What changed with Mexico's 2023 vacation reform?

Starting January 1, 2023, employees are entitled to a minimum of 12 vacation days after their first year of service. The entitlement increases by 2 days per year up to 20 in the fifth year, then by 2 days every 5 years.

How does the pension reform affect the employer burden?

Mexico's 2020 pension reform gradually increases employer contributions to Cesantía en Edad Avanzada y Vejez between 2023 and 2030. The rate varies from 3.150% to 6.422% of the SBC depending on salary level.

Mexico Labor Cost Calculator 2026 | Employer Payroll Burden: IMSS, INFONAVIT, ISN

ⓘ Values updated with the 2026 UMA (MXN $108.57/day), current minimum wage (MXN $315.04/day), and the graduated Cesantía y Vejez rates from Mexico's pension reform.

1 General Settings

State ?

Risk Premium Class ?

2 Employee Details

Calculation Results

Cost Breakdown by Employee

IMSS Employer Contribution Detail (Monthly)

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How to Calculate the True Cost of Hiring an Employee in Mexico

The cost of employing someone in Mexico goes well beyond the gross monthly salary. As an employer, you must cover a series of mandatory contributions and statutory benefits including IMSS social security, INFONAVIT housing fund, state payroll tax (ISN), and minimum benefits such as the Christmas bonus (aguinaldo), paid vacation and vacation premium.

Components of the Employer Payroll Burden in Mexico

IMSS employer contributions: Include work-risk insurance, disease & maternity (fixed fee + surplus), cash benefits, medical expenses for retirees, disability & life insurance, and daycare & social benefits.
Retirement, Advanced-Age Severance & Old Age (RCV): Under Mexico's pension reform, the employer contribution for Cesantía y Vejez uses a graduated table that can reach up to 6.422% of the SBC (salary base for social security contributions).
INFONAVIT: The employer contributes 5% of the SBC to the employee's housing fund.
ISN (State Payroll Tax): Varies by state, ranging from 2% in Colima to 4.25% in Baja California. Applied to the gross payroll.
Aguinaldo (Christmas bonus): A minimum of 15 days' salary per year, paid in December.
Vacation days: Starting at 12 days in the first year and increasing with seniority (2023 reform).
Vacation premium (prima vacacional): 25% of the salary corresponding to vacation days.

What is the Integration Factor?

The integration factor (factor de integración) is used to calculate the Salary Base for Social Security Contributions (SBC, Salario Base de Cotización). It incorporates the daily proportional share of the aguinaldo and vacation premium into the base salary. The formula is: 1 + (aguinaldo days / 365) + (vacation days × 25% / 365).

What Percentage is the Employer Burden in Mexico?

On average, the employer payroll burden in Mexico ranges between 30% and 40% on top of the gross salary, depending on the salary level, the state you operate in, and your company's risk class. For higher salaries, the graduated Cesantía y Vejez rate increases this percentage significantly.

Frequently Asked Questions

The UMA (Unit of Measurement and Update) is updated every February by INEGI (Mexico's statistics institute). The minimum wage is updated each January by CONASAMI (the National Minimum Wage Commission). This calculator uses the values in effect for 2026.

Starting January 1, 2023, employees in Mexico are entitled to a minimum of 12 vacation days after completing their first year of service (previously 6 days). The entitlement increases by 2 days per year up to 20 days in the fifth year, and then by 2 additional days for every 5 years of service after that.

The SBC is capped at 25 times the daily UMA. For 2026, this equals MXN $2,714.25 per day (approximately MXN $81,427.50 per month). Salaries above this threshold are registered at the maximum allowed for IMSS purposes, which means the employer burden as a percentage of salary decreases for very high salaries.

Mexico's 2020 pension reform gradually increases employer contributions to Cesantía en Edad Avanzada y Vejez (advanced-age severance & old-age insurance) between 2023 and 2030. The rate varies by salary level using a graduated table, ranging from 3.150% to 6.422% of the SBC. Higher-paid employees cost more in social security as a result.

The State Payroll Tax (Impuesto Sobre Nómina / ISN) is calculated on total gross compensation paid, not on the SBC. The rate varies by state and is paid monthly to the corresponding state tax authority.

Yes. An Employer of Record (EOR) like Start-Ops Mexico can legally employ workers on your behalf, handling payroll, IMSS registration, tax withholding and compliance. This lets you hire in Mexico quickly without incorporating a local company. Contact us to learn more.