Hiring in Mexico: the most employee-protective law in North America.

Mexico has one of the most pro-employee labour codes in the Americas. The Ley Federal del Trabajo (LFT) doesn't read like a US-style framework where everything not forbidden is allowed; it reads like a list of rights that cannot be waived, even by mutual agreement. Founders coming from the US or Canada are routinely shocked by three things: the aguinaldo (mandatory Christmas bonus), the PTU (mandatory profit sharing), and the cost of terminating someone without 'just cause' under Article 47.

Mexico is also one of the most attractive nearshore markets in the world right now — same time zones as the US, strong engineering talent, USMCA tailwinds. If you're going to hire here, do it properly the first time. The cost of getting it wrong is paid in lump-sum severance and STPS audits.

The legal frame: rights you cannot contract around

Article 5 of the LFT makes any contract clause that reduces a statutory right void — and the void clause is replaced by the statutory minimum. There is no 'at-will' employment in Mexico. Indefinite-term contracts are the default. Fixed-term contracts are only valid in narrow, listed scenarios (project work, replacement of a worker on leave, etc.). If you misuse a fixed-term contract, courts will reclassify it as indefinite and award full severance.

The mandatory benefits — the things people forget to budget for

• Aguinaldo — 15 days of salary, paid by December 20 every year. Pro-rated for partial-year employees.
• Vacation — minimum 12 days after 1 year (raised from 6 days in the 2023 reform), increasing with tenure.
• Vacation premium — an extra 25% on top of regular pay during vacation days.
• PTU (profit sharing) — 10% of pre-tax profit distributed to workers each May (capped at 3 months' salary or the average PTU of the prior 3 years, whichever is higher).
• IMSS (social security) — employer pays ~30%+ of payroll across IMSS, INFONAVIT (housing), and SAR (retirement).
• Maternity leave — 12 weeks fully paid via IMSS (6 weeks pre-natal + 6 weeks post-natal).

Termination — the article-47 problem

Mexican employers can terminate for 'just cause' under Article 47 (theft, repeated unjustified absences, dishonesty, violence, etc.) without severance — but the procedural bar is very high. You must give written notice with the specific facts within 30 days, and the burden of proof is on you in the Labour Board. Most Mexican employers terminate without cause and pay the statutory package, because contesting a wrongful-dismissal claim and losing means paying not only severance but also back wages from the date of termination to the date of the ruling — which can be years.

The 2021 outsourcing reform — REPSE and the end of labour leasing

In April 2021 Mexico banned the subcontracting of personnel except for 'specialized services' that are not part of the contracting company's core activity, and only by providers registered in REPSE (Registro de Prestadoras de Servicios Especializados). Translation: you cannot hire a Mexican worker through a generic staffing company to do work that's core to your business. Misuse triggers fines up to ~$5M MXN per incident, joint-and-several liability for the employer's obligations, and tax-deductibility loss.

Working hours and overtime

• Maximum 48 hrs/week (8 hrs/day) for day shift, 42 hrs for night shift, 45 hrs for mixed shift.
• Mandatory 1 paid day of rest per 6 days worked.
• Overtime: first 9 hrs/week at 2× pay; anything beyond that at 3× pay.
• Working on a Sunday adds a 25% premium even if it's a regular working day.
• A 40-hour-workweek reform is under active legislative discussion — watch this space.

Take this home — the founder's Mexico hiring checklist

• Use a REPSE-registered EoR or set up your own Mexican entity (S. de R.L. or S.A.) — don't 1099 a full-time worker in Mexico.
• Budget ~40–50% on top of gross salary for fully loaded cost (IMSS, INFONAVIT, SAR, aguinaldo, vacation premium).
• Default to indefinite-term contracts. Only use fixed-term contracts when the law specifically permits.
• Build a severance reserve of ~3 months + 20 days/year for every Mexican employee.
• Pay aguinaldo by December 20. Distribute PTU by May 30. Calendar both.
• Get a Mexican labour lawyer to draft your contract template. Translate it to Spanish — Spanish governs.

Before you act — read this

Official sources to verify (keep this list bookmarked)