Mexico pairs nearshore convenience for US companies — time zones, USMCA familiarity, a deep tech and back-office talent pool — with a labor law that takes classification seriously and a tax system that makes contractor engagements unusually auditable: every legitimate payment is backed by a CFDI electronic invoice registered with the tax authority. That’s a feature. Use it.
How Mexico decides who is an employee
Article 20 of the Federal Labor Law defines the employment relationship through one word: subordination — personal work performed under another’s direction for pay. Courts look for the usual evidence: fixed schedules, direct supervision, exclusivity, integration into the org. There is no registration or corporate wrapper that overrides the facts; if subordination exists, employment exists, and the label on the contract is decoration.
The rule that confuses foreign buyers: the 2021 outsourcing reform (REPSE). It banned general labor outsourcing and requires providers of “specialized services” to register — but it regulates company-to-company staffing arrangements. Engaging an individual independent professional directly is a different legal animal, judged by the subordination test above. Vendors love to wave REPSE around; for direct contractor engagements it’s mostly beside the point.
What misclassification costs
Reclassification awards the worker the LFT employment package retroactively: aguinaldo (minimum 15 days’ pay each Christmas), paid vacation with the vacation premium, employer IMSS (social security) and INFONAVIT (housing fund) contributions with surcharges — and the item unique to Mexico, PTU: mandatory profit-sharing of 10% of taxable profit among employees. PTU claims are what turn Mexican misclassification from a payroll problem into a P&L problem. Severance rules (three months plus seniority premiums for unjustified dismissal) ride along.
Contract and IP
- Written services agreement tied to deliverables, with the contractor’s RFC on it; require a CFDI for every payment — an engagement with no CFDIs is invisible to SAT and indefensible in a dispute.
- Avoid subordination artifacts: no fixed schedule, no exclusivity clause unless truly needed, contractor’s own equipment.
- IP: Mexican copyright law is relatively friendly to commissioning parties for works made on commission, but scope disputes are common — assign economic rights explicitly and cover pre-existing materials.
Taxes and paperwork
The contractor’s side. A legitimate Mexican contractor is registered with SAT (has an RFC), issues CFDI electronic invoices through the tax authority’s system, and pays income tax — many qualify for RESICO, the simplified regime taxing gross receipts at roughly 1–2.5% up to MXN 3.5M/year. Exported services can qualify for 0% IVA if they are on the closed list in VAT Law Art. 29 (IT services such as software development among them); otherwise the contractor charges 16% (sat.gob.mx, Kreston BSG, both checked 2026-09-28). The CFDI requirement is your due-diligence shortcut: no RFC, no CFDI — no engagement.
The client’s side. Foreign clients pay gross; no Mexican withholding applies without a Mexican payer entity. US payers collect a W-8BEN and file no 1099. Keep contract + CFDIs; they are the audit trail.
How to pay contractors in Mexico
| Method | What the contractor sees | Notes |
|---|---|---|
| Payout platform → SPEI | MXN, instant on the last leg | The default from abroad; platform converts USD→MXN |
| SPEI transfer | Instant, MXN | Domestic rail — needs a Mexican origin account |
| SWIFT wire | Usually MXN at the receiving bank’s rate — individuals can hold USD accounts only in the 20 km border strip or Baja California / Baja California Sur (bbva.mx, checked 2026-09-28) | Legacy option; rarely worth it — banks charge to receive (BBVA México: USD 30 + IVA, BBVA fee schedule, checked 2026-09-28) |
| Wise | MXN near mid-market | Strong USD→MXN corridor |
USD→MXN platform spreads range from tight to painful; at nearshore team sizes the FX margin, not the subscription, is the real vendor price. Compare landed MXN.
Platforms that cover Mexican contractors
Verified against the providers’ own Mexico pages:
| Platform | Our score | MXN payouts | COR available |
|---|---|---|---|
| Deel | 8.7 | Yes | Yes |
| Remote | 8.4 | Yes | Yes |
| Multiplier | 8.4 | Yes | Yes |
| Rippling | 8.3 | Yes | Yes |
| Papaya Global | 8.2 | Yes | Yes |
| Payoneer | 8.0 | Yes | — |
| Wise | 7.6 | Yes | — |
Full list with filters — in the contractor management rating.
Contractor of Record in Mexico
A Contractor of Record earns its premium in Mexico on three jobs: verifying SAT registration and collecting CFDIs so the paper trail actually exists, running the subordination assessment before and during the engagement, and signing as the counterparty, which reduces misclassification risk — whether any liability moves depends on the indemnity, so ask specifically whether PTU exposure is inside it, because that’s the expensive tail. Roles that are employment in substance should go through an EOR instead. Providers with explicit COR offerings are compared in our COR rating.