Social Security Contributions in Mexico: What Foreign Employers Must Pay
Expanding your team into Mexico? Whether you’re hiring remote developers, manufacturing staff, or sales reps, it’s not just salary you need to budget for — you’ll also need to account for mandatory social security contributions.
Foreign companies often underestimate how comprehensive (and costly) Mexico’s social security system can be. This article breaks down what you need to know about IMSS obligations, payroll taxes, and how to stay compliant as an international employer.
1. Who Handles Social Security in Mexico?
In Mexico, the main agency responsible for social security is the Instituto Mexicano del Seguro Social (IMSS). It provides access to:
Healthcare
Disability coverage
Parental leave
Retirement pensions
Occupational risk insurance
Employers are legally obligated to enroll their employees in IMSS and contribute monthly on their behalf. This applies even if the company is foreign and doesn’t have a legal entity in Mexico, depending on how the worker is hired.
2. What Are the Mandatory Contributions?
Here’s a general breakdown of social security contributions that employers must cover (as of 2025):
| Contribution Type | Paid By | % of Salary (Approx.) |
|---|---|---|
| Occupational Risk Insurance | Employer | Varies (0.5%–7%) |
| Retirement and Pension (SAR) | Employer/Employee | 6.5% (Employer), 1.125% (Employee) |
| Health and Maternity Insurance | Employer/Employee | 20% (combined) |
| INFONAVIT (Housing Fund) | Employer | 5% |
| Disability and Life Insurance | Employer | 1.75% |
| Sickness and Medical Benefits | Employer/Employee | Variable |
Employers typically contribute 25% to 30% on top of the employee’s gross salary. Failure to comply can result in penalties, audits, and legal claims.
🎯 Need an estimate for your headcount?
Contact Global Touch for a payroll simulation in Mexico.
3. What Happens If You Don’t Pay?
Many foreign companies attempt to classify full-time staff as independent contractors to avoid these contributions. But if the relationship resembles an employment one, this exposes you to:
Reclassification by Mexican authorities
Retroactive IMSS payments
Fines and interest
Lawsuits for labor benefits
Mexican courts often side with workers, and if a labor relationship is proven, you may owe years of unpaid social contributions.
Related reading:
Risks of Misclassifying Workers in Mexico
4. Best Practices for Foreign Employers
✅ Hire Through an Employer of Record (EOR)
An EOR in Mexico can handle:
Legal onboarding and offboarding
IMSS registration and contributions
Payroll tax compliance
Monthly filings and reporting
This helps you avoid the risk and complexity of dealing with SAT (Tax Authority) and IMSS directly.
✅ Ensure Accurate Payroll Calculations
Avoid using foreign payroll systems for Mexican hires. Local payroll needs to:
Be in MXN (pesos)
Include social security and tax deductions
Follow local labor law for holidays, bonuses, and overtime
✅ Provide Clear Contracts and Payslips
Your employment agreements should state:
Social security registration
Employer and employee contribution rates
Net vs. gross salary structure
Payslips must reflect all deductions and be available to the employee upon request.
5. Can Foreign Employers Be Exempt?
If you’re contracting freelancers or invoicing workers, you might think you’re exempt — but this is rarely sustainable if the worker has:
A fixed schedule
Ongoing responsibilities
Supervision or reporting obligations
Only genuine independent contractors are exempt from IMSS. Otherwise, you’re on the hook for contributions and labor benefits.
Conclusion
Social security in Mexico isn’t just a formality — it’s a legal and financial cornerstone of hiring local talent. If you’re a foreign employer, understanding your IMSS obligations is critical to staying compliant, avoiding costly audits, and building trust with your team.
Working with a trusted EOR in Mexico like Global Touch can help you focus on growing your team, while we handle the compliance.