Payroll in Mexico is a monthly compliance exercise with several distinct rails: federal income tax withheld under SAT's progressive tables, social insurance contributions to IMSS, an employer-only housing fund contribution to INFONAVIT, a state payroll tax that varies by where the employee works, and statutory items such as the December aguinaldo that land on fixed calendar dates. A company with a Mexican entity runs all of this itself; a company without one hires through an employer of record whose local entity already holds the registrations. Either way, the numbers below are what a compliant payroll actually remits, and they are why total employer cost in Mexico sits well above gross salary.
Registrations before the first payslip
A Mexican employer must hold an employer registration with IMSS, the social insurance institute, before it can enrol workers and pay the employer-employee contributions; IMSS runs company registration, affiliation movements and payment issuance through its online employer services, including a digital employer desk for filings. Alongside IMSS sit registration with the tax authority for payroll withholding and, in most states, registration for the state payroll tax. This setup work is the practical reason an employer of record exists as a product: its entity already carries the registrations, so a foreign company's first Mexican hire can be payrolled in days rather than after an incorporation and registration project.
The employer contribution stack
Employer social insurance contributions to IMSS run from roughly 20% to more than 35% of the integrated salary base depending on workplace risk classification and salary level, and they fund healthcare, disability, retirement and related coverage. On top of IMSS, every employer pays 5% of integrated salary into INFONAVIT, the national housing fund, with no employee share. The state payroll tax, the ISN, adds between 1% and 4% of payroll depending on the state where the employee works, so the same salary costs measurably more in some states than others. The base for these contributions is integrated salary, which folds in aguinaldo, vacation premium and other regular benefits, so the statutory stack compounds: raising a benefit raises the contribution base too.
Withholding, deadlines and the December cliff
Income tax is withheld from employees each pay period under the progressive tables set by SAT, the federal tax authority, and remitted by the 17th of the following month. Pay frequency is commonly weekly, fortnightly or semi-monthly depending on the category of worker. The calendar item that catches foreign employers is the aguinaldo: at least 15 days of salary, payable before 20 December, with a proportional amount for employees who joined during the year. Vacation premium falls due as vacation is taken, and profit sharing is distributed by the end of May. A payroll forecast for Mexico that spreads cost evenly across twelve months is wrong; December is materially heavier, and a good EOR invoice or payroll report shows that explicitly.
Own entity or EOR for Mexican payroll
Running payroll on your own entity makes sense when Mexican headcount justifies the fixed cost of registrations, a local accountant and ongoing filings, and when you want direct control of the employment relationship. Below that threshold, an employer of record spreads its compliance infrastructure across many clients and hands you one monthly invoice: salary, the contribution stack and its fee. When comparing vendors, ask for the invoice breakdown at your actual salary level, including the state where the employee lives, since the ISN and some IMSS risk classifications differ by location, and ask how the December aguinaldo and vacation premium appear on the invoice. Figures here describe the statutory frame in general terms; the vendor's quote and the law in force control the actual amounts, and nothing here is legal or tax advice.
Questions people ask about payroll mexico
What does an employer pay on top of salary in Mexico?
IMSS social insurance contributions of roughly 20% to 35% or more of integrated salary depending on risk class, a 5% INFONAVIT housing contribution, and a state payroll tax of 1% to 4%. Statutory benefits such as the aguinaldo and vacation premium raise the integrated salary base these are calculated on.
When is Mexican payroll tax remitted?
Income tax withheld from employees under SAT's progressive tables is remitted by the 17th of the following month, and IMSS contributions run on their own payment calendar through the employer portal. The state payroll tax follows each state's schedule.
What is the aguinaldo and when is it paid?
A statutory year-end payment of at least 15 days' salary, payable before 20 December each year, with a proportional amount for partial years of service. It is a legal entitlement, not a discretionary bonus, and December payroll must be funded accordingly.
Can a US company run Mexican payroll without an entity?
Not directly; the registrations require a Mexican employer. The routes are incorporating an entity, or hiring through an employer of record whose entity already holds IMSS, tax and state registrations and payrolls the employee on your behalf for a fee.