Making the decision to expand your business globally isn’t an easy decision to make. Although it can be incredibly beneficial and rewarding for both your business and the local economy, there are cultural differences and different tax and labour laws to consider. Although you can educate yourself and your departments, it’s better to consult experts who understand the climate and can ensure you’re compliant. If you want to keep on top of your global payroll knowledge, we’re here to help.
Payroll Worldwide is a qualified, experienced employer of record (EOR), providing human resource (HR) and payroll services for businesses in Latin America and those wishing to expand. We can help your employees settle in LATAM, navigating the various tax and labour laws to ensure a smooth transition. If you’re concerned about running payroll and understanding the various regulations when expanding to Mexico, read our helpful article below to get started.
Paying Your Employees
How businesses in different countries pay their employees varies. The national minimum wage, payroll compliance and tax benefits are different in Latin American countries than others, so you need to ensure you’re up to date. In Mexico, all payments to employees must be made from an in-country bank account, which needs to be considered when setting up employees on payroll.
It is a regulatory requirement that payments created using a Mexican debit account require the one receiving the payment to be a registered beneficiary. Payments that require this include international and domestic priority payments, as well as Mexico electronic transfers like payroll. LATAM is a rapidly growing market and is becoming more desirable to foreign businesses wishing to expand. We can aid your human resources development, providing global payroll solutions specific to LATAM. We can also help you recruit new employees, developing onboarding strategies to get the best talent for your business. To find out more about our services, please visit us here.
Leave and Added Pay Considerations
In Mexico, employees are entitled to six days’ vacation after one year of work, with an added 25% vacation premium. After each year of service, employees get an added two days of holiday until the end of the fourth year with their current employer. However, Mexicans have seven required paid holidays (known as bank holidays in the UK). When expanding to Mexico, you need to be aware of holiday considerations, which a qualified PEO can assist with.
Businesses in Mexico also need to consider extra pay and bonuses for their employees, both as a legal requirement and an incentive. Employees must give their employees a Christmas bonus, which is 15 days of salary before the 20th December based upon the number of days they’ve worked at the company throughout the year. For instance, if an employee has worked there for eight months, they are entitled to 10 days Christmas bonus. Also, if employees work in areas with high employment rates, they can be rewarded for factors such as punctuality and productivity within the company.
How Important is Tax
The tax year in Mexico runs from the 1st of January to the 31st of December. Whilst working in Mexico, residents must obtain a Tax ID number and must be registered with the Mexican tax authorities. There are a wide range of taxable incomes, including salaries and remunerations, rental income and the incorporation regime. Employees should also be registered with the Mexican Social Security Institute, and they must pay social security contributions at a rate of 5%. You can read more about Mexican tax law here.
Here at Payroll Worldwide, we provide exemplary PEO services to businesses in Latin America and those wishing to expand. Global payroll laws differ from country to country; we can ensure your payroll solutions run smoothly and are fully compliant, giving you peace of mind and allowing you to focus on other aspects of your business. To find out more, or to receive a free consultation, please drop us an email at hello@payrollworldwide.com, give us a call on 07469 892524, or you can fill out our online form here.
