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Ultimate guide to hiring international contractors in Mexico

July 24, 2022

Growing a business is always challenging. You have a lot of things to juggle, including understanding your customers, staying on top of market changes, and delivering excellent customer service. Great employees make a huge difference in helping your business scale, but you also need to keep down the costs of a large workforce. 

One popular way to help your business grow while cutting expenses is to outsource work to international contractors.

How to find contractors in Mexico

In Mexico, the best way to find contractors is through Twago, Guru, Workana MexicoBrybe, Indeed Mexico, Upwork, or other freelancer sites.

What you should know before hiring a contractor in Mexico

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Who is a contractor in Mexico?

According to Mexico’s Federal Labor Law (FLL), the main factor that defines a contractor is if they don’t have a work schedule or have to obey the employer. Mexico labor laws are very protective towards workers’ rights, so it’s a good idea to get help from a local expert to make sure that you’ve understood the requirements correctly. 

When you hire a contractor in Mexico, it’s a good idea to sign a written contract that makes it clear that:

  • The contractor doesn’t have to follow any set work hours
  • The contractor doesn’t have any reporting obligations
  • The contractor will use their own office, tools, equipment, etc. 

You should also make sure you don’t do anything to make it look like the contractor is subordinate to your business, like giving them business cards, a business email account, or power of attorney. 

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The regulations around hiring contractors in Mexico

In Mexico, you don’t have any obligations to provide the contractor with specific benefits. You can agree on whatever compensation you like, and you can terminate the relationship according to the terms you agree on in your contract. 

Mexican independent contractors have to pay their own taxes and social security benefits, including contributions to the National Housing Fund for Workers (INFONAVIT), and national income tax (ISR). You might have to make provisional withholdings for ISR from their revenue and pay it to the government. 

You can learn more here about the regulatory framework around hiring an independent contractor in Mexico, or talk to a local legal expert.

The difference between contractors and employees

Every country has laws that define whether your worker is an employee who’s entitled to certain benefits and working conditions, or a contractor who’s essentially self-employed. 

It’s important to check what the definition is of a “contractor” in the country where you want to hire workers, and make sure that you respect it. If the country thinks your worker is an employee, then you might have to pay them back for unpaid compensation and other missed benefits.

If your worker is a contractor and not an employee, it makes a difference to:

  • The number of hours they can work in a day, week, and month
  • Their entitlement to benefits like vacation time and employer-contributed pensions
  • How their salaries are taxed
  • What your tax situation is in that country and your home country

The definition of an independent contractor

Generally, this means the payer has a say in what work is done, but not in when, where, or how the work is completed. A contractor can work for more than one payer at the same time without consulting the payer, and they can accept or refuse work whenever and however they like. 

The definition of an employee

If the work they do is controlled by the payer, the worker is usually considered as an employee. Someone who can’t work for more than one payer at the same time, or without permission from the payer, is also considered an employee.

If you’re unsure if your workers are contractors or employees, here are some more ways to tell the difference:

  • Who provides tools and supplies? If it’s you, the person is more likely to be considered an employee.
  • Are expenses reimbursed? If so, they are probably an employee.
  • Is the work performed a fundamental aspect of the business? If so, they are probably an employee.
  • How long has the contractor been working for you? The longer the relationship, the more likely they are to be considered an employee. 
  • Did the worker sign a non-compete agreement? That’s often seen as turning a contractor into an employee.

Here are some ways to make sure your workers are contractors and not employees:

  • Do not set fixed hours they have to work (e.g. 9am-5pm).
  • Avoid hiring a contractor to perform an essential aspect of your business.
  • Don’t request an exclusive relationship; instead, give the contractor freedom to have multiple clients outside your organization.
  • Don’t require workers to complete a training or supervision period.
  • Ask workers to provide their supplies and tools, and don’t reimburse them for expenses.
  • Don’t provide workers with the kind of compensation that you’d usually give to an employee, like insurance, pension, or vacation days.

Some countries require you to make a written contract with an independent contractor, while others do not. But when it comes to deciding if the worker is an employee or a contractor, authorities will look more at your actual relationship than at anything written in a contract. 

The benefits of hiring overseas contractors 

  • You’ll have employees on the ground at your target markets, so they can supervise the supply chain.
  • You have local employees who understand the culture and market that you’re selling to.
  • You can hire the best talent there is, no matter where it’s located.
  • Hiring talented workers in areas where the cost of living is low helps keep your costs down.
  • You can easily provide “follow the sun” round the clock customer support, because you have employees in different time zones. 

Whatever your reasoning, working with international contractors can be a great way to build your business and employ the best talent anywhere in the world. 

Payoneer makes it easy to pay your global contractors 

Once you’ve found local independent contractors to hire, you’ll want a convenient and affordable way to pay them. With Payoneer, you can pay independent contractors in 190+ countries around the world in their local currency, which makes it far easier and more convenient for the contractor to access their funds.

Payoneer’s fast, secure, and low-cost online payments solution allows you to send payments using your credit card or ACH bank debit transfers, which means you can skip the hassle of pre-funding your account. You can even save time and use batch payments to pay dozens of contractors simultaneously, or automate recurring payments so you’ll never be late with payday. 

Payoneer has a competitive foreign currency exchange rate and attractive fees, like just 1% for ACH bank debit transfers and 3% for credit card payments. What’s more, if you already have funds in your Payoneer account, such as a payment from your own clients, you can use that balance to pay your contractors free of charge.

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[1] According to eligibility and current Payoneer offering

The content provided in this article including any information relating to pricing, fees, and other charges is accurate and valid only as of the date it was published. In addition, changes in applicable regulations, policies, market conditions, or other relevant factors may impact the accuracy of the mentioned pricing and fees and other associated details. Accordingly, it is further clarified that any information regarding pricing, fees and other charges is subject to changes, and it is your responsibility to ensure you are viewing the most up to date content applicable to you. Payoneer will provide the most up to date and accurate information relating to pricing and fees as part of the account registration process. Registered customers can view this information via their online account.

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