/ Recursos Humanos / By

Opening a Factory in Mexico: Labor, Safety, and Permit Requirements

As global manufacturing shifts away from Asia, Mexico has emerged as a prime destination for factory expansion—offering proximity to the U.S., favorable trade agreements, and a skilled labor force. But setting up a factory in Mexico involves more than choosing a site and breaking ground. It requires strict compliance with labor laws, safety standards, and regulatory permits that vary by region and industry.

This guide walks you through the essentials of establishing a manufacturing operation in Mexico, with legal and practical insights for multinational companies.

Why Mexico for Manufacturing?

Mexico’s appeal lies in its:

  • Strategic location near the U.S. market
  • Access to 50+ global trade partners through free trade agreements
  • Competitive labor costs
  • Advanced logistics and industrial parks
  • Specialized workforce in automotive, aerospace, electronics, and textiles

According to Statista, the manufacturing sector contributes over 18% to Mexico’s GDP, making it a critical pillar of economic growth.

1. Labor Law Compliance in Mexico

Hiring employees for your factory in Mexico involves strict adherence to Mexican labor law (Ley Federal del Trabajo), including:

  • Written employment contracts
  • Mandatory benefits such as vacation days, profit sharing (PTU), Aguinaldo, and IMSS (social security)
  • Employee union rights
  • Standard 48-hour work week and overtime regulations

Related Article:

What Are the Different Types of Employment Contracts in Mexico?

Failure to comply can result in:

  • Severe fines
  • Audits from the Ministry of Labor (STPS)
  • Closure of facilities in extreme cases

To avoid such risks, companies often rely on an Employer of Record (EOR) to handle compliant hiring. Learn how Global Touch helps international manufacturers stay compliant while building a workforce in Mexico.

2. Safety and Environmental Standards

Factories in Mexico must meet national and state-level occupational safety and environmental laws, such as:

  • Compliance with NOM standards (Official Mexican Standards)
  • Mandatory training for hazardous material handling
  • Proper ventilation, noise, and waste management
  • Inspections by the STPS and PROFEPA (Federal Attorney for Environmental Protection)

For a list of applicable NOMs by industry, visit DOF – Diario Oficial de la Federación.

Neglecting these standards may lead to:

  • Suspension of activities
  • Revocation of operating licenses
  • Criminal liability for executives in case of accidents

3. Key Permits and Licenses

Depending on your factory’s location and activity, you’ll need to secure:

Federal Permits:

  • Land Use Permits (Uso de Suelo)
  • Environmental Impact Assessments (MIA)
  • Water and Wastewater Discharge Permits

Local/State Permits:

  • Construction Licenses
  • Operating License (Licencia de Funcionamiento)
  • Civil Protection Certification
  • Electrical Installation Approval (CFE)

Permit times range from 3 to 12 months and often require engaging local experts or legal counsel to navigate bureaucratic layers.

4. Union Considerations and Labor Relations

Unions play a major role in Mexico’s manufacturing ecosystem. Recent reforms (e.g., 2019 labor reform aligned with USMCA) promote:

  • Transparent union elections
  • Worker consultation for collective contracts
  • Independent unionization

Employers must now register contracts and union activity with the Centro Federal de Conciliación y Registro Laboral (CFCRL). Learn more about union reform on USMCA Labor Fact Sheet (ustr.gov).

5. Tax and Trade Incentives for Manufacturers

Mexico offers various fiscal incentives for manufacturers through:

  • IMMEX program: Exempts import taxes on raw materials and machinery
  • Prosec program: Reduces import duties on key manufacturing inputs
  • Free Trade Zones and Shelter programs

Consult with a local tax advisor or Global Touch’s compliance team to explore the best setup.

Conclusion

Opening a factory in Mexico is a smart strategic move—but one that demands careful legal, labor, and environmental planning. Ensuring labor law compliance, meeting safety standards, and acquiring the right permits are not just checkboxes—they are foundational to long-term success.

By partnering with a local expert or Employer of Record (EOR), your company can streamline the expansion process, avoid regulatory headaches, and focus on production and growth.

Ready to expand into Mexico?
Talk to our team to ensure your factory launch meets every legal requirement.