Hire employees in Mexico from Canada (Complete Guide)
Learn how Canadian companies can hire employees in Mexico legally. Explore entity setup, contractors, and why EOR is the safest and fastest solution
More Canadian companies are turning to Mexico for expansion, attracted by lower employee costs, a skilled talent pool, and proximity through the USMCA. Mexico’s strong industrial and service sectors make it a prime destination for building cross-border teams and nearshoring operations.
However, hiring in Mexico involves several compliance challenges:
Complex labor laws and mandatory employee protections
Payroll and tax obligations under SAT and IMSS regulations
Legal risks from contractor misclassification or non-compliance
In this guide, we’ll explain the three main ways Canadian companies can hire in Mexico: setting up a legal entity, working with an Employer of Record (EOR), or hiring contractors.
Key Hiring Options for Canadian Companies in Mexico
Canadian companies exploring Mexico’s market have three practical ways to hire local talent. Each path differs in compliance requirements, setup time, and long-term suitability.
Knowing how these models work under Mexican law helps businesses choose the safest, most efficient, and most compliant route.
Option 1: Open a Local Mexican Entity
Building a legal entity in Mexico gives Canadian companies full operational and financial control but demands a deep investment of time, resources, and legal expertise. It’s the most traditional yet complex method of hiring.
Extensive legal procedures: You must register the company with SAT (Tax Authority), IMSS (Social Security), and INFONAVIT (Housing Fund), obtain a notarial deed, and complete multiple government filings before operations can begin.
Ongoing accounting and HR obligations: Monthly digital tax reports, payroll submissions, and employee benefit management are mandatory, with strict oversight from Mexican authorities.
Heavy compliance burden: Employers must follow the Federal Labor Law, issue CFDI payroll receipts, and adhere to NOM standards on workplace safety and employment conditions.
This route is best suited for corporations planning a long-term, large-scale presence. For smaller businesses testing the market, the administrative load and costs outweigh the benefits, making this the least agile option.
Option 2: Hire Independent Contractors
Hiring independent contractors might appear flexible or cost-effective, but it exposes companies to serious compliance risks in Mexico. Under the Federal Labor Law, if a contractor works exclusively for one company and follows its directions, the relationship is legally classified as employment.
High legal exposure: Misclassification can lead to back pay, unpaid benefits, IMSS contributions, and a 90-day severance penalty.
Strict independence rules: Contractors must work with multiple clients, issue CFDI invoices, and handle their own taxes to remain compliant.
Not suitable for ongoing roles: Contractor hiring should be limited to project-based or specialized short-term work where subordination does not exist.
While this model can work for certain projects, using contractors for long-term positions violates Mexican labor law and can result in costly disputes or audits.
Option 3: Use an Employer of Record (EOR) in Mexico
Partnering with a Mexican Employer of Record (EOR) gives Canadian companies the ability to hire staff quickly and legally, without forming their own entity. The EOR becomes the legal employer in Mexico while your company manages the employee’s role, work scope, and performance.
Full legal compliance: The EOR handles all contracts, payroll processing, social security registration, and CFDI issuance under Mexican law.
Faster time-to-hire: Employees can start within weeks, or sometimes even days, removing delays related to incorporation or government registration.
Lower operating costs: The EOR model avoids setup fees, accounting retainers, and local HR infrastructure, simplifying expansion for SMEs and startups.
Employee protections guaranteed: All statutory benefits, including IMSS, vacation pay, Christmas bonus (Aguinaldo), and annual profit-sharing (PTU), are managed correctly and on time.
For most Canadian companies, the safest and quickest way to hire in Mexico is through a REPSE-registered Employer of Record like Human Resources Mexico (HRM). HRM offers a fully compliant employment structure, managing payroll, benefits, and HR support with its local Mexican team.
With clear pricing and over 16 years of local experience, HRM provides complete legal protection and authentic human service, which no global platform can match.
Legal and Compliance Framework in Mexico
Hiring in Mexico involves a detailed legal structure that ensures employee protection, fiscal transparency, and accountability for every employer.
Canadian companies expanding into Mexico must comply with multiple national laws that define how employment, payroll, and benefits are managed.
Federal Labor Law (LFT): Governs employment contracts, working hours, wages, severance, profit-sharing (PTU), and employee rights. It defines what constitutes a legal employer and ensures employees receive statutory benefits like vacation pay and Aguinaldo (Christmas bonus).
Social Security Law (IMSS and INFONAVIT): Requires every employee to be registered with IMSS for healthcare and retirement and INFONAVIT for housing benefits. Contributions to both are mandatory and must be managed by the legal employer.
CFDI Payroll Receipts: All salaries must be issued through CFDI (Comprobante Fiscal Digital por Internet) electronic invoices. These digital pay slips are submitted directly to SAT, Mexico’s tax authority, creating a complete legal and fiscal record of each payment.
REPSE Registration: Since the 2021 outsourcing reform, any company offering employment services must hold valid REPSE authorization. This distinguishes legitimate Employers of Record (EORs) from illegal outsourcing firms.
One-Employer Rule: Co-employment is prohibited in Mexico. Each employee must be under a single, legally recognized employer responsible for payroll, taxes, and social security.
Together, these laws ensure that all employees in Mexico are formally hired, fully registered, and protected.
A REPSE-certified EOR in Mexico, like Human Resources Mexico (HRM) guarantees full compliance with each of these legal pillars, giving Canadian companies peace of mind when expanding into Mexico.
Employment Contracts and Labor Standards
In Mexico, every employment relationship must be supported by a written contract; verbal agreements are not legally valid.
These contracts define the rights and obligations of both employer and employee, ensuring transparency and compliance with the Federal Labor Law (LFT).
Written Contracts: Required for all hires, outlining job duties, salary, benefits, and working hours. Failure to provide one can lead to legal presumptions against the employer.
Types of Contracts: The most common are indefinite-term agreements, which offer long-term stability, and fixed-term contracts, used for specific projects or time-bound roles. Each must clearly state the employment duration and conditions for renewal or termination.
Mandatory Clauses: Contracts must cover working hours, compensation, vacation entitlements, confidentiality, intellectual property rights, and compliance with IMSS and INFONAVIT benefits.
Language Requirement: Mexican labor authorities require contracts to be in Spanish for legal enforcement. However, bilingual contracts are best for Canadian employers to ensure both parties fully understand the terms.
Cultural and Labor Standards: Mexican workplace culture values respect, work-life balance, and employee protections. Employers must honor all statutory benefits, avoid discrimination, and respect union rights.
Human Resources Mexico (HRM) manages every aspect of contract drafting, translation, and compliance — ensuring all agreements meet Mexican legal standards while remaining clear and enforceable for Canadian companies.
Mandatory Employee Benefits in Mexico
Mexican labor law guarantees employees a range of statutory benefits that employers must provide, regardless of company size or sector. These entitlements are non-negotiable and are central to compliance under the Federal Labor Law and Social Security Law.
Aguinaldo (Christmas Bonus): A mandatory annual payment equal to at least 15 days of salary, paid before December 20 each year. Many employers offer more as part of competitive packages.
Vacation and Vacation Premium: Employees are entitled to a minimum of six paid vacation days after one year of service, increasing with seniority. A 25% vacation premium must be paid on top of regular salary during leave.
Public Holidays and Paid Leave: Mexico recognizes multiple federal holidays and paid leave for maternity, paternity, and illness, covered through IMSS benefits.
Profit Sharing (PTU): Employees receive 10% of the company’s taxable profits, distributed annually as mandated by law.
Social Security and Health Coverage: Registration with IMSS provides access to healthcare, retirement pensions, and disability benefits. INFONAVIT contributions support housing loans.
Unlike Canada, these benefits are mandatory and legally enforced by Mexican authorities. Employers of Record (EORs) like Human Resources Mexico (HRM) manage all calculations, filings, and benefit payments automatically, ensuring full compliance and accurate employee coverage.
Termination Rules and Severance Obligations
Mexico’s termination laws are highly protective of employees, making it essential for Canadian companies to understand the correct legal process. Unlike Canada, Mexico does not recognize “at-will” employment, meaning terminations must follow specific legal grounds and procedures.
Termination With Cause: The Federal Labor Law lists limited reasons that justify dismissal, such as dishonesty, repeated absenteeism, or breach of confidentiality. Each case must be documented with evidence and communicated in writing. If the employer fails to prove cause, the termination is considered unjustified.
Termination Without Cause: When an employee is dismissed for reasons unrelated to misconduct, the company must provide mandatory severance equal to 90 days of salary, plus 20 days per year of service, accrued benefits, unused vacation, and proportional Aguinaldo.
Notice and Procedure: Employers must notify the employee in writing and comply with the conciliation process before the Federal Labor Board if disputes arise. Improper handling can lead to penalties and reinstatement orders.
In Mexico, termination risk is considerably higher than in Canada due to these strict laws. Human Resources Mexico (HRM) ensures complete compliance by managing severance calculations, legal documentation, and payouts directly — protecting client companies from costly labor disputes.
Independent Contractor Risks (Important for Canadian Firms)
Many Canadian companies consider hiring independent contractors in Mexico to save time and reduce costs. However, this approach can create serious legal and financial risks due to Mexico’s strict definition of employment and the concept of “subordination.”
Subordination Explained: Under Mexican labor law, if a contractor works exclusively for one company, follows its instructions, or uses its equipment, that individual is legally classified as an employee — not an independent contractor. This means the company becomes liable for all employee rights and benefits.
Retroactive Claims and Penalties: A misclassified contractor can retroactively demand full employee entitlements, including unpaid wages, vacation pay, profit sharing (PTU), and severance. Employers may also face back payments to IMSS and INFONAVIT, plus heavy fines for labor law violations.
Requirements for True Contractors: To remain compliant, contractors must have multiple clients, issue CFDI invoices for each project, manage their own taxes, and use their own tools or equipment. Few meet all these standards consistently.
Because of these risks, direct contractor hiring is rarely advisable for foreign companies. A REPSE-registered Employer of Record (EOR) like Human Resources Mexico ensures full compliance by hiring workers legally, managing payroll, and eliminating the threat of misclassification penalties.
Costs, Salary Expectations, and Market Outlook
Mexico offers a competitive and skilled labor market that’s highly attractive for Canadian companies seeking cost efficiency without compromising quality. Salaries in Mexico are substantially lower than in Canada, with savings often exceeding 60–70% across most professional categories.
Average Salary Ranges: Skilled professionals in IT earn between MXN 35,000–60,000 per month, administrative and support staff typically make MXN 18,000–30,000, and finance or accounting specialists range from MXN 25,000–45,000 depending on experience and location. These rates reflect local purchasing power while providing excellent value for international employers.
EOR Cost Structure: Partnering with an Employer of Record usually involves a 15–25% service markup covering payroll management, taxes, benefits, compliance, and HR administration. This allows companies to predict total employment costs accurately.
Market Comparison: Compared to Canada, total employment costs in Mexico, including benefits and employer contributions, remain dramatically lower, giving businesses a strong incentive for nearshoring.
Human Resources Mexico (HRM) applies a simple, transparent percentage markup on gross taxable pay — no onboarding, FX, or hidden fees.
This clarity sets HRM apart from global SaaS-based EOR platforms that often add layered service charges, ensuring Canadian companies know exactly what they pay and why.
Why Employer of Record (EOR) Is the Best Route for Canadian Companies
For Canadian companies expanding into Mexico, partnering with a REPSE-certified Employer of Record (EOR) is the most efficient, compliant, and low-risk hiring model available. It eliminates the complexity of setting up a local entity while ensuring every employment obligation under Mexican law is met.
Full Legal Compliance: A compliant EOR manages all employer responsibilities under the Federal Labor Law (LFT), Social Security Law (IMSS), and tax authority (SAT). Employees are properly registered, taxed, and insured from day one.
No Entity Setup Required: The EOR acts as the legal employer, allowing companies to operate immediately without incorporation, bank accounts, or legal filings.
Fast and Seamless Hiring: Onboarding can be completed within days, not months, enabling rapid team deployment for projects or market entry.
Complete HR and Payroll Support: HRM’s bilingual team manages payroll processing, CFDI receipts, IMSS registrations, benefits, severance, and PTU distribution — all in-house for accuracy and confidentiality.
Transparent Pricing: HRM uses a single markup model on gross taxable pay, with no onboarding, FX, or offboarding fees — unlike global SaaS EOR platforms that charge hidden add-ons.
With a local presence, REPSE certification, and 16+ years of in-country expertise, Human Resources Mexico (HRM) delivers a fully human, transparent, and compliant EOR solution tailored for Canadian businesses hiring in Mexico.
Common Mistakes Canadian Companies Should Avoid
Many Canadian businesses enter the Mexican market with good intentions but make costly compliance mistakes that lead to penalties, lawsuits, or employee disputes. Understanding these risks is essential before choosing how to hire and manage staff locally.
Hiring Contractors Instead of Employees: Treating full-time workers as contractors violates Mexico’s “subordination” rule. Misclassified contractors can claim employee rights retroactively, leading to back pay, IMSS debts, and fines.
Using Non-REPSE Global Platforms: Most global EOR platforms—like Deel, Remote, or Skuad—lack valid REPSE registration and operate through fiscal shell entities or third-party partners. These setups are not legally authorized to act as Employers of Record in Mexico, exposing clients to severe legal risk and inflated costs.
Improper Payroll and Currency Payments: Paying salaries in foreign currency or skipping official CFDI payroll receipts violates SAT and IMSS reporting rules, which can trigger audits and penalties.
Incorrect Severance Handling: Mexico’s labor laws require a 90-day severance plus accrued benefits for unjustified terminations. Failing to calculate or deliver this properly can result in legal claims.
Lack of Bilingual Documentation: All contracts must be in Spanish to hold legal value, and bilingual copies protect both parties.
Human Resources Mexico (HRM) eliminates these risks entirely — operating as a REPSE-certified, fully local EOR that manages payroll, benefits, and compliance lawfully and transparently for Canadian companies.
Conclusion
Hiring employees in Mexico from Canada is entirely achievable with the right legal structure and trusted local partner. Working with a REPSE-registered Employer of Record (EOR) ensures full compliance with Mexican labor, tax, and social security laws — without the need to open a local entity.
Human Resources Mexico (HRM) provides transparent, bilingual, and fully managed EOR services, covering payroll, IMSS registration, severance, and benefits in-house.
With 16+ years of local expertise, HRM enables fast, compliant onboarding and peace of mind for Canadian companies expanding into Mexico.
Get a custom proposal today and start hiring confidently.
FAQs
Can a Canadian company hire remote employees in Mexico without a legal entity?
Yes. A Canadian company can legally hire remote employees in Mexico through a REPSE-registered Employer of Record (EOR). The EOR becomes the official employer, managing contracts, payroll, benefits, and taxes in full compliance with Mexican labor and social security laws.
What is the safest way for a Canadian company to pay employees in Mexico?
The safest way is through the EOR’s local payroll system, which issues official CFDI pay slips in pesos. This ensures that all salaries, taxes, and benefits are properly recorded with SAT and IMSS, keeping the company fully compliant with Mexican financial and tax regulations.
How long does it take to hire in Mexico through an EOR?
Hiring through an EOR is fast and efficient, typically taking 3–7 business days once employee documents are verified. The EOR handles onboarding, contract creation, IMSS registration, and CFDI payroll setup, allowing Canadian companies to begin operations quickly and legally without establishing a local entity.
Do Canadian companies pay Mexican social security?
Yes. All employees in Mexico must be registered with IMSS. However, the EOR manages contributions, filings, and benefits directly with social security authorities, ensuring timely payments and complete compliance, while the Canadian company reimburses these costs as part of the transparent monthly service fee.
What makes HRM different from global EOR platforms?
Human Resources Mexico (HRM) operates exclusively in Mexico with full REPSE registration, a physical office, and a bilingual HR and payroll team. Unlike global SaaS EOR platforms using shell entities or undisclosed partners, HRM provides real local presence, transparent pricing, and fully human HR support for every employee.
