Talent Boom: Why More US Companies Than Ever are Hiring Employees in Mexico

February 21, 2023

More and more US companies are crossing the Rio Grande to scout out professional talent, especially in the tech sector. Here's how they’re doing it.

In the race for top foreign talent, global firms tend to look far afield these days. If you’re a US company hiring employees in Mexico, however, you’re just across the border from a large reservoir of talented workers. 

Mexico’s vibrant and diverse employee market holds huge potential for growing a competitive workforce, and right on the United States’ doorstep.

This is why ‘nearshoring’ is on the up, with increasing numbers of quality Mexican professionals able to offer competitive remote working services.

This exciting new era is turning the heads of HR departments south, yet they find themselves having to contend with familiar issues when hiring employees in Mexico, including:

  • Spanish language barriers and cultural differences clouding the recruitment process
  • Making sure employment contracts meet the nuances of Mexican federal labor laws
  • Finding the funds for paying local recruitment, finance, and legal experts
  • Dealing with the mountain of paperwork that comes with foreign hires

If you’re responsible for overseas recruitment at your company, then these are obstacles that  are worth trying to jump over. 

Mexico is at the epicenter of a Latin American investment boom that attracted a record $15 billion of funding in 2021. And the hiring of LatAm skilled workers almost tripled in the second half of that year alone, according to Bloomberg.

In fact, hiring across the region outstripped every continent across the globe as foreign companies found themselves drawn in by a potent mix of highly skilled professionals, new remote work possibilities, and stunning Unicorn business initiatives.

The Latin American investment boom
us company hiring employees in mexico
Source: Bloomberg

The same Bloomberg research found that over 150% more companies flocked to the region in 2021 than the previous year. 

Clearly, if your company doesn't make the most of this growing talent pool, a rival surely will. 

As inflation and the cost-of-living crisis continues to push more US companies toward hiring employees in Mexico, it’s a trend that’s gathering momentum.

Don’t get put off by a tricky foreign hiring process. Book a call with Remoti’s team today to see how our embedded talent acquisition platform is helping global corporations expand swiftly and efficiently.

Why are US companies hiring employees in Mexico? 

At the heart of the surge across the Rio Grande for skilled workers lies a simple motive: Mexico has what US companies need. 

Namely, an abundance of educated workers willing to work with diligence and care in return for a competitive salary are proving harder to find.

If we take the ever-important tech market as an example, we start to see this in sharper focus. 

The US has a voracious appetite for tech talent, with almost two-thirds of IT firms identifying a lack of expertise as a key challenge, according to a report by global consultancy firm Gartner. 

Yet, the US talent pool is failing to live up to the demand, with almost a million unfilled IT and related roles in 2019 alone – a problem that’s gotten worse since the pandemic. 

Mexico, meanwhile, has a wealth of riches. Fast-growing digital hubs such as Monterrey and Guadalajara are becoming known as the ‘Silicon Valley of Latin America’ and have fostered a high-quality conveyor belt of talent production; so much so, that it’s led to a growing IT talent surplus.

Outside of tech, improving professional infrastructures in the manufacturing, healthcare, and entertainment sectors are also making it easier for US companies to carry out recruitment practices in Mexico.

Here are the defining factors motivating companies like yours toward hiring employees in Mexico.

Close economic ties 

The USA, Mexico, and Canada all subscribe to USMCA, the free trade agreement that forms the bedrock of a $26 trillion North and Central American trading bloc. 

The deal facilitates cross-border hiring via a co-operative framework that includes fair working conditions, intelligence sharing, and combating illegal activities. 

The close proximity of the countries also makes it easy to organize in-person meet-ups, conferences, and other corporate events that help build employment relationships. 

Easier visa process

The TN visa is a product of NAFTA, USMCA’s predecessor. It’s designed to give nationals a fast track to work authorization in each member nation, something that could prove handy should you decide to relocate a Mexican worker to the US. 

It also makes employing non-residents in Mexico simpler by providing a direct route to acquiring the necessary working papers, handing international companies the versatility they’re craving. 

Well-educated and motivated workforce 

Mexico is awash with modern education initiatives that have helped foster a bright, highly educated new generation of workers. 

According to Bloomberg, Guadalajara is home to 30 design centers and four tech research centers that contribute to the 100,000-strong IT workforce there. The country’s first digital transformation campus, The Monterrey Digital Hub (launched in 2018), smooths the education-to-work transition for tech students, creating oven-ready professionals as a result. 

Business accelerators ImpactHub and Startup Mexico are two other prominent startups that help young professionals prepare for the world of work, both in and out of the tech scene. 

Excellent value for money

Skilled workers should always be paid a fair rate, yet Mexico’s skilled and motivated workforce comes with lower labor costs than their US counterparts. 

While the average monthly salary of $744 is higher than in other LatAM countries like Ecuador, it’s still much less than the US average, thought to be around $4,300 in December 2022.

To be more specific, an intermediate software developer – a professional sought after by many US multinationals – earns less than a third ($3,156 per month) than a North American equivalent with the same skill set ($10,154 per month), according to 2022 data from Forbes. This represents 67% saving in labor costs, something that’s consistent across the IT industry.

The pay gap across the US and Mexican IT sectors
us company hiring employees in mexico
 Source: Mexico Tech Salaries Report (via Forbes)

In many walks of life, you get what you pay for. Yet, it’s difficult to see how this applies to skilled Mexican remote workers who are the equal, if not better, than their counterparts in high-salaried nations. 

How US companies are hiring employees in Mexico 

Like with many things in life, accessing Mexico’s bright and vibrant labor market comes at a price. 

Opening a local entity, or foreign subsidiary, is the traditional way of getting your foot in the door in Mexico. Yet, this is also a tough and expensive process that involves high set-up costs and the payment of corporation and social security taxes. 

Not to mention the mountain of paperwork your company will need to climb. 

To paint a clearer picture, here’s an overview of what a US company hiring employees in Mexico must handle.

Making the right hires

Locating and screening suitable candidates demands an in-depth knowledge of just where to look in a diverse Mexican talent pool. 

Local recruitment practices in Mexico can help, of course. They’ll have the tools and know-how to navigate the job market across the country, can break down language and cultural barriers, and act as an agreeable ‘middle person’ between you and the worker. 

However, these services can charge up to 25-30% of an agreed annual employee’s salary – for each candidate. For global businesses looking to quickly expand their workforce, this is a heavy price burden to bear for a service that isn’t guaranteed to land you what you’re looking for. 

Getting contracts right

For US businesses, drawing up a compliant worker contract in Mexico is time-consuming and expensive. Worker agreements differ from those in North America, and firms must agree to mandatory terms, including:

  • A maximum 48-hour work week for full-time employees — anything more becomes overtime at double or triple the rate
  • The correct amount of paid time off, plus a compulsory holiday premium of 25% of the salary for those vacation days.
  • The payment of a Christmas bonus, known as an aguinaldo, which is 15 days of salary 
  • A profit-sharing arrangement, amounting to 10% of your company’s pre-tax annual earnings spread across the workforce.

But it’s not just starting contracts that’s tricky: it’s ending them, too. Employers must get the compensation correct, even if the worker breaks the terms of an employee agreement.

A Mexican employee who’s fired with a justifiable clause is still entitled to their accrued contract benefits, including 12 days’ pay for every worked year — but no severance pay. 

Those fired without a cause are entitled to compensation amounting to a minimum three months’ pay, at least 20 days' salary for each working year, as well as a possible seniority bonus if they have over 15 years of service.

In short, new employee contracts need to meet all these standards to be fully compliant with local labor laws. Failure to do so risks serious legal consequences.

Independent contractors

Many international companies are drawn toward Latin American independent contractors, particularly in Brazil and Mexico, because they’re not eligible for the same employee benefits as contracted workers. They also offer more versatility to employers, who may just need someone for short-term work. 

However, in a bid to clamp down on misclassification, the Mexican government recently introduced strict new measures that dictate how to pay contractors in Mexico, which requires extra assistance from local legal experts or PEOs. 

Setting up an employee payroll

Signing up new recruits is one thing, but making sure you pay them correctly and efficiently is another.

Mexican law stipulates that a bi-monthly payment is made, on the 15th and last day of each month, to all contracted workers. 

Your company must also withhold the correct amount of tax from employee paychecks. Like with the IRS, workers pay taxes according to their salaried amount, so you’ll need to have all their financial information to hand in an efficient and organized payroll. 

Social security contributions, too, are deducted and sent to the Instituto Mexicano Del Seguro Social (IMSS), which supports employees should they go on sick, maternity, or paternity leave. 

Complying with local employment laws is essential here, and paying the wrong salary, tax or health insurance amount can lead to heavy fines. 

A Mexican professional employer organization (PEO) can help alleviate some of this burden, performing as a fully established local entity. It helps ensure you comply with local regulation, and would perform administrative tasks, such as payroll and employment agreements, on your behalf. 

Many US companies choose to go down the PEO route as a way of streamlining the hiring process and staying in line with tough local laws. Yet, like many external services, PEO providers come at a significant cost and tend to form a barrier between employers and their new recruits. 

How Remoti’s HR-as-a-Service is making hiring in Mexico easy 

Finding the right match for your company in a new talent pool is tough, especially one as vast as Mexico’s. 

Remoti is an embedded talent platform that knows time is money for global businesses like yours. This is why we’ve built our HR-as-a-service on three core components: speed, efficiency, and quality. 

Rather than operate as a third-party entity outside of your ecosystem, Remoti acts as a plug-in extension to your existing recruitment service. 

Once you jump on board, you’ll tap into a wealth of regional knowledge that will fast track your search for the perfect candidate, draw up a watertight contract, and sail through local compliance. All for a tiny fraction of the cost of setting up a new legal entity, or hiring a PEO.

Whether you’re looking to draw up a remote employee contract or info about how to pay a contractor in Mexico, Remoti has the answer.

Here’s how we do it. 

Talent scout

Remoti saves you hours of trawling through a vast labor market by condensing all of your employee needs into a detailed recruitment plan. 

Our Talent Scout service then uses this to scour our online marketplace for the right matches. It factors in personality traits and cultural backgrounds (as well as red flags) to cherry-pick a shortlist of candidates for you to choose from. 

We screen and prep the applicants, inform them of your company’s goals, and make sure they’re interview-ready. 

You’ll get full control over who to interview and when via our Ti app, which gives you direct access to candidates, as well as an overview of their qualities. 

It’s a revved-up employee search that’s 40% more cost-effective than the typical US recruitment process. 

Fully compliant contracts and payroll

Navigating the minefield of legal compliance in a foreign country is enough to put many businesses off. 

This is where Remoti’s team of local experts come into play. We plug you into a deep well of legal, admin, and tax knowledge to draw up watertight compliant contracts between you and the employee. 

We set up an agile global payroll process that pays workers in USD directly into the Remoti wallet (linked to their bank account), avoiding the cost of cross-border payments into Mexican Pesos.

Via your employee overview on the Ti app, you can set up monthly payments and deduct tax and social security contributions all within a few taps of your keyboard or screen. 

Employee development

Workers sign up to Remoti to search for jobs, but they also get plenty more as part of the deal. 

Our in-house EdTech program trains them in key specialties, including language, coding, and management, so that they’re compatible with global overseas companies. 

It means your company gets access to polished diamonds who can hit the ground running for you when they jump on board. 

It doesn’t end once they put pen to paper with you, either. Everyone retains access to the Ti app where they can continue to benefit from our cutting-edge training that will continue to improve them as they progress their career. 

More and more US multinationals are putting their faith in Remoti’s global team to hunt, hire and handle quality talent in Mexico, Brazil, and beyond. 

Ready to expand your workforce into one of the world’s best-value talent pools? Book a call today with one of our experts who’ll show how Remoti’s embedded talent acquisition platform will hunt, hire, and handle quality new additions for your company — at a fraction of the cost.