest Alternative: Employer of Record (EOR)
Benefits of Using an EOR
An EOR allows companies to:
- Hire employees immediately
- Avoid creating a legal entity
- Skip SAT, IMSS, and Infonavit registration
- Ensure full compliance
- Onboard employees within 24–48 hours
Ideal for companies that want to expand quickly or test the Mexican market.
Common Mistakes Foreign Companies Make
Misclassifying workers as freelancers
This leads to legal disputes and fines.
Paying employees from abroad
This bypasses social security and creates liabilities.
Failing to issue CFDI payroll receipts
These are mandatory for all employees.
Ignoring state payroll taxes
Non-compliance can trigger audits and penalties.
Not offering mandatory benefits
Mexico has strict labor protections.
Best Practices for Hiring in Mexico
- Use an EOR if you need to hire quickly
- If hiring directly, complete all registrations
- Use compliant Spanish-language contracts
- Issue correct CFDI payroll receipts
- Stay aligned with SAT, IMSS, and labor laws
Conclusion
Foreign companies can legally hire employees in Mexico by registering a local entity or by using an Employer of Record. Direct hiring requires several government registrations and strict compliance, while an EOR enables rapid, fully compliant hiring without establishing a legal presence.
Both paths are valid — the right choice depends on your goals, timeline, and long-term strategy.
