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Article

10 min read

How to Run Payroll in Mexico [Updated for 2025]

Global payroll

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Author

Shannon Ongaro

Published

October 17, 2024

Last Update

January 28, 2025

Table of Contents

How to process payroll in Mexico

Common challenges in payroll management in Mexico

Deel Global Payroll in Mexico makes payroll simple

Key takeaways
  1. When running payroll in Mexico, managers must consider its setup, processing, and payment frequency.
  2. Key challenges include poor system integrations, reliance on multiple outsourced vendors, navigating local labor laws, and ensuring high security standards.
  3. Employers hiring in Mexico can use Deel to simplify onboarding, payments, benefits, and more.

If you're planning to hire talent in Mexico and are concerned about managing payroll, it's important to first understand the country's payroll system.

From setting up a legal entity to managing employee deductions and filing taxes with authorities like SAT and IMSS, getting it wrong can lead to costly penalties and reputational harm.

At Deel, we understand these complexities deeply, leveraging our experience across 100+ countries to help companies streamline global payroll.

In this blog, we’ll walk you through the essentials of how to run payroll in Mexico—no matter your team’s size or structure. By adopting the right strategies and tools, like Deel’s unified payroll platform, you can ensure compliance, simplify workflows, and focus on growing your business.

Let’s make running payroll in Mexico not just manageable but a cornerstone of your success.

How to process payroll in Mexico

Understanding how payroll functions in Mexico involves considering three key elements: setup, processing, and payment frequency.

1. Setup

Setting up payroll in Mexico is tied to several requirements:

Establishing a legal entity: This includes defining the company type, registering under the appropriate tax regime, opening a business bank account, and obtaining the Federal Taxpayer Registry (RFC).

See also: A Guide to Setting up a Local Entity

Registering with social security: Employers must register their company and employees with the Mexican Social Security Institute (IMSS) and the National Workers' Housing Fund Institute (INFONAVIT). Employee registration requires collecting their CURP (Unique Population Registry Code), a key identifier for tax and employment records.

To ensure payroll processing complies with local regulations, employers must stay up to date with Mexico’s labor and tax laws. Proper compliance stabilizes your business, provides security for your employees, and enhances your reputation as an employer.

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2. Processing

Processing payroll in Mexico involves several steps, ensuring accurate compensation and compliance with local laws.

Employee onboarding and documentation: Collect necessary documents like a government-issued ID, social security number, background checks, bank details for direct deposit, and other documentation required by either your company or the Mexican tax authorities.

Regular and statutory deductions: You need to calculate deductions according to Mexican law. This includes income tax (ISR), social security contributions (IMSS), INFONAVIT contributions, and other deductions as agreed upon, such as pension contributions or insurance premiums.

Compliance with labor laws: Ensure compliance with laws regarding minimum wage, overtime pay, holidays, and employee rights such as paid vacation.

Payroll tax and social security filing: Employers must file payroll taxes and social contributions within the deadlines set by authorities like the Tax Administration Service (SAT) and IMSS. For example, employer-employee contributions must be processed via the Single Self-Determination System (SUA).

Mandatory payroll costs in Mexico

Program Cost What Offered by
Social Security (Instituto Mexicano del Seguro Social or IMSS)^ Approx 10% Note: Only paid by employer if the employee is earning minimum wage Social security contributions by employer Government
Infonavit (National Housing Fund) 5% Housing credits for applicable employees Government
Local Wage Tax Varies based on company location; usually 2% to 3.5% Wage tax Government
TOTAL Up to approx 18.5%

See also: Employer costs for an employee in Mexico

3. Payment frequency

The frequency with which you pay your workers in Mexico depends on the arrangement established within your company. The most common payroll frequencies are:

  • Weekly: Payment every seven days, usually at the end of the workweek
  • Fortnightly: Payments are made every two weeks, often on Fridays
  • Biweekly: Payments every 15 days, typically on the 15th, 30th, or 31st of the month

The chosen frequency can vary depending on the type of company, the position, and the nature of the work performed.

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Common challenges in payroll management in Mexico

Poor integrations

When your payroll system isn't integrated with other key business systems—such as HR management, benefits, insurance, and time-tracking systems—it can lead to delays, data duplication, and inaccurate payroll calculations. This lack of integration hampers your finance team’s ability to make informed decisions based on real-time financial data.

Solution:

Deel Global Payroll integrates seamlessly with 110+ HR and accounting systems, unlike traditional providers that offer fewer options. This ensures smooth data flow, reduces errors, and saves time on manual data entry.

Multiple outsourced vendors

Managing payroll with multiple local providers in Mexico (or other markets) can lead to reporting inconsistencies and fragmented employee experiences. Additionally, if you operate in multiple regions, using different vendors per region makes it difficult to consolidate company data, analyze financials, and maintain a clear view of your business’s financial health.

Solution:

Deel offers a unified payroll solution with standardized reporting across all countries, eliminating the need for multiple local providers and making global payroll management seamless.

See also: All-in-One Payroll: Why 300+ HR and Finance Leaders Say It’s The New Standard

How Momentu expanded across Latin America with Deel

Momentu, a corporate mental health and emotional wellness platform, needed an efficient way to hire and pay professionals across Latin America and beyond. But managing the process manually or with fragmented tools was costly and chaotic.

Deel’s platform allows Momentu to manage variable payments based on therapist availability while saving 5–10% on salary costs. With consolidated payments and talent-friendly options like Deel cards, crypto, and emergency advances, Deel eliminates complexity.

“Since that first Deel hire, our relationship has not stopped and now our team is in Ecuador, Argentina, Mexico, Bolivia, and 5 other countries, including Spain.” — Juan Pablo Montoya, co-founder, Momentu

Understanding local laws

Labor and tax regulations vary by country, and managing payroll in Mexico requires knowledge of specific local laws. For example, Mexico’s overtime regulations differ from those in other Latin American countries—100% additional pay for each overtime hour worked, compared to 50% in Argentina. Keeping up with changes to minimum wage or compliance regulations can be a daunting task.

Solution:

Deel’s in-house payroll managers in 100 countries ensure compliance with local labor laws. Our team of legal experts stays current with any regulatory changes, so you don’t have to worry about legal non-compliance.

Lack of process automation

Many traditional payroll providers lack automation, relying on manual data entry and increasing the risk of human errors. Manual data handling also leads to inconsistencies in payroll records, making it harder to spot discrepancies or correct errors in time.

Solution:

Deel’s platform automates your entire payroll workflow, from employee data entry to payment processing, saving time and reducing the risk of costly errors.

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Fragmented payments for employees and freelancers

Companies often manage separate payroll processes for employees and freelancers, which complicates payment operations and increases administrative burdens.

Solution:

Deel simplifies this by combining employee and freelancer payments into one platform, allowing you to manage your entire global team in one place, whether they are full-time employees or independent contractors.

Uncertain security standards

Outsourcing critical payroll functions to third-party vendors can raise concerns over data security. Payroll providers that lack robust security measures could expose your sensitive employee data, including personal and financial information, to breaches.

Solution:

Deel prioritizes data privacy and security, with compliance certifications such as GDPR, SOC2, and ISO 27001. Our platform includes custom permissions, approval settings, and detailed data logs, giving you full control over who can access sensitive information.

Limited scalability and support

As your team grows, non-scalable payroll systems can slow down operations, requiring frequent changes in payroll providers. Managing fragmented systems also increases processing times, which could delay payroll cycles and affect overall efficiency.

Solution:

Deel provides scalable solutions that grow with your company. You get direct support from a dedicated customer success manager, as well as 24/7 assistance for your payroll teams, ensuring smooth operations regardless of your company’s size.

See also: How Deel Achieves Industry-Leading Customer Satisfaction

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Effortlessly review payroll data, make necessary adjustments, and pay everyone in one simple payment—all in a few clicks. Click below to launch a tour of Deel's Global Payroll platform.

FAQs

The basic components of a payroll in Mexico are:

  • Base salary: From which deductions are made
  • Legal deductions: Federal and state taxes, IMSS, and INFONAVIT
  • Benefits: Christmas bonus, vacation, vacation bonus, and profit sharing (PTU)
  • Other discounts: Pension plans, insurance, unions, etc

In 2025, the minimum daily wage in Mexico is MXN$278.80. In the Northern Border Free Zone, it’s Mex$419.88 per day.

Deductions are calculated based on current tax laws, company agreements, and mandatory contributions to entities such as IMSS (for health), INFONAVIT (for housing), and the retirement system. It should be noted that these depend on the type of employment contract. Some may be income tax and employer-employee contributions, for example.

Always consult with a legal and accounting expert regarding the specific case of each employee.

To calculate the Christmas bonus in Mexico, you have to take into account the time your employees have been working in the company and the type of compensation they receive (fixed salary or variable monthly salary).

Two proposals have been introduced in the Senate to increase the Christmas bonus from 15 to 30 days. Evaluation is set for 2025.

All workers under an employment relationship have the right to a bonus. If a worker has worked for less than a year, he or she is entitled to a proportional payment. However, those who are hired on a fee basis do not have this right.

The frequency of payment in Mexico depends on the agreed periodicity. It can be weekly, biweekly, or fortnightly. According to Article 88 of the Federal Labor Law in Mexico, "The terms for payment of wages can never be longer than one week for persons who perform material work and fifteen days for other workers."

Companies must record and retain details such as wages paid, taxes withheld, social security contributions, and other related documents for a minimum of five years.

See also: A Complete Guide to Employee Payroll Records

Employers in Mexico must comply with regulations set by the SAT and the Ministry of Labor and Social Welfare (STPS). There are several laws that regulate payroll in Mexico. These include the:

  • Federal Labor Law (LFT)
  • Federal Tax Code (CFF)
  • Social Security Law (LSS)
  • INFONAVIT Law
  • Income Tax Law (LISR)
  • other local and federal regulations

Among the main obligations of the employer regarding payroll are issuing timely payments, making the correct deductions, complying with tax rates and social contribution declarations and payments, and providing digital payroll receipts (or paystubs).

When managing payroll with Deel, payroll receipts are automatically generated following Mexican laws and complying with the standards requested by the SAT.

The Digital Fiscal Receipt for Payroll on the Internet (CFDI) is a digital document required by the tax authority that validates the legality of salary payments and deductions applied in Mexico.

Setting up payroll for a new business in Mexico requires employer registration, employee data collection, and compliance with local tax and labor laws.

According to the Federal Labor Law, there are five types of contracts in Mexico, such as open-ended or indefinite-term contracts, contracts for a specific work or time, seasonal employment contracts, employment contracts for initial training, and trial period contracts.

Penalties for failing to comply with payroll processing range from potential fines and legal action to reputational damage.

Just as non-compliance can result in significant financial penalties, as well as legal action by affected employees, the reputational damage generated by unethical or illegal labor practices can affect the company's image and credibility with employees, customers, and the general public.

Mexican laws include maternity and paternity leave requirements:

Maternity leave includes 84 days of paid leave. It’s funded by the IMSS, which pays 100% of the employee’s salary up to a maximum of approximately MXN$65,000 per month. Employees must have been registered with IMSS for at least 30 weeks in the prior 12 months by the time of the 34th gestational week. Employer top-up is optional.

Paternity leave in Mexico includes five days of paid leave, at 100% of the employee’s regular salary. It’s funded by the employer. At the employer’s discretion, the employee can extend this leave, but it will be unpaid.

Learn more about managing payroll in Mexico

Global Payroll Bootcamp is the opportunity to learn everything you need to know about efficient international payroll management in Mexico: the most common mistakes, the power of centralizing payroll for multiple countries, and how to achieve this with the help of a strategic partner in global payroll.

Deel Global Payroll in Mexico makes payroll simple

Whether your workforce is entirely in Mexico or spread across multiple countries, Deel Global Payroll can help. Deel allows you to manage every aspect of payroll in one place—from onboarding new talent to processing final payments—making the entire process seamless.

  • Visibility in a single platform: Manage payroll anywhere through a modern, easy-to-use platform
  • Unlock Continuous Compliance: Deel is the only platform that actively helps you monitor and flag regulatory changes, with recommended actions before they become an issue
  • Run accurate and timely payrolls: Automatically sync employee details from your HR platform to avoid duplicate data entry and keep your information up to date. You can also pay your entire team with a single, lump sum payment in seconds
  • Connect and build powerful integrations: Connect Deel to your favorite tools to reduce manual tasks and streamline workflows, or build custom integrations with our API
  • Stay on top of spending with real-time, global reporting: Consolidate currency discrepancies with a unified view of all costs in your preferred currency. Use the variance view to quickly spot any errors between payroll cycles
  • Customer support: Maintain direct communication with a dedicated CSM, as well as 24/7 support, live chat, Slack integrations, phone and video support, and more

Schedule a free 30-minute call with a Deel specialist now.

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About the author

Shannon Ongaro is a content marketing manager and trained journalist with over a decade of experience producing content that supports franchisees, small businesses, and global enterprises. Over the years, she’s covered topics such as payroll, HR tech, workplace culture, and more. At Deel, Shannon specializes in thought leadership and global payroll content.

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