An Employer of Record is a local company that acts as the legal employer of workers on behalf of a foreign company that does not have a local entity in the country.
A reliable Employer of Record in Mexico will support its clients through every stage of the employment lifecycle, from onboarding to offboarding.
While an EOR handles everything from hiring and payroll administration to benefits management and offboarding, it is important to understand the full scope of what these services actually include in practice.
Onboarding Stage
Once the client has defined the candidate, the position, the salary, and any additional benefits, the EOR takes care of:
- Building the employee’s official personnel file
- Drafting the employment contract in accordance with the Federal Labor Law
- Classifying the worker under the correct occupational risk category
- Registering the employee with the Mexican Social Security Institute (IMSS)
- Activating any requested supplementary benefits
- Contracting and paying providers for agreed in-kind benefits
Administration and Retention Stage
Once the employee is active, the EOR continuously manages all employer obligations:
- Calculating payroll according to the agreed pay period
- Disbursing payroll payments on time
- Paying supplementary benefits
- Managing payments to in-kind benefits providers
- Processing off-cycle payments when needed
- Issuing employment letters and labor-related documents
- Paying statutory benefits on time, including Christmas bonus, vacation days, and vacation premium
- Issuing digital payroll receipts stamped by the tax authority
- Registering salary increases with IMSS
- Paying both employer and employee Social Security contributions
- Filing and paying the monthly State Payroll Tax
- Withholding and remitting income tax and Social Security deductions from the employee
- Withholding and remitting Infonavit housing credit deductions
- Processing and paying Fonacot loan deductions
- Recording and applying leaves of absence due to general illness or occupational risk
- Managing wage garnishment deductions and payments when applicable
- Calculating and paying profit sharing (PTU) in the cases where it applies
- Advising the client on labor, tax, and human resources matters
Offboarding Stage
When the employment relationship comes to an end, whether through resignation or at the client’s decision, the EOR handles the closing process in an orderly manner and in full compliance with the law:
- Calculating the severance or final settlement amount based on the type of termination
- Formalizing the termination in accordance with the Federal Labor Law
- Issuing stamped payroll receipts for the final settlement or severance payment
- Closing the employee’s personnel file
- Deregistering the employee from IMSS
- Disbursing the severance or final settlement payment to the worker
- Supporting the formal closure of the employment cycle before the Federal Conciliation and Arbitration Board
- Providing labor advisory or defense services at no additional cost or at a preferred rate
Working with an Employer of Record in Mexico goes well beyond hiring and running payroll. It means having a local partner who knows the legal framework, anticipates risks, and ensures that every employer obligation is met on time, from the employee’s first day to their last.
For foreign companies looking to operate in Mexico with agility and legal certainty, an EOR is the most efficient way to build a local team without taking on the administrative and legal burden of setting up a local entity.
At Umanium, we cover every stage of the employee lifecycle and are always here to answer your questions on labor law, taxation, and social security in Mexico.