Payroll Compliance for Binational Employees Living in San Diego and Working in Tijuana
In the Tijuana–San Diego border region, it’s increasingly common to hire binational employees—individuals who reside in the U.S. but work physically in Mexico or have hybrid arrangements. This setup can offer flexibility, cultural alignment, and access to high-quality talent. However, it also brings a complex web of tax, labor, and immigration compliance challenges.
If your company employs U.S.-resident individuals who commute to Tijuana—or you’re planning to hire binational talent—this guide will help you understand what’s legal, what’s risky, and how to stay compliant.
🌐 Who Are Binational Employees?
Binational employees typically:
- Live in San Diego County (or nearby)
- Are U.S. citizens or permanent residents
- Work in Tijuana (in-person, hybrid, or remotely)
- May cross the border daily or weekly
They may be hired for roles in BPOs, call centers, engineering, manufacturing support, IT, or bilingual customer service.
⚖️ Key Payroll Obligations in Mexico
Even if the employee resides in the U.S., Mexican labor law applies as long as:
- The services are rendered physically in Mexico, and
- The employer operates or is registered in Mexico
That means you must:
- Register them with IMSS (social security)
- Issue official Mexican payroll (CFDI de nómina)
- Deduct and pay ISR, IMSS, INFONAVIT, and other contributions
- Provide all required benefits, such as aguinaldo, vacation, profit sharing (PTU), etc.
🔗 Related: What Foreign Employers Must Pay for Social Security in Mexico
🇺🇸 What If You Pay Them in the U.S.?
Some employers try to pay these workers in USD via U.S. payroll systems to simplify administration. But that approach can trigger risks:
- No legal employment relationship in Mexico, leading to lack of labor protection
- Violations of Mexico’s outsourcing and labor laws if the U.S. entity isn’t registered locally
- Exposure to permanent establishment (PE) tax risks if the employee generates revenue in Mexico
- The worker may still owe taxes in Mexico if their activities are considered source-based income
📌 Bottom line: If work is performed in Mexico, Mexican payroll obligations apply—regardless of citizenship or residence.
🛂 Immigration Considerations
If the employee is not a Mexican citizen, they must have legal permission to work in Mexico. Options include:
- Temporary resident visa with work permit (for U.S. citizens or other foreigners)
- Dual citizenship (common in this region)
- Work visas sponsored by a registered Mexican entity
Working in Tijuana without proper authorization can result in deportation or fines—for both the worker and employer.
🧾 Payroll Structuring Options
Here are 3 common (legal) structures used by compliant companies:
| Model | Description | Considerations |
|---|---|---|
| 🇲🇽 Full Mexican payroll | Employee is hired, paid, and taxed in Mexico | Most compliant for work performed in Mexico |
| 🌐 Dual structure | Paid partly in Mexico (base salary), partly in the U.S. (bonus, commissions) | Complex tax reporting; must be carefully designed |
| 🤝 EOR model | An Employer of Record in Mexico hires and pays the worker | Reduces risk for companies without a Mexican entity |
📋 Best Practices for Compliance
- Issue all payments via legal payroll in Mexico
- Provide benefits under LFT (Federal Labor Law) regardless of U.S. residence
- Have a clear written contract stating location, obligations, and legal employer
- Work with a legal or EOR partner experienced in cross-border HR
- Avoid “independent contractor” schemes for full-time roles—they’re red flags
🧠 Final Thoughts
Cross-border employment offers exciting opportunities—but mishandling payroll for binational employees can lead to fines, audits, or even criminal charges. Don’t assume that living in San Diego exempts someone from Mexican labor law if their work is done in Tijuana.
To stay compliant, structure payroll legally in Mexico, issue proper documentation, and ensure you understand your labor, tax, and immigration exposure on both sides of the border.
