1. Understanding Gross Salary and Allowances
In Mexico, the gross salary refers to the total monthly compensation an employee earns before any deductions, which includes both the base salary and any allowances.
| Component | Description | Amount (MXN) | Amount (USD) |
|---|---|---|---|
| Monthly Gross Income | Total monthly compensation before any deductions | 10,000 | 489.72 |
| Monthly Allowance | Additional payments for specific needs (e.g., housing, transport) | 1,000 | 48.97 |
| Total Gross Salary | Total of base salary and allowances | 11,000 | 538.69 |
2. Employer Contributions (Burden on Employer)
In Mexico, employers are required to make mandatory contributions for social security and other statutory obligations. These contributions are calculated based on the total income of the employee.
| Contribution Type | Employer’s Rate | Amount (MXN) | Amount (USD) | Details / Logic Behind the Burden |
|---|---|---|---|---|
| Illness and Maternity (UMA% calendar day) | 20.4% of the total income | 643.71 | 31.52 | Based on total income, capped at 3,155.43 MXN |
| IMSS (Social Security) | 11.2845% of the total income | 1,241.30 | 60.79 | Based on total income, capped at 78,885.63 MXN |
| INFONAVIT (Housing Fund) | 5% of the gross income | 500 | 24.49 | Based on gross income, capped at 78,885.63 MXN |
| Payroll State Tax | 3% of the total income | 330 | 16.16 | Based on total income |
| Surplus (UMA * 22% Calendar Day) | 1.1% of the total income | 121 | 5.93 | Based on total income, capped at 69,419.45 MXN |
| Life Insurance | 0% of the gross income | 0 | 0 | No life insurance provided |
3. Total Employer Contribution Cost
The total employer contribution includes all mandatory social security and contingency payments, as well as specific contributions for insurance and retirement plans.
| Total Employer Contribution Cost (MXN) | 2,836.00 |
|---|---|
| Total Employer Contribution Cost (USD) | 138.9 |
| Percentage of Gross Salary | 25.78% |
4. How the Employer’s Burden is Calculated
For an employee earning 10,000 MXN monthly (gross salary including allowance), the employer’s contributions are calculated as follows:
| Contribution Type | Employer Contribution (MXN) | Calculation Explanation | Cap Amount (MXN) |
|---|---|---|---|
| Illness and Maternity (UMA * % * Calendar Day) | 643.71 | 20.4% of total income (10,000 × 20.4%) | 3,155.43 |
| IMSS (Social Security) | 1,241.30 | 11.2845% of total income (10,000 × 11.2845%) | 78,885.63 |
| INFONAVIT (Housing Fund) | 500 | 5% of gross income (10,000 × 5%) | 78,885.63 |
| Payroll State Tax | 330 | 3% of total income (10,000 × 3%) | N/A |
| Surplus (UMA * 22% Calendar Day) | 121 | 1.1% of total income (10,000 × 1.1%) | 69,419.45 |
| Life Insurance | 0 | No life insurance provided | N/A |
Total Employer Contribution Cost (MXN): 2,836.00
Total Employer Contribution Cost (USD): 138.9
Percentage of Gross Salary: 25.78%
5. Total Costs to the Employer
The total cost to the employer, including gross salary and employer contributions:
| Component | Amount (MXN) | Amount (USD) |
|---|---|---|
| Total Gross Salary | 11,000 | 538.69 |
| Total Employer Contributions | 2,836.00 | 138.9 |
| Total Employer Cost | 13,836.00 | 677.57 |
6. Income Tax and Salary Payments
In addition to employer contributions, employers must also ensure compliance with income tax for employees. Mexico follows a progressive tax rate, where taxes are calculated based on annual income.
Income Tax Calculation Example
For an employee earning 10,000 MXN monthly (120,000 MXN annually), the income tax payable is calculated based on the following tax brackets:
| Taxable Income (MXN) | Tax Rate | Tax Payable (MXN) |
|---|---|---|
| 0 – 6,942 | 1.92% | 133.04 |
| 6,943 – 58,922 | 6.00% | 3,115.32 |
| 58,923 – 103,550 | 10.88% | 4,880.93 |
| Total Tax Payable | 8,129.29 MXN (Effective Tax Rate: 6.77%) |
7. Working Hours and Pay Schedule
| Category | Details |
|---|---|
| Standard Working Hours | 40 hours per week (8 hours per day) |
| Overtime | Paid at 1.5x the standard hourly rate |
| Pay Schedule | Salaries are paid monthly, typically by the last working day of the month |
8. How GlobainePEO Eases Payroll Management in Mexico
By partnering with GlobainePEO, businesses can streamline payroll management in Mexico, ensuring compliance with local laws and minimizing risks.
- Compliance Assurance: Ensure full adherence to Mexico’s tax and contribution regulations.
- Simplified Payroll Processing: Efficiently manage contributions, deductions, and compliance with Mexico’s tax system.
- Local Expertise: Leverage GlobainePEO’s deep knowledge of Mexico’s payroll system and local employment laws.
- Cost Efficiency: Minimize the administrative burden while ensuring full regulatory compliance.
- Employee Benefits: Simplify management of employee contributions and benefits, such as social security.
9. Summary Table: Payroll Breakdown in Mexico
| Category | Amount (MXN) | Amount (USD) | Percentage of Gross Salary | Details / Logic Behind the Burden |
|---|---|---|---|---|
| Monthly Gross Income | 10,000 | 489.72 | 74.85% | Total salary before deductions or allowances |
| Monthly Allowance | 1,000 | 48.97 | 9.09% | Additional payments for specific needs (housing, transport) |
| Illness and Maternity | 643.71 | 31.52 | 5.90% | Based on total income, capped at 3,155.43 MXN |
| IMSS | 1,241.30 | 60.79 | 11.28% | Social Security contribution, capped at 78,885.63 MXN |
| INFONAVIT | 500 | 24.49 | 4.55% | Housing fund contribution, capped at 78,885.63 MXN |
| Payroll State Tax | 330 | 16.16 | 2.87% | State payroll tax based on total income |
| Surplus (UMA * 22% Calendar Day) | 121 | 5.93 | 1.10% | Based on total income, capped at 69,419.45 MXN |
| Life Insurance | 0 | 0 | 0% | No life insurance provided |
| Total Employer Contribution Cost | 2,836.00 | 138.9 | 25.78% | Total of all contributions (Pension, Insurance, Taxes) |
| Overall Cost (Gross + Employer Contributions) | 13,836.00 | 677.57 | 100% | Total cost of employment, including salary and employer contributions |
How GlobainePEO Can Help with Payroll in Mexico🌐
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