Cross-border employment in Mexico: Navigating challenges, unlocking opportunities

When multinational companies look to expand in Latin America, Mexico naturally emerges as a key destination given its proximity to the United States, its highly competitive workforce, and integration through the US-Mexico-Canada Agreement (USMCA) – all factors making it a strategic hub for global operations.

However, Mexican labour law has unique characteristics that can surprise foreign companies. What may be standard in other countries can pose risks in Mexico if not properly managed.

Mexico acts as a bridge between North America and Latin America. Its geographical position makes it an ideal logistics centre for manufacturing, exporting, and foreign investment. It also boasts one of the youngest and most skilled populations in Latin America, benefiting industries such as technology, advanced manufacturing, and business services.

In Mexico, there is no concept of “employment at will”. Terminations without just cause entail high severance costs. This makes it necessary to draft clear and solid contracts from the beginning. Additionally, employers are legally required to provide benefits such as Christmas bonus, vacation premium, and profit sharing (PTU).

Even in corporate sectors, unions are present. The 2019 labour reform strengthened workers’ rights, and even a simple temporary assignment can trigger tax residency in Mexico if not properly planned, affecting both the company and the employee.

Sending a foreign executive to Mexico may require specific immigration permits, and failing to comply with the requirements may lead to penalties. A common question arises: does Mexican labour law or foreign labour law apply? Resolving this duality helps prevent litigation.

A well-drafted contract protects both employer and employee. It is the foundation of clear and healthy labour relations. Transparency and compliance strengthen corporate reputation. Companies that foster communication with unions and employees achieve lower turnover and higher productivity.

The rise of remote work has blurred traditional employment borders. Today, a Mexican worker can work for a foreign company without leaving the country, but this creates tax and legal questions:

• In which country should taxes be paid?
• Which labour laws apply?
• How should social security obligations be handled?

Companies with clear global mobility and telework policies attract specialised talent. However, in order to achieve this, it is essential to:

• Develop labour policy manuals aligned with Mexican law;
• Implement regular internal labour audits; and
• Promote training in labour regulations for human resources teams.

Likewise, working with a firm specialised in cross-border labour and tax law reduces risks and facilitates expansion.

Cross-border employment in Mexico is not an obstacle; challenges such as terminations, benefits, and unions, when managed well with solid contracts, proactive compliance, and specialised advice, can strengthen reputation, attract talent, and provide operational stability.

In a world where globalisation constantly redefines work, Mexico offers a unique platform: strategic location, international integration, and a skilled workforce prepared for the challenges of the future.

---

Prof Sergio Guerrero Rosas, Managing Director at Guerrero y Santana, has over 25 years’ experience advising companies from SMEs to multinationals, as well as individuals, on tax and estate planning. He is also Global Vice Chair of the GGI Trust & Estate Planning (TEP) Practice Group.