Why UK Companies Are Expanding Hiring in Mexico

UK companies are increasingly expanding into Mexico as part of a global trend toward nearshoring and building cross-continental teams. Mexico’s economic stability, workforce quality, and trade accessibility make it an ideal base for supporting international operations, especially across the Americas.

• Bilingual Talent Pool: Mexico offers a growing supply of bilingual professionals fluent in English and Spanish — essential for managing LATAM operations and customer support.
  
  

• Proximity to the U.S. Market: Its strategic location enables UK firms to collaborate seamlessly with North American clients and partners across similar time zones.
  
  

• Emerging Tech and Finance Hubs: Mexico’s rapid growth in technology, fintech, and shared services makes it an attractive site for knowledge-based roles.
  
  

• Lower Employment Costs: Labor costs, including benefits and taxes, are considerably lower than in the UK, allowing companies to scale more efficiently.
  
  

• Strong Trade Relations: The UK–Mexico Continuity Trade Agreement (UKMCA) reinforces cooperation, ensuring stable trade and investment conditions for British businesses.
  
  

Together, these factors make Mexico a powerful gateway for UK companies seeking skilled, affordable, and compliant international teams. Let’s explore how British employers can legally and efficiently hire in Mexico while staying fully compliant with local laws.

Legal Ways for UK Companies to Hire in Mexico

UK companies looking to build teams in Mexico have three primary legal pathways for hiring local professionals. Each option comes with its own level of control, compliance responsibility, and financial commitment.

Understanding these models helps British employers choose the most effective and legally secure approach for their expansion.

Option 1: Set Up a Mexican Entity

Creating a legal entity in Mexico gives UK companies complete control over their operations, payroll, and employee management. However, it also requires a substantial investment of time, money, and administrative resources.

• Legal Incorporation: The company must register with SAT (Tax Authority), IMSS (Social Security), and INFONAVIT (Housing Fund) while obtaining all necessary legal permits and a Mexican tax ID.
  
  

• Ongoing Compliance: Employers must issue CFDI payroll receipts, manage monthly accounting filings, and ensure compliance with the Federal Labor Law (LFT) and Social Security Law.
  
  

• Complex Accounting Requirements: Mexican tax law requires employers to upload electronic accounting records monthly, and errors can result in financial penalties.
  
  

• Cost and Timelines: Incorporation can take several months and requires local representation, legal counsel, and HR infrastructure.
  
  

This model is best suited for large UK corporations planning a long-term presence in Mexico. For smaller or mid-sized firms, the high setup costs and administrative burdens often outweigh the benefits.

Option 2: Hire Independent Contractors in Mexico

Hiring independent contractors may seem appealing for flexibility and lower costs, but it poses serious compliance risks under Mexican labor law. The concept of “subordination” determines whether a worker is legally considered an employee.

• Subordination Risk: If a contractor works exclusively for one company, follows its instructions, and uses its tools, the relationship is deemed employment, not contract work.
  
  

• Legal Consequences: Misclassification can lead to retroactive claims for unpaid benefits, severance, social security contributions, and even criminal penalties for tax evasion.
  
  

• True Contractor Requirements: To remain compliant, contractors must serve multiple clients, issue CFDI invoices, and handle their own tax obligations.
  
  

While contractors are suitable for short-term or project-based work, using them for ongoing roles exposes UK businesses to high legal and financial risks.

Option 3: Use a Local Employer of Record (EOR) in Mexico

Partnering with a REPSE-registered Employer of Record (EOR) is the most efficient and compliant solution for UK companies hiring in Mexico. The EOR becomes the legal employer of the staff while the UK company manages their daily work and performance.

• Full Legal Compliance: The EOR handles employment contracts, payroll, taxes, IMSS registration, and CFDI issuance in accordance with Mexican law.
  
  

• No Entity Setup Required: Companies can hire staff within days without opening a subsidiary or navigating complex incorporation procedures.
  
  

• Transparent Costs and Support: All employment expenses are consolidated into one predictable monthly invoice, supported by bilingual HR professionals.
  
  

• Complete Risk Mitigation: The EOR assumes all employer responsibilities, eliminating risks related to misclassification, severance, or benefit mismanagement.
  
  

Most UK companies choose to work with a local, REPSE-registered EOR like Human Resources Mexico (HRM) to ensure full compliance, transparency, and peace of mind.

HRM’s on-the-ground presence, bilingual HR team, and human-centered support model make it the most trusted partner for British firms expanding into Mexico safely and efficiently.

Mexico’s Employment Law and Contract Requirements

Employment relationships in Mexico are highly regulated, and unlike the UK, verbal agreements or casual arrangements are not legally valid.

Every employee must have a written employment contract, and a Spanish-language version is mandatory for legal enforcement before Mexican authorities.

• Mandatory Written Contracts: All hires must be supported by formal contracts outlining job duties, salary, benefits, and working hours. Failure to provide one may lead to legal presumptions in favor of the employee.
  
  

• Contract Types: Mexico recognizes both indefinite-term and fixed-term agreements, but does not allow zero-hour or casual contracts common in the UK. Each contract must clearly define the employment duration, renewal terms, and termination clauses.
  
  

• Content Requirements: Contracts must specify salary, benefits, working hours, vacation entitlement, confidentiality, and intellectual property ownership. They must also detail how terminations and severance will be handled under Mexican law.
  
  

• Employee Protections: The Federal Labor Law (LFT) provides stronger job security than UK law, limiting dismissals and requiring mandatory severance pay for unjustified termination.
  
  

For UK companies, compliance can be complex. A REPSE-registered Employer of Record (EOR) like Human Resources Mexico (HRM) ensures that all contracts are bilingual, compliant, and legally binding — protecting both employer and employee under Mexican labor regulations.

Payroll, Tax, and Social Security for UK Employers in Mexico

Payroll and taxation in Mexico operate under a centralized digital system that is very different from the UK’s PAYE framework.

All employees must be paid in Mexican pesos (MXN) through a local bank account, with salaries processed and reported electronically to Mexico’s tax authority (SAT).

• Mandatory Employer Contributions: Employers must contribute to IMSS (Mexican Social Security Institute) for healthcare, retirement, and disability insurance, and to INFONAVIT (National Housing Fund), which supports employee home loans.
  
  

• Taxes and Deductions: Monthly withholdings include ISR (Income Tax), IMSS contributions, INFONAVIT payments, and applicable state taxes. These are automatically deducted and remitted by the employer to maintain full compliance.
  
  

• CFDI Payroll Receipts: Each payment must be issued as a CFDI digital invoice, a government-approved payslip submitted to SAT. These records confirm tax and benefit contributions for both employer and employee.
  
  

• Employer Cost Burden: On average, total employment costs amount to 25–35% above base salary, covering all mandatory taxes and benefits.
  
  

For UK-based employers, there are no PAYE, National Insurance, or UK pension obligations when employment is governed under Mexican jurisdiction.

A REPSE-registered Employer of Record (EOR) like Human Resources Mexico (HRM) manages payroll, tax filings, and benefit administration locally, ensuring full compliance and transparent reporting.

Mandatory Employee Benefits Under Mexican Law

When UK companies hire employees in Mexico, they must comply with a range of mandatory benefits established under the Federal Labor Law (LFT). These entitlements are non-negotiable and must be provided to every employee, regardless of position or seniority.

• Aguinaldo (Christmas Bonus): A mandatory annual bonus equal to at least 15 days of salary, payable before December 20 each year.
  
  

• Paid Vacation: Employees receive a minimum of 12 paid vacation days after one year of service, which increase with each additional year.
  
  

• Vacation Premium: Employers must pay a 25% premium on top of the employee’s daily wage during their vacation period.
  
  

• Profit Sharing (PTU): Companies are legally required to distribute 10% of their taxable annual profit among eligible employees.
  
  

• Social Security and Healthcare: All workers must be registered with IMSS, providing access to medical care, retirement benefits, and disability coverage.
  
  

• Public Holidays and Leave: Employees are entitled to 8–10 national holidays annually, plus maternity, paternity, and medical leave under IMSS coverage.
  
  

Unlike the UK, where benefits such as bonuses or pensions can vary by employer, Mexico’s benefits are mandated by law and cannot be waived or replaced.

We at Human Resources Mexico (HRM) ensure these statutory obligations are managed accurately, keeping UK companies fully compliant.

How to Handle Payroll and Payments from the UK to Mexico

Managing payroll and payments from the UK to Mexico requires careful attention to local currency regulations, tax compliance, and financial reporting standards.

Unlike in the UK, where employers can pay staff directly in GBP, Mexican law mandates that all payroll be processed locally and in Mexican pesos (MXN).

• Local Payroll Requirement: Payroll must be managed through a Mexican legal entity or a REPSE-registered Employer of Record (EOR). This ensures that salaries, taxes, and social security contributions are properly recorded and reported to SAT, Mexico’s tax authority.
  
  

• Currency Compliance: All employee payments must be made in pesos through a local bank account. Paying in GBP or foreign currency is considered non-compliant and can result in tax penalties.
  
  

• Cross-Border Transfer Challenges: Direct transfers from the UK to Mexico are subject to foreign exchange (FX) margins, intermediary bank fees, and potential delays. These can distort payroll timing and create reconciliation challenges.
  
  

• EOR Advantage: A local EOR like Human Resources Mexico (HRM) receives funds from the UK company and processes all employee payments in pesos, issuing CFDI payroll receipts that comply with SAT standards.
  
  

UK companies should avoid paying employees directly from the UK, as this can trigger Mexican tax audits and create double-taxation exposure. Partnering with HRM ensures fully compliant, on-time payroll management without FX complications or audit risk.

UK-Mexico Double Taxation Agreement and Permanent Establishment Risk

Many UK businesses expanding into Mexico underestimate the tax implications of having staff on the ground. The UK–Mexico Double Taxation Agreement prevents double taxation but also defines when a foreign company becomes subject to Mexican taxes through Permanent Establishment (PE) rules.

Understanding these provisions is vital before hiring directly.

• Permanent Establishment Defined: A PE is created when a foreign company has employees, managers, or agents operating in Mexico under its company name or controlling business activities. Once this threshold is met, the company becomes liable for Mexican corporate income tax, VAT, and local reporting.
  
  

• How It Happens: Even one employee signing contracts, managing operations, or representing the company locally can trigger PE status. This leads to complex tax filings, accounting obligations, and possible fines for undeclared operations.
  
  

• EOR Compliance Solution: Partnering with a REPSE-registered Employer of Record (EOR) prevents this issue entirely. The EOR becomes the legal employer in Mexico, handling payroll, tax withholdings, and compliance while the UK company directs daily work.
  
  

This structure allows British firms to expand into Mexico without creating a taxable presence. Human Resources Mexico (HRM) provides a compliant, legally secure EOR framework that eliminates PE risk while ensuring smooth, transparent cross-border employment.

Cost of Hiring Employees in Mexico from the UK

For UK companies, Mexico offers exceptional value when it comes to hiring skilled professionals. Labor costs are significantly lower than in the UK, allowing businesses to expand teams and capabilities without compromising on quality or compliance.

• Average Salary Range: Skilled professionals in Mexico typically earn between USD $1,200 and $2,500 per month, depending on experience and industry.
  
  

• Total Employer Cost: When including mandatory benefits such as IMSS contributions, INFONAVIT, Aguinaldo, vacation premium, and PTU, the total employer cost is usually 25–35% higher than the gross salary. For instance, a developer earning USD $2,000 monthly may cost around USD $2,600 to $2,700 in total.
  
  

• UK Comparison: Equivalent roles in the UK cost two to three times more, even before factoring in National Insurance, pensions, or office overheads. This cost differential allows UK firms to build high-quality remote teams or support hubs in Mexico at a fraction of the expense.
  
  

Through a REPSE-registered Employer of Record (EOR) like Human Resources Mexico (HRM), all employment costs are consolidated under a single transparent markup, ensuring full visibility, legal compliance, and predictable monthly budgeting.

This model enables UK companies to scale efficiently while maintaining compliance and cost control.

Why Global EOR Platforms Fail in Mexico (Hidden Risks for UK Companies)

Many global Employer of Record (EOR) platforms promote multi-country coverage but are not legally structured to operate in Mexico.

For UK companies, this creates significant compliance and reputational risks. Despite their advanced technology, these platforms lack the legal foundation required by Mexican authorities.

• Lack of REPSE Registration: Most global EORs, including Deel, Remote, and Skuad, do not hold valid REPSE authorization — a legal requirement for any company providing employment services in Mexico.
  
  

• Third-Party Subcontracting: They often operate through undisclosed local partners, meaning the client rarely knows who the actual employer of record is. This lack of transparency creates liability in the event of labor disputes or audits.
  
  

• CFDI and IMSS Non-Compliance: Without REPSE status, they cannot issue CFDI payroll receipts or register employees directly with IMSS, violating tax and social security regulations.
  
  

• Hidden Fees and Unclear Costs: Many add “profit-sharing” or “compliance” surcharges, despite not generating profits in Mexico — concealing unregistered operations.
  
  

• Limited Human Support: Services are primarily software-driven, with no bilingual HR presence in Mexico, leaving employees without real local support.
  
  

• Illegal Contractor Promotion: Some platforms promote hiring independent contractors, which is illegal under the Federal Labor Law when there is subordination.
  
  

UK companies should partner with a real Mexican EOR like Human Resources Mexico (HRM) — fully REPSE-registered, physically based in Mexico, and providing transparent, bilingual HR and payroll support.

Why Choose HRM to Hire Employees in Mexico from the UK

For UK companies expanding into Mexico, Human Resources Mexico (HRM) offers the most reliable, transparent, and compliant Employer of Record (EOR) solution.

With over 16 years of experience operating exclusively in Mexico, HRM combines legal expertise, local presence, and personalized service to make international hiring simple and risk-free.

• Fully REPSE-Certified and Compliant: HRM is officially registered with Mexico’s Secretaría del Trabajo y Previsión Social (STPS), meeting all requirements of the 2021 outsourcing reform. This ensures complete legal compliance for every employment relationship.
  
  

• Local Presence and Real Team: Unlike global SaaS platforms that rely on hidden partners, HRM operates from its own physical office in Mexico City, staffed by bilingual HR, legal, and payroll professionals.
  
  

• Transparent Pricing: HRM uses a clear, single-markup model based on gross taxable pay — no onboarding, FX, or offboarding fees. Every client knows exactly what they pay each month.
  
  

• Human-Centered Support: Both clients and employees receive 100% human assistance from real HR professionals in English and Spanish, no automated chatbots or ticket systems.
  
  

For UK companies seeking a secure, fully managed hiring model, HRM delivers the complete package — compliance, cost transparency, and genuine human service, ensuring every hire in Mexico is legal, protected, and supported.

Get a custom proposal today and start hiring confidently.

FAQs

Can a UK company legally hire employees in Mexico without an entity?

Yes. A UK company can legally hire in Mexico through a REPSE-registered Employer of Record (EOR) such as Human Resources Mexico (HRM). The EOR becomes the legal employer, managing contracts, payroll, taxes, and compliance, allowing the UK business to operate smoothly without establishing its own Mexican entity.

Do UK companies pay Mexican social security?

Yes. Employers must contribute to IMSS (social security) and INFONAVIT (housing fund). However, these payments are made locally by the EOR on behalf of the UK company. HRM ensures that all contributions, filings, and benefit calculations are handled accurately and on time under Mexican law.

How long does it take to hire employees in Mexico from the UK?

Hiring through an EOR is fast and compliant. Once documents are verified and approved, onboarding typically takes 3–7 business days. HRM prepares contracts, registers employees with IMSS, and initiates payroll immediately, enabling UK companies to start operations quickly and legally in Mexico.

What currency should UK employers use for paying Mexican employees?

All employees in Mexico must be paid in Mexican pesos (MXN) via a local payroll system. Payments in foreign currency are non-compliant and may trigger audits by Mexican authorities. HRM manages all salary payments locally, ensuring compliance with SAT and labor regulations.

What makes HRM better than global EOR providers?

Human Resources Mexico (HRM) operates exclusively in Mexico with full REPSE certification, a local office, and a bilingual HR team. Unlike global SaaS EORs that depend on shell entities or third-party partners, HRM provides real human HR support, transparent pricing, and complete legal accountability in Mexico.