Mexico US payroll comparison is essential for every company, as proper payroll management and human resources practices are of vital importance; satisfied employees are one of the keys to achieving corporate objectives.
Although geographically these countries share a border, labour legislation varies considerably between Mexico and the United States, even though the common goal is to comply with the law and pay payroll correctly.
Key Points to Compare Payroll in Mexico and the United States
1. Payment Frequency
In this regard, there are similarities; both countries allow monthly, biweekly, or weekly payments, essentially depending on the nature of the business.
2. Salary Types
Both countries allow payment of fixed, variable, or mixed salaries (fixed + variable).
3. Employee Benefits
Mexico: Labour law requires payment of a Christmas bonus (Aguinaldo), a minimum of 12 days of vacation (increasing with seniority), a vacation bonus, and in some cases, annual profit sharing (PTU), depending on the company’s financial results.
United States: Law does not stipulate specific benefits; these are at the discretion of the employer.
4. Termination and Severance
Mexico: Payment of a severance package (finiquito) is mandatory, recognising proportional parts of statutory benefits; in specific cases (dismissals), indemnities must also be paid.
United States: There is no equivalent to a finiquito, and no mandatory payment is required.
5. Regulatory Authority
Mexico: Payroll is strictly regulated by the SAT (Tax Administration Service) and the Secretaría del Trabajo y Previsión Social. All payments must be recorded electronically through sealed digital payment receipts, which have fiscal validity.
United States: There is no requirement for fiscal stamping. Compliance is managed by the IRS (Internal Revenue Service) at the federal level and state tax agencies. The system is more decentralised and varies by state.
6. Tax Withholding
In both countries, employers must withhold and pay taxes. In Mexico, this applies to the SAT and IMSS (National Social Security and Health System), and in the United States, to federal (SUTA – State Unemployment Tax) and state (FUTA – Federal Unemployment Tax) agencies.
7. Workers’ Compensation and Workplace Insurance
Mexico: This insurance is included within the monthly employer contributions to the IMSS.
United States: Workers’ Compensation is mandatory and must be contracted by the employer with an insurance company or a state fund, covering any work-related injury or illness.
If you are coming from the United States and wish to understand payroll in Mexico, prepare for a more formal and electronically regulated system. If you are from Mexico and wish to understand payroll in the U.S., you will find greater flexibility and variations between states, but also greater responsibility in classifying workers correctly, calculating taxes accurately, and contracting insurance.
Learn More About Payroll Management
For professional guidance on payroll management in Mexico and the United States, visit our website or contact Payroll Worldwide today.
Written by:
Fabiola Martos Boyd
Director of Operations, International – Latam
