Employer of Record in Mexico

Employer of Record in Increasing Demand

As reshoring efforts continue to impulse businesses to hire within the United States, many companies struggle with locating and retaining the right workforce on the budget that allows them to be competitive in the global market. Workforce dynamics have shifted over the past few years, and accessible technology offerings allow employees the connectivity and interaction needed for many daily activities, all from remote locations. Increases in diversity efforts have impulsed companies to value a multi-cultural workforce, yet rising employment costs driven by the increased cost-of-living have put strain on budgets and access to top talent.

These conditions have driven the demand for Employer of Record (EOR) services among companies, especially in the manufacturing, professional services, and technology sectors. An increasingly global economy, coupled with the trend towards nearshoring, is leading to an expansion of operations into countries like Mexico. Nearshoring, or the transfer of business processes to nearby countries, has many benefits. Its under these conditions that many companies turn to Employer or Record services to navigate the often complex environment of foreign labor laws, manage employment risks, and ensure a smooth transition.

Read more about the benefits of nearshoring here.

Mexico continues to be an important nearshoring location for companies of all types that want to have close access to the U.S. market. Mexico has gained significant experience in the manufacturing sector, but it also has a growing professional services sector. From IT to marketing and finance, Mexico offers a highly skilled workforce at competitive rates. However, navigating the country's labor laws and managing employment risks can be daunting for those unfamiliar with its legal system.

Read more about the professional services sector in Mexico here.

Employer of Record vs. Professional Employer Organization

Employer of Record and Professional Employer Organization are often used interchangeably, but they have some key differences. Both modalities are used to help companies expand globally by managing payroll, benefits, taxes and other HR responsibilities.

Hiring workforce in Mexico via an Employer of Record (EOR) modality provides an avenue for a company to build a workforce in Mexico without the need to incorporate a legal entity in the country. A third party provides an employment administration solution and takes the liability for employment in the country where the employees are located.

A Professional Employer Organization (PEO) is the administration of your workforce that are hired on your legal entity within the country where the employees are located. Essentially, the company is still the legal employer of record and maintains control over the operations of their employees, but a third party manages the HR-related responsibilities.

The primary difference is the owner of the employment entity, which has a lot of implications for compliance, risk and flexibility. Each business case may favor one model over the other, or even a custom solution that contemplates growth and independence over time.

In summary, Employer or Record is provided for companies seeking to expand their horizons and enrich their talent pool, with limited appetite to incorporate and manage a business in Mexico.

Benefits of Employer of Record in Mexico

There are many benefits to hiring an Employer of Record in Mexico.

1. Compliance with Mexican labor laws: A reputable Employer of Record stays up to date on all changes and updates in Mexican employment laws. This ensures that your company is always in compliance and avoids any potential legal issues.
2. Risk management: When using an Employer of Record, the third party takes on the risks and liabilities associated with employment in Mexico. This minimizes the risk for your company and allows you to focus on your core business.
3. Expansion without Exposure: As mentioned earlier, hiring an Employer of Record allows you to expand into Mexico without having to set up a legal entity. This saves time and resources while still allowing you to access top talent in the country.
4. Cost-effective: Hiring an Employer of Record is often a more cost-effective option compared to incorporating a legal entity and managing all HR responsibilities on your own. This allows you to allocate resources towards growing your business rather than managing administrative tasks.

Why choose Prodensa as your Employer of Record in Mexico?

• Scalable support in human resources and payroll matters, that permits a trial run in a foreign country yet spans the integral support of project management experts when the time comes for growth
• Candidates chosen and supervised by clients, with Prodensa support to transfer and adapt the corporate culture to the Mexican workforce, driven by Prodensa's Employer of Choice methodology
• On-site, hybrid or home office schemes with national coverage in Mexico via our network of 20+ offices throughout the country plus Houston, Texas
• Transparent payroll calculations with 100% compliance with outsourcing regulations in Mexico
• Experts with daily responsibility over HR-related compliance in Mexico, including participation in institutions such as INDEX, US-Mexico Foundation, CONCAMIN, American Chamber Mexico, and CONASIMI, CAINTRA, COPARMEX, among others

Prodensa offers both the EOR model and the PEO model for companies that seek to hire employees and operate in Mexico. Our material experts can review your operational goals and walk you through the risks, implications and even cost model for your business case. Prodensa has hired more than 2,400 professionals in Mexico since 2018, and manages over 80 businesses on a day-to-day basis for foreign clients.

Expanding your business into Mexico can bring many benefits, but it also comes with its own set of challenges. Hiring an Employer of Record in Mexico can help alleviate these challenges and provide a smooth transition for your company.

For further reading about Mexican employment laws, check our our Hiring Employees in Mexico e-book here.