How to Hire

Hiring a Developer in Mexico as a U.S. Company

The demand for skilled software developers continues to grow, and the rise of remote work has opened up new possibilities for U.S. companies to find talent beyond their borders. With its proximity to the U.S., overlapping time zones, and a large pool of talented developers at competitive rates, Mexico has become a leading location for hiring nearshore software developers.

However, navigating Mexican employment laws can be complex. This comprehensive guide provides U.S. employers with the essential information they need to hire nearshore software developers based in Mexico. It covers key aspects of Mexican employment law, compensation and benefits, and other legal and regulatory requirements to ensure compliance and successful hiring.

Overview

Mexico has been consistently striving to develop its technological market. The country sees modernization as a means to cultivate a skilled IT workforce who can work remotely and bring home foreign currency.

The Mexican government has established 38 IT clusters across the country to achieve this goal. These clusters have state-of-the-art equipment with stable electricity and internet. Consequently, nearly 72 percent of Mexicans have access to the internet.

Here are some more facts about Mexico:

Currency: Mexican Peso (MXN)
Language: Spanish
Timezone: GMT-6
Population: 127,600,000
Number of developers: 423,398+
Average developer’s salary range: USD 20,000 – 30,000 per year
Ease of doing business: 71.7/100
Human Capital/Skills: 64.9/100
Working hours: maximum 48 hours/week
National holidays: 8 per year

Employment Laws in Mexico

Mexican labor laws are employee-centric, prioritizing the protection of employee rights and ensuring fair working conditions. The Federal Labor Law (Ley Federal del Trabajo – LFT) is the primary legislation governing employment relationships in Mexico.

Here are some key aspects relevant to hiring nearshore software developers in Mexico:

Employment Contracts

In Mexico, all employment relationships must be formalized with a written contract in Spanish. This contract should clearly outline the terms of employment, including job responsibilities, compensation, working hours, benefits, and termination conditions.

Here are some of the essential clauses that must be included in an employment contract in Mexico:

Employee and Employer Information: This includes the full names, addresses, and relevant identification numbers of both the employee and the employer.

Job Description: A detailed description of the employee’s role, responsibilities, and reporting structure is essential. This clarifies the expectations for the employee and helps avoid misunderstandings.

Compensation and Benefits: The contract should clearly state the employee’s salary, payment frequency (e.g., weekly, bi-weekly, monthly), and details of any additional benefits provided, such as health insurance, retirement plans, or bonuses.

Working Hours and Schedule: The contract should specify the standard working hours, provisions for overtime work (if applicable), and any flexibility in the work schedule.

Termination Clause: This clause outlines the grounds for termination, any applicable notice periods, and severance pay entitlements. It’s important to note that Mexico does not have “at-will” employment, so termination must be justified.

Confidentiality: Provisions to protect confidential company information should be included to safeguard trade secrets and sensitive data.

For remote workers, the contract should also specify the location of work, the percentage of time spent working remotely, and any arrangements for equipment and expenses. For example, if the company provides equipment like laptops or ergonomic chairs, this should be documented in the contract.

Termination of Employment

Unlike the U.S., Mexico does not have the concept of “at-will” employment. This means that employers cannot terminate an employee without a justifiable reason. Termination must be based on legally recognized grounds, such as serious misconduct, poor performance, or economic reasons.

If an employee is terminated without just cause, they are entitled to severance pay, which can be substantial. Severance pay typically includes three months’ salary, 20 days’ pay for each year of service, and other benefits.

The employer is required to formally notify the employee in writing, clearly specifying the reason for termination, payments owed, including accrued wages, unused vacation days and other entitlements and should be signed by the former employee. This document serves as legal proof that both parties agree to the terms of separation and helps avoid further legal conflicts.

While not legally required, it is common practice to provide a two-week notice period for terminations without cause. This is considered a professional courtesy and can help maintain a positive relationship with the departing employee.

Telecommuting Regulations

Mexico has specific regulations for remote work, defined as “telecommuting” when more than 40% of the work is performed outside the traditional office setting. These regulations aim to ensure that remote workers have similar protections and benefits as those working in a traditional office environment.

Here are some key obligations for employers under Mexico’s telecommuting regulations:

Provide Necessary Equipment: Employers must provide remote workers with the necessary equipment to perform their jobs effectively. This may include computers, ergonomic chairs, printers, and other essential tools.

Reimburse Work-Related Expenses: Employers are required to reimburse remote workers for expenses related to their work, such as internet and electricity costs. This helps ensure that employees are not financially disadvantaged by working remotely.

Ensure a Safe Workspace: Employers must ensure that the remote worker’s workspace is safe and ergonomic. This includes factors such as proper lighting, ventilation, and a comfortable work setup.

Respect the Right to Disconnect: Remote workers have the right to disconnect outside of working hours. This means that employers cannot require them to be constantly available or respond to work-related communications during their non-working time. This right promotes work-life balance and prevents employee burnout.

Employees also have responsibilities under these regulations, such as:

Inform Employer of Address Changes: Remote workers must inform their employer of any changes to their work address. This ensures that the employer can maintain accurate records and fulfill any legal obligations related to the employee’s location.

Data Privacy: While there are no specific data privacy requirements for foreign employers regarding the protection of employee personal information for foreign employees working remotely in Mexico, it’s still good practice to handle employee data responsibly and securely.

Working Hours and Public Holidays

Mexico has three main types of work shifts:

Day Shift: 6:00 AM to 8:00 PM, with a maximum of 48 hours per week.

Night Shift: 8:00 PM to 6:00 AM, with a maximum of 42 hours per week.

Mixed Shift: A mix of day and night hours, with a max of 45 hours per week. If more than 3.5 hours fall within the night period, it’s considered a night shift.

That said, the standard workweek by law in Mexico is 48 hours, usually split over six days (Monday to Saturday) 24. However, the most common for office workers is to follow a 40-hour, five-day workweek (Monday to Friday) with a 1-hour unpaid break for meals.

Overtime Regulations

Any work exceeding the standard working hours is considered overtime and must be compensated at a higher rate. For the first nine hours of overtime, employees are entitled to double the regular hourly rate. However this total must be divided across a maximum of three hours of overtime per day, and no more than three days per week. Any additional overtime beyond this is compensated at triple the regular hourly rate.

Public Holidays

Mexico has several public holidays where employees are entitled to paid time off. These holidays celebrate important national events or religious observances.

Here’s a list of 2025 public holidays in Mexico:

January 1st	New Year’s Day
February 5th	Constitution Day
March 21st	Benito Juárez’s Birthday
April 17th	Holy Thursday
April 18th	Good Friday
May 1st	Labor Day
September 16th	Independence Day
November 20th	Revolution Day
December 25th	Christmas Day

If employees are required to work on a public holiday, they must be paid double their regular daily wage. This ensures that employees are fairly compensated for working on days that are typically designated for rest and celebration.

In addition to public holidays, Mexican law mandates a Christmas bonus, known as “Aguinaldo.” This bonus is equivalent to 15 days’ salary and is typically paid before December 20th. If an employee works on a Sunday, they are entitled to a premium of 25% of their regular daily wage.

Probationary Period

When hiring employees in Mexico, it’s important to be aware of the regulations surrounding probationary periods. These periods allow employers to evaluate an employee’s performance before offering them a permanent position.

In Mexico, the probationary period cannot exceed 30 days for general employees or 180 days for management-level positions. During this time, employees have the same rights and benefits as regular employees, including minimum wage, social security, and other entitlements.

It’s important to note that even during the probationary period, termination must be justified. Employers cannot simply dismiss an employee without a valid reason, even if they are still within the probationary period.

Vacation, Sick Leave, and Parental Leave

Mexico has robust laws regarding vacation time, sick leave, and parental leave, ensuring that employees have adequate time off for rest, recovery, and family care.

Vacation

Employees in Mexico are entitled to a minimum of 12 days of paid vacation after one year of service. This entitlement increases with years of service, as shown in the table below:

Years of Service	Vacation Days
1	12
2	14
3	16
4	18
5 – 9	20
10 – 14	22
15 – 19	24
20 – 24	26
25 – 29	28

In addition to their regular salary, employees receive a vacation bonus (“prima vacacional”) of at least 25% of their salary for the vacation period. This bonus is a mandatory benefit and is intended to provide employees with extra financial support during their vacation time.

Sick Leave

Employees in Mexico are entitled to sick leave for illnesses certified by the Mexican Social Security Institute (IMSS). Sick leave can last up to 52 weeks, and employees receive 60% of their salary from the fourth day of illness. This sick leave payment is provided through the IMSS, not directly by the employer. For work-related illnesses or injuries, the employer must pay 100% of the employee’s salary from the first day of their absence.

Maternity and Paternity Leave

Mexico provides both maternity and paternity leave to support working parents.

Maternity Leave: Pregnant employees are entitled to 12 weeks of paid maternity leave, typically six weeks before and six weeks after childbirth. This leave allows mothers to prepare for childbirth, recover from delivery, and care for their newborn.

Paternity Leave: Fathers are entitled to five days of paid paternity leave following the birth or adoption of a child. This leave allows fathers to support their partners and bond with their new child.

Compensation and Benefits

While software developer salaries in Mexico are significantly lower than in the U.S., it’s essential to offer competitive compensation and benefits packages to attract and retain top talent. This can help you compete with other companies, both in Mexico and internationally, for skilled software developers.

Typical benefits for software developers in Mexico may include:

Private health insurance: This is a common benefit as public healthcare may have limitations. Providing private health insurance can be a significant factor in attracting and retaining employees.

“Aguinaldo”: A mandatory Christmas bonus equivalent to at least 15 days’ salary. This bonus is a legal requirement and is typically paid before December 20th.

“Reparto de utilidades”: Profit-sharing, where employees receive a portion of the company’s profits. This can be a valuable benefit that motivates employees and fosters a sense of ownership in the company’s success.

Vacation Bonus: Equal to 25% of the base salary for vacations taken. It must be paid at the time the employee takes their vacation. This ensures employees are compensated during their rest period.

Sick leave: As outlined in the previous sections, these are mandatory benefits that provide employees with time off for rest, recovery, and family care.

Professional development opportunities: Supporting employees’ professional growth through training, certifications, and conference attendance can be a valuable benefit that enhances their skills and career development.

Payroll and Taxes

When hiring remote software developers in Mexico, U.S. employers need to understand their obligations regarding payroll and taxes.

Companies looking to hire in Mexico need to register for a Mexican tax ID. This is a crucial step for complying with Mexican tax laws and fulfilling your obligations as an employer. In addition to registering for a tax ID, you’ll also need to comply with other requirements, such as social security and workers’ compensation insurance. These contributions ensure that your employees are covered in case of illness, injury, or other unforeseen circumstances.

Payroll is usually paid bi-weekly, with deductions for income tax (ISR) and social security. Employers must give employees a detailed payroll receipt showing gross salary, deductions, and net pay, which must be sent electronically through the SAT system. Not following these rules can lead to fines and legal issues.

Managing payroll and taxes in a foreign country can be complex. It’s essential to have systems in place to ensure accurate calculation of salaries, withholdings, and deductions, as well as timely payment of taxes and social security contributions.

Additional Considerations

In addition to the legal and regulatory aspects discussed above, there are some additional considerations for U.S. employers hiring nearshore software developers in Mexico:

Data Privacy: Familiarize yourself with Mexico’s data privacy laws (Federal Law on the Protection of Personal Data Held by Private Parties) to ensure the protection of employee data. This law outlines how personal data must be collected, used, and stored, and it’s crucial to comply with these regulations to avoid legal issues.

Immigration: If the remote software engineer needs to travel to the US for work, ensure they have the necessary visa and work permits. This may involve sponsoring the employee for a work visa and navigating the US immigration process.

Cultural Sensitivity: Be mindful of cultural differences in communication styles and work practices. Building a strong and respectful working relationship with your remote team in Mexico requires understanding and appreciating these cultural nuances.

It’s Easier to Hire in Mexico with Next Idea Tech

Instead of navigating these complexities alone, consider partnering with Next Idea Tech. We specialize in connecting U.S. companies with pre-vetted nearshore software developers based in Latin America, including Mexico, and handle all the legal and HR complexities for you.

By partnering with Next Idea Tech, U.S. companies can:

Bypass the complexities of Mexican employment law: Next Idea Tech handles all legal and regulatory requirements, including employment contracts, payroll, benefits, and tax compliance.

Access a pre-vetted talent pool: Next Idea Tech’s rigorous vetting process ensures that you have access to highly skilled and qualified software developers.

Scale your team quickly and efficiently: Next Idea Tech’s on-demand scalability allows you to adjust your team size as needed, without the hassle of traditional hiring processes.

Focus on your core business: Next Idea Tech takes care of all HR and administrative tasks, allowing you to focus on your core business objectives.

Reduce costs and risks: Next Idea Tech’s comprehensive services can help you reduce hiring costs and mitigate the risks associated with non-compliance with Mexican labor laws.

With Next Idea Tech, you can confidently tap into Mexico’s vibrant tech talent pool without the complexities of navigating the legal and regulatory landscape on your own. Schedule a consultation today to learn more.

Jeremiah