Running payroll in Mexico: a complete guide from gross pay to CFDI

Payroll in Mexico turns each gross salary into four separate calculations for four different authorities: income tax (ISR) withheld for the tax authority (SAT), social-security contributions for IMSS, a 5% housing contribution for INFONAVIT, and a payroll tax for the state where the employee works. Each calculation uses its own base and its own reference values, and most of those values change on 1 January or 1 February. Every payment also has to be documented in a government-stamped electronic receipt, the CFDI de nómina. This guide explains how to run payroll (nómina) in Mexico in the order a pay run calculates it, using 2026 figures, and ends with one employee taken from MXN$30,000 gross to net pay and to the full cost to the employer.

The legal framework for payroll in Mexico and the 40-hour week

Five bodies of law set the rules, each enforced by a different authority.

• The Ley Federal del Trabajo (LFT), the federal labor law, sets wages, working hours, overtime, and the statutory benefits. The labor ministry (STPS) enforces it.
• The Ley del Impuesto sobre la Renta (LISR), the income tax law, sets the withholding the employer makes on behalf of SAT.
• The Ley del Seguro Social (LSS) sets the IMSS contributions, split into several insurance branches.
• The INFONAVIT law sets the housing contribution and the deduction of workers' housing-loan repayments.
• Each state's finance law sets that state's payroll tax, the Impuesto Sobre Nóminas (ISN).

The LFT also fixes how often employees are paid. Article 88 caps the pay period at one week for manual work and fifteen days for everyone else, so monthly payroll is not an option. Most salaried staff are paid by quincena (a 15-day pay period), on the 15th and the last day of the month.

Working hours are changing. A constitutional reform published in the Diario Oficial (DOF), the official gazette, on 3 March 2026 cut the maximum work week from 48 to 40 hours, and the implementing LFT decree was published on 1 May 2026. The limit stays at 48 hours in 2026, then falls by two hours each January: 46 in 2027, 44 in 2028, 42 in 2029, and 40 from 2030. Overtime is paid at double time up to a weekly cap (9 hours in 2026 and 2027, rising to 12 by 2030), with up to four further hours a week at triple time.

From 1 January 2027 employers must keep an electronic record of each worker's start and finish times, within the scope and exceptions that STPS sets by general rules, with fines of 250 to 5,000 UMA (the reference unit explained in the next section) for failing to do so. The decree also forbids cutting wages or benefits because hours fall, so the hourly rate rises each January while the monthly salary stays the same.

Minimum wages and the UMA: the two reference values

Mexican payroll uses two reference values, and they are easy to confuse.

The minimum wage is set each December by the national minimum-wage commission (CONASAMI) and takes effect on 1 January. For 2026 it is MXN$315.04 a day in most of the country and MXN$440.87 a day in the Northern Border Free Zone (Zona Libre de la Frontera Norte), a list of 45 border municipalities rather than whole states. Tijuana and Ciudad Juárez are in the zone; Monterrey and Hermosillo are not.

The UMA (Unidad de Medida y Actualización) is an inflation-indexed unit created by the 2016 constitutional reform to replace the minimum wage as the reference for fines, caps, and tax exemptions, so that the minimum wage could rise without raising them. INEGI, the statistics institute, publishes it each January, and it takes effect on 1 February. For 2026 it is MXN$117.31 a day, MXN$3,566.22 a month, and MXN$42,794.64 a year.

The split matters because the two values now differ widely. The minimum wage is the legal minimum for pay and for the social-security base. The UMA sets the contribution ceiling, the ISR exemption caps, and the employment subsidy. A cap written as "30 days of minimum wage" in older text is read as 30 UMA, which is MXN$3,519.30, not MXN$9,451.20. And January is a hybrid month: the new minimum wage applies, but the UMA is still last year's.

The SBC: the integrated daily wage used for IMSS and INFONAVIT

IMSS and INFONAVIT do not charge contributions on the salary. They charge them on the Salario Base de Cotización (SBC), a daily figure that adds the value of the employee's benefits to the daily wage. LSS Article 27 includes cash pay, bonuses, premiums, commissions, and in-kind benefits, and excludes a defined list, such as matched savings funds, grocery vouchers up to 40% of the daily UMA, and overtime within the legal limits.

For a salaried employee on the statutory minimum benefits, the SBC is calculated with an integration factor:

• Aguinaldo (year-end bonus): 15 days ÷ 365 = 0.0411
• Vacation premium: 12 vacation days × 25% ÷ 365 = 0.0082
• Integration factor: 1 + 0.0411 + 0.0082 = 1.0493

An employee earning MXN$1,000 a day therefore has an SBC of MXN$1,000 × 1.0493 = MXN$1,049.30. The factor increases with seniority, because vacation days increase: 14 days in the second year gives 1.0507, and 20 days in the fifth gives 1.0548. An employer that pays more than the statutory minimum (20 days of aguinaldo, say) uses a higher factor.

Two limits apply. The SBC cannot fall below the minimum wage for the zone (LSS Article 28), and it is capped at 25 UMA, MXN$2,932.75 a day from February 2026. No IMSS or INFONAVIT contributions are charged on pay above the cap.

The SBC must also be registered with IMSS. Hires (altas), terminations (bajas), and salary changes (modificaciones) must be reported to IMSS within five business days (LSS Article 15). Contributions are charged on the SBC on file, so a raise that is paid but never reported leaves the employer underpaying every contribution until IMSS detects the difference.

ISR withholding each pay period and the subsidio para el empleo

ISR is a progressive tax with eleven brackets and marginal rates from 1.92% to 35%. The employer withholds it from each payment and remits it to SAT by the 17th of the following month (LISR Article 96). Each withholding is a provisional payment toward the employee's annual tax.

The method is the same in every bracket: take the taxable pay for the period, subtract the bracket's lower limit, multiply the excess by the bracket's rate, and add the bracket's fixed fee (cuota fija). SAT publishes separate tables for daily, weekly, 10-day, 15-day, and monthly periods in Annex 8 of the annual tax rules (Resolución Miscelánea Fiscal). The peso amounts are updated whenever accumulated inflation since the last update exceeds 10% (LISR Article 152); the 2026 tables, published on 28 December 2025, applied an update factor of 1.1321, the first update since the 2023 tables. The tables are not simple multiples of each other, so a quincena is taxed with the 15-day table, not with half the monthly one.

Two adjustments apply before the tax is calculated. Certain pay is exempt up to a UMA-based cap (covered in the benefits section below). And a worker who earns only the minimum wage has no ISR withheld at all.

One adjustment applies after. The subsidio para el empleo (employment subsidy) is a credit for low earners, set by presidential decree. Under the decree published on 31 December 2025, a worker whose monthly taxable income does not exceed MXN$11,492.66 receives a credit of 15.02% of the monthly UMA, which is MXN$535.65 from February. January uses 15.59% of the 2025 UMA, because the new UMA is not yet in force. The credit only reduces ISR. If the credit exceeds the tax, withholding is zero and the excess is not paid to the worker.

A worker on MXN$10,000 a month shows how much the credit matters at the bottom of the scale:

• Bracket: MXN$7,168.52 to MXN$12,598.02, fixed fee MXN$420.95, rate 10.88%
• ISR before the credit: MXN$420.95 + (MXN$10,000 − MXN$7,168.52) × 10.88% = MXN$729.02
• Withholding after the credit: MXN$729.02 − MXN$535.65 = MXN$193.37

The cutoff is a hard line, with no phase-out. At MXN$11,492.66 the worker receives the full credit; one peso more and the worker receives nothing.

At year end, the employer runs an annual adjustment (ajuste anual) for each eligible employee: one who was on the payroll from 1 January, had not left before 1 December, and earned no more than MXN$400,000. An employee who states in writing that they will file their own return is excluded (LISR Article 97). The adjustment applies the annual table to the year's income and refunds or collects the difference against what was withheld.

IMSS contributions by insurance branch

IMSS contributions are split across five insurance branches (types of social-security coverage, each with its own rates). Some branches have several components, which is how one contribution becomes nine lines on a cost report. The employer pays most of the total, and several components are employer-only.

Three components are not a flat percentage of the SBC.

The fixed fee is charged per worker regardless of pay: 20.40% of one daily UMA, about MXN$718 for a 30-day month in 2026. For a minimum-wage worker that is a large share of the cost; for a manager it is small.

Work risk depends on the employer. A new employer is placed at the average premium for its risk class, from 0.54355% for Class I (office and software work, for example) to 7.58875% for Class V (mining and similar). Each February the employer recalculates its own premium from the previous year's accident record (LSS Article 74), within a minimum of 0.50% and a maximum of 15%.

Cesantía y Vejez is the branch the 2020 pension reform is raising every January until 2030. The employer rate depends on the worker's SBC expressed as a multiple of the UMA. For 2026 it is 3.150% for an SBC equal to the minimum wage, 3.676% up to 1.5 UMA, 4.851% up to 2 UMA, 5.556% up to 2.5 UMA, 6.026% up to 3 UMA, 6.361% up to 3.5 UMA, 6.613% up to 4 UMA, and 7.513% above 4 UMA. Because the 2026 general minimum wage alone is about 2.7 UMA, the bands between the minimum wage and 2.5 UMA cover no one in practice: an SBC above the minimum starts in the 6.026% band. Because the SBC includes the year-end bonus and vacation premium, even a minimum-wage worker's SBC sits slightly above the minimum wage, so the 3.150% rate rarely applies. By 2030 the top rate reaches 11.875%. The worker's rate stays at 1.125%.

For a worker on the minimum wage, the employer pays the worker's share as well (LSS Article 36), so nothing is deducted from that worker's pay.

INFONAVIT, SAR, and the state payroll tax

INFONAVIT charges the employer 5% of the SBC, capped at the same 25 UMA, paid into the worker's housing subaccount (INFONAVIT law, Article 29). The amount is never deducted from the worker. Separately, when INFONAVIT notifies the employer that a worker holds a housing loan, the employer must withhold the repayment from pay and remit it. The two are easy to confuse and are opposites: the 5% is an employer cost, the loan repayment is a deduction from the worker.

SAR (Sistema de Ahorro para el Retiro) is the retirement savings system, and in payroll shorthand "SAR" usually means the employer's 2% Retiro contribution. That 2%, the Cesantía y Vejez contributions from both sides, and the government's contribution are credited to the worker's individual account at an AFORE (a private pension fund manager). The INFONAVIT housing subaccount is held in the same account. The employer does not pay the AFORE directly: it pays through the IMSS payment system, and the money is routed to the worker's account.

ISN, the state payroll tax, is charged by each state on total pay, not on the SBC, and only the employer pays it. Most states charge 3%. The headline rates in 2026 run from 2.4% (the lowest band of Sinaloa's progressive scale) to 4.25% in Baja California, and Mexico City charges 4%; a few states levy surcharges in addition to the headline rate. Each state also sets its own exemptions and its own due date. The tax is owed to the state where the employee works, so a client with staff in three states registers and files in three states.

Statutory benefits and how each is taxed

The LFT requires four benefits beyond salary, and each one has its own ISR exemption, set in UMA.

Aguinaldo. At least 15 days of salary, paid before 20 December, prorated for anyone who worked part of the year (LFT Article 87). Up to 30 UMA (MXN$3,519.30) is exempt from ISR. An employee on MXN$1,000 a day receives MXN$15,000, of which MXN$11,480.70 is taxable. Proposals to raise the minimum to 30 days have been before Congress in 2026 but had not become law as of early October 2026.

Vacation and the vacation premium. Since the 2023 reform, employees receive 12 working days of paid vacation after their first year of service, rising by two days a year to 20 in the fifth year, then by two days every five years (LFT Article 76). In addition to vacation pay, the employer owes a premium (prima vacacional) of at least 25% of the salary for those days (LFT Article 80). Vacation pay is ordinary salary; the premium is exempt up to 15 UMA a year (MXN$1,759.65).

Profit sharing (PTU). Employers distribute 10% of taxable profit to employees each year, within 60 days of the date the annual tax return is due (LFT Article 122): by 30 May for companies and by 29 June for individual employers. Each worker's share is capped at three months' salary or the average of the last three years' PTU, whichever is higher for the worker (LFT Article 127). PTU is exempt from ISR up to 15 UMA and is excluded from the SBC.

Sunday premium. A worker whose shift falls on a Sunday is owed an extra 25% of a day's salary (LFT Article 71), exempt from ISR up to one UMA per Sunday worked.

Overtime has a separate exemption. For workers above the minimum wage, half of the double-time overtime within the legal limit is exempt from ISR, up to five daily UMA a week (LISR Article 93).

CFDI de nómina: the stamped electronic payslip

In Mexico the tax authority effectively co-signs every payslip. Every payment to an employee must be documented in a CFDI de nómina, an electronic receipt in SAT's XML format with a payroll complement listing each earning and deduction by SAT code. The employer signs it with its digital seal certificate and sends it to an authorized certification provider (a PAC), which stamps it and returns a unique identifier (UUID). The stamped XML is the legal payslip.

Regla 2.7.5.1 of the 2026 tax rules sets the deadline. The CFDI can be issued before the payment, or within a number of business days after it that depends on headcount: 3 days for 1 to 50 workers, 5 for 51 to 100, 7 for 101 to 300, 9 for 301 to 500, and 11 for more than 500.

SAT also uses the stamped CFDIs to pre-fill the employer's monthly ISR withholding declaration, and the only way to change the pre-filled figures is to issue or cancel receipts (RMF 2026 Regla 3.9.16). A wrong code on the receipt produces a wrong figure on the declaration, and a salary payment without a valid CFDI is not deductible for the employer's own income tax (LISR Article 27).

The Mexico payroll calendar: monthly, bimonthly, and annual deadlines

Payroll deadlines in Mexico fall into four cycles: every pay run, monthly, bimonthly, and annual.

Every pay run: CFDI stamped within the headcount window above.

Monthly, by the 17th of the following month:

• ISR withheld, declared and paid to SAT (LISR Article 96).
• IMSS sickness and maternity, disability and life, work risk, and childcare contributions, calculated in the IMSS software (SUA) and paid through IMSS's payment portal (LSS Article 39).
• ISN, by each state's date (most use the 17th, several use another day).

Bimonthly, by the 17th of the month after each two-month period: Retiro, Cesantía y Vejez, and INFONAVIT. The periods are January–February (due 17 March), March–April (17 May), May–June (17 July), July–August (17 September), September–October (17 November), and November–December (17 January).

Annual:

• February: the ISR annual adjustment for eligible employees, and the IMSS work-risk premium recalculation.
• 30 May (companies) or 29 June (individual employers): PTU payment.
• 20 December: aguinaldo.
• 1 January: new minimum wage, new Cesantía y Vejez rates, and new ISR tables when inflation passed the 10% trigger during the previous year.
• 1 February: new UMA.

Late payment to SAT, IMSS, or INFONAVIT accrues inflation adjustments and monthly surcharges from the day after the deadline. IMSS and INFONAVIT are autonomous tax bodies (organismos fiscales autónomos) and collect unpaid contributions with tax-collection powers, as SAT does.

A worked example: from MXN$30,000 gross to net pay and employer cost

Take an employee in Mexico City, in their first year, on a salary of MXN$30,000 a month (MXN$1,000 a day), paid by quincena, with statutory minimum benefits. The employer is in risk Class I at 0.54355%. The month is November 2026, which has 30 days. Figures are illustrative and use 2026 values.

Step 1: the SBC. MXN$1,000 × 1.0493 = MXN$1,049.30 a day. The SBC equals 8.94 UMA, so Cesantía y Vejez uses the top 2026 rate of 7.513%. The SBC for the month is MXN$1,049.30 × 30 = MXN$31,479.00. The amount above 3 UMA (MXN$351.93 a day) is (MXN$1,049.30 − MXN$351.93) × 30 = MXN$20,921.10.

Step 2: ISR. Each quincena pays MXN$15,000 and uses the 15-day table: MXN$916.20 + (MXN$15,000 − MXN$8,651.41) × 21.36% = MXN$2,272.26. Two quincenas: MXN$4,544.52. (The monthly table on MXN$30,000 would give MXN$4,519.65; the annual adjustment settles the difference.) Income is above MXN$11,492.66, so there is no subsidy.

Step 3: the worker's IMSS contributions.

• Excess over 3 UMA: MXN$20,921.10 × 0.40% = MXN$83.68
• Cash benefits: MXN$31,479.00 × 0.25% = MXN$78.70
• Pensioners' medical costs: MXN$31,479.00 × 0.375% = MXN$118.05
• Disability and life: MXN$31,479.00 × 0.625% = MXN$196.74
• Cesantía y Vejez: MXN$31,479.00 × 1.125% = MXN$354.14
• Total: MXN$831.31

Step 4: net pay. MXN$30,000.00 − MXN$4,544.52 − MXN$831.31 = MXN$24,624.17.

Step 5: the employer's contributions.

• Fixed fee: MXN$117.31 × 30 × 20.40% = MXN$717.94
• Excess over 3 UMA: MXN$20,921.10 × 1.10% = MXN$230.13
• Cash benefits: MXN$31,479.00 × 0.70% = MXN$220.35
• Pensioners' medical costs: MXN$31,479.00 × 1.05% = MXN$330.53
• Disability and life: MXN$31,479.00 × 1.75% = MXN$550.88
• Work risk: MXN$31,479.00 × 0.54355% = MXN$171.10
• Childcare: MXN$31,479.00 × 1.00% = MXN$314.79
• Retiro: MXN$31,479.00 × 2.00% = MXN$629.58
• Cesantía y Vejez: MXN$31,479.00 × 7.513% = MXN$2,365.02
• IMSS total: MXN$5,530.32
• INFONAVIT: MXN$31,479.00 × 5% = MXN$1,573.95
• ISN (Mexico City): MXN$30,000.00 × 4% = MXN$1,200.00
• Employer contributions and tax: MXN$8,304.27

Step 6: total cost. The month costs the employer MXN$30,000.00 + MXN$8,304.27 = MXN$38,304.27, 27.7% more than the salary. The aguinaldo (MXN$15,000 a year) and the vacation premium (MXN$3,000 a year) add MXN$1,500 a month when accrued, plus MXN$60 of ISN when they are paid, bringing the monthly cost to MXN$39,864.27, or 32.9% more than the salary. PTU depends on the year's profit and is an additional cost.

Because the integration factor includes the aguinaldo and vacation premium, the employer pays IMSS contributions on the December bonus in every month of the year. And of the MXN$13,680.10 between the employee's net pay and the employer's monthly cost, only MXN$5,375.83 appears as deductions on the payslip; the other MXN$8,304.27 is employer contributions and tax that the employee never sees.

Summary

Payroll in Mexico follows a fixed sequence. The employer calculates the SBC from the daily wage and the integration factor, no lower than the zone minimum wage and capped at 25 UMA. ISR is withheld with the table for the pay period, the subsidy applies only up to MXN$11,492.66 a month, and the tax is remitted by the 17th. IMSS contributions and INFONAVIT's 5% are charged on the SBC, with Cesantía y Vejez at the 2026 rate for the worker's UMA band; the state's ISN is charged on total pay. The aguinaldo, vacation premium, and PTU are paid on their dates, each with its UMA-based exemption. Every payment needs a stamped CFDI within 3 to 11 business days.

Almost every number in that sequence changes on a published schedule: the minimum wage each January, the ISR tables whenever inflation triggers an update, the UMA each February, the Cesantía y Vejez rate every year to 2030, the work week every year to 2030, and state ISN rates whenever a state legislature changes them. On spreadsheets or a slow-moving provider, each of those dates is a manual update that someone has to remember. Flux applies the current values each time it calculates a pay run, so your clients receive payslips calculated on this year's rules and your team's time goes to the questions that need an accountant.