Steps for Terminating a Foreign Employee in Mexico While Remaining Compliant
Updated for 2026
Terminating a foreign employee in Mexico requires strict compliance with Mexican labor law, immigration regulations, and tax obligations. Dismissing a worker improperly can lead to significant financial liabilities, sanctions from the Instituto Nacional de Migración (INM), and litigation before labor authorities. This guide provides a detailed, step-by-step framework to terminate a foreign employee legally and protect your organization from risk.
1. Understand the Legal Framework Governing Foreign Employee Termination
Terminating a foreign employee involves three regulatory bodies:
- Federal Labor Law (Ley Federal del Trabajo)
Governs severance, termination causes, and employer obligations. - Instituto Nacional de Migración (INM)
Must be notified when sponsorship ends, and when employee immigration status changes. - Mexican Tax Authority (SAT)
Requires payroll closure, CFDI termination receipts, and proper ISR calculations.
For more information, see How to Register Foreign Employees with the Mexican Tax Authority (SAT).
The employer’s obligations do not end with the labor separation; they extend into tax reporting and immigration sponsorship responsibility.
2. Step One: Determine the Type of Termination
There are only three legal paths to terminate an employee in Mexico:
A. Voluntary Resignation (Renuncia Voluntaria)
The employee initiates separation, signs a resignation letter, and receives accrued benefits.
B. Termination with Cause (Despido Justificado)
Possible only when the employer can prove a legally recognized cause under Articles 47 and 51 of the Federal Labor Law.
Evidence must be robust, documented, and consistent.
C. Termination Without Cause (Despido Injustificado)
The employer has the right to terminate at any time but must pay full statutory severance.
Incorrect classification of the termination type is one of the most common errors leading to lawsuits.
3. Step Two: Prepare Mandatory Documentation
Before separation occurs, the employer must prepare:
- A written termination notice explaining the cause (if applicable)
- Signed acknowledgment or delivery attempt documentation
- Employee file records (contract, evaluations, warnings, immigration documents)
- Severance calculation (finiquito or indemnización)
- Digital payroll CFDI (SAT requirement)
- Resignation letter (if voluntary)
Foreign nationals often require documentation in both Spanish and English for clarity.
4. Step Three: Calculate Statutory Payments
Mexico mandates specific payments during termination. Failure to calculate correctly leads to legal exposure.
Required Payments Include:
- Accrued salary
- Proportional vacation days
- Vacation premium
- Christmas bonus (Aguinaldo)
- PTU (if applicable)
- Outstanding expense reimbursements
If termination is without cause, must include:
- Three months’ integrated salary
- 20 days per year of service
- Seniority premium
Employers using EOR services will have these calculations handled through compliant payroll channels. To understand EOR support in immigration-related cases, consult The Role of Employer of Record (EOR) Services in Supporting TN Visa Employees.
5. Step Four: Conduct the Termination Meeting
The termination meeting should occur in a professional setting and include:
- A company representative (HR)
- The employee
- A labor attorney or conciliator (optional but recommended)
Best practice involves documenting the interaction and obtaining signatures immediately.
Employers must avoid coercion or pressure tactics, which can invalidate the termination.
6. Step Five: File Required Notifications With the INM
Foreign employees hold work authorization sponsored by their employer. When employment ends:
Employers MUST notify INM within 90 calendar days.
This is required under Article 63 of the Immigration Law.
The employer must provide:
- INM notification form
- Copy of the termination letter
- Identification of the foreign national
- Employer Registration Certificate (CIE) information
If your company has updated its corporate details, ensure INM records are current. For procedures, see How to Update Your Employer Registration Certificate (CIE) with INM After Corporate Changes.
Failure to notify INM can lead to penalties for the employer and future sponsorship complications.
7. Step Six: Address the Employee’s Immigration Status
After termination, the foreign employee must take one of the following actions:
- Change employer (new sponsorship)
- Change to a different residency category
- Leave Mexico and notify authorities at the border
Foreign nationals cannot legally continue working under the previous employer’s sponsorship after separation.
For detailed guidance on related immigration processes, refer to Complete Guide to Work Permits for Foreign Employees in Mexico (2026 Edition).
8. Step Seven: Issue the Final Payroll CFDI
SAT mandates issuance of a final payroll CFDI reflecting:
- Severance payments
- Accrued benefits
- Taxes withheld
- Settlement amounts
This document must be issued in the correct SAT payroll category. Errors can create tax liabilities for both employee and employer.
Official SAT regulations: https://www.sat.gob.mx
9. Step Eight: Prepare for Potential Labor Claims
Foreign employees have the same labor rights as Mexican nationals. Employers should maintain:
- Signed resignation letter (if applicable)
- Evidence of severance payment
- Delivery receipts
- Proper INM notifications
- Correct CFDIs
Proper documentation significantly reduces litigation risk.
10. External Resources
- Mexican Federal Labor Law (LFT): https://www.diputados.gob.mx
- Instituto Nacional de Migración (INM): https://www.gob.mx/inm
- Mexican Tax Authority (SAT): https://www.sat.gob.mx
Final Thoughts
Terminating a foreign employee in Mexico requires precise adherence to labor, tax, and immigration regulations. Companies must follow a structured process that ensures transparency, documentary accuracy, and regulatory compliance. By applying best practices and maintaining proper records, employers protect themselves from lawsuits, fines, and INM penalties while ending the employment relationship respectfully and legally.
Internal Links Included
- How to Register Foreign Employees with the Mexican Tax Authority (SAT)
- The Role of Employer of Record (EOR) Services in Supporting TN Visa Employees
- How to Update Your Employer Registration Certificate (CIE) with INM After Corporate Changes
- Complete Guide to Work Permits for Foreign Employees in Mexico (2026 Edition)
