When do you graduate from an EOR to your own Mexico entity?

The calculation below uses a USD to MXN rate of approximately 17.5 for illustration. Teamed charges from $599 USD with zero FX mark-up. The actual MXN equivalent depends on the exchange rate at the time of invoice.

All entity cost figures in this table are typical ranges. They cover outsourced payroll, bookkeeping, bimonthly IMSS declarations, monthly SAT ISR filings, and HR admin for a small S.A. de C.V. They are illustrative, not law figures. Actual costs vary with the complexity of your setup and the benefits programme you run.

The crossover compresses faster at higher salaries. IMSS employer contributions at 26.15% apply on the Salario Base de Cotizacion (SBC) up to a capped ceiling. At higher tech salaries the fixed-peso IMSS components become a smaller share of payroll cost, but the entity overhead does not change. The crossover shifts closer to 5 to 6 employees at MXN 120,000 monthly salaries. At lower salaries it shifts toward 8 to 10.

Mexico bundles pension contributions inside the IMSS rate. The Retiro (2% employer) and Cesantia y Vejez (CEAV) components are already included in the 26.15% figure. They apply on both sides of the comparison, so they do not change the crossover significantly. Run the Crossover Calculator with your own headcount and salary band.

1. Calculate the EOR cost

   Multiply the Teamed fee (from $599 USD) by your planned Mexico headcount. This is the fixed variable cost. It grows linearly as you hire.

2. Estimate the entity fixed overhead

   Typically MXN 45,000 to 85,000 per month for a small S.A. de C.V. This covers outsourced payroll with CFDI stamping, bookkeeping, IMSS/SAT filings, and HR admin. This cost does not grow much until headcount exceeds 15.

3. Find the crossover headcount

   The crossover is where EOR monthly cost equals entity monthly overhead. For most Mexico City tech salary bands, this is around 6 to 9 employees. Use the Crossover Calculator for your own numbers.

4. Factor in non-financial triggers

   The maths gives you a headcount threshold. PTU profit-sharing design, permanent establishment substance, and SAT fiscal structure are separate questions that may override the cost crossover in either direction.

5. Plan the graduation date

   Allow 6 to 10 weeks for entity formation before the first payroll on your own entity. Factor in IMSS registro patronal processing time. Start the GEMO process while EOR continues running.

These are typical ranges. They are not law figures. There is no law that sets what a S.A. de C.V. costs to form. The range reflects real market rates for notaries, corporate services firms, and specialist advisors. It varies with how much substance and complexity your structure needs.

Why IMSS registration is the hidden bottleneck

The SAT RFC registration can be completed in a few days if the notary has a digital certificate. The IMSS registro patronal is slower. Foreign-parented companies must appoint a Mexican legal representative before the IMSS will process the registration. That representative must hold a valid CURP and RFC. Finding and onboarding that representative typically adds 2 to 4 weeks to the process. Plan for it before you set the first payroll date.

These figures are typical market ranges for a small S.A. de C.V. with 1 to 15 employees in Mexico City. They are illustrative. They are not law figures. Actual costs depend on whether you outsource or hire in-house, and the complexity of your payroll and benefits programme. State payroll tax (ISN) varies by state, from around 1% in some states to 3% in Mexico City and Nuevo Leon.

Above 15 employees, a dedicated Mexico City HR and finance function typically becomes necessary. The cost band widens at that point. CFDI electronic invoice stamping is mandatory for all salary payments and adds a per-payslip cost not present in an EOR arrangement.

Most cost comparisons skip the director-liability dimension because it is hard to put a number on. It is worth naming explicitly before you decide.

Personal liability under the Codigo Fiscal

Under Article 26 of the Codigo Fiscal de la Federacion (CFF), administrators, directors, and any person who effectively controls tax obligations of a legal entity become jointly and severally liable for the company's unpaid federal taxes. This applies when the company does not pay. The SAT can pursue the individual directly. It is not a theoretical risk: the CFF enforcement program has expanded significantly since 2020.

IMSS and LFT personal exposure

The Ley del Seguro Social makes employers jointly liable for IMSS contributions. If your Mexican entity falls behind on IMSS declarations or payments, the IMSS can fine the company and pursue administrators personally. The fines are calculated per employee per omitted period and compound quickly.

The compliance treadmill

• SAT monthly ISR withholding declarations: due by the 17th of each following month. Late filing generates automatic recargos and penalties under CFF.
• IMSS bimonthly SUA declarations: employer must file and pay contributions for each bimonthly period. Omissions attract IMSS fines per unregistered employee per period.
• INFONAVIT monthly contributions: 5% employer housing fund contribution, filed and paid monthly. Separate from IMSS but administered together.
• State payroll tax (ISN): due monthly, rate varies by state. Mexico City and Nuevo Leon are at the higher end. Missing a state filing triggers state tax authority penalties separately from federal ones.
• Annual SAT fiscal declaration: due by 31 March following the fiscal year. Missing it triggers automatic fines and can trigger a SAT audit.
• CFDI payroll receipts: every quincenal payroll payment must be accompanied by a digitally stamped CFDI (Comprobante Fiscal Digital por Internet). An unstamped payroll receipt is not a valid deduction for the company.

Each filing is individually manageable. Stacked across a year, they consume real management attention. An EOR carries all of these on its own entity.

• Under 6 Mexico employees on average salaries: EOR is cheaper and faster every month. The entity overhead has nothing to amortise against.
• Market validation phase: you are hiring 1 or 2 people to test commercial fit. Entity setup commits capital and management attention before you know whether the Mexico market will deliver.
• Project-based hires: 6 to 12 month engagements where the formation cost will not amortise before the project ends.
• No profit-sharing or CFDI ESOP needs yet: your hires are not expecting Participacion de los Trabajadores en las Utilidades (PTU) optimisation or a local share structure. The entity becomes more useful once equity or local profit-sharing is part of the compensation design.
• Acquired team you may divest: post-acquisition holding patterns where adding a local entity creates winding-up complexity and SAT liquidation obligations later.
• State risk is unclear: if you have not decided whether to base operations in Mexico City, Monterrey, or Guadalajara, entity setup locks in a registered address and a state payroll tax rate before the commercial question is resolved.

• Sustained headcount above 9 Mexico employees at average salaries: the entity overhead amortises across enough people that per-head cost falls below the EOR fee.
• PTU profit-sharing design: the Participacion de los Trabajadores en las Utilidades requires Mexican employees of a Mexican company to share 10% of annual taxable profits. If you have a Mexican entity with significant local revenue, the PTU calculation is material. Planning around it requires a local entity and a local fiscal structure. An EOR employer pays PTU on its own consolidated profits, not yours.
• Permanent establishment and RFC substance: certain Mexico City enterprise customers and government contracts require the supplier to hold a registered Mexican RFC and a local S.A. de C.V. for invoicing. EOR employment does not count as your fiscal substance.
• Multi-state expansion: once you have teams across Mexico City, Monterrey, and Guadalajara, the administrative load of coordinating multiple state payroll tax registrations through an EOR is comparable to running them yourself.
• IMSS salary history: for longer-tenure employees, having direct IMSS affiliation through your own entity gives you control over the SBC declaration and the CEAV pension tranche phased increases, which affect your total cost trajectory through 2030.

The technical mechanic is contract novation under the Ley Federal del Trabajo: the employment contract transfers from the Teamed Mexico entity to your new S.A. de C.V. on a specified date. All terms carry across. Salary, vacation entitlement, continuous service date, and accrued benefits all remain unchanged. The employee sees a different employer name on their CFDI payslip. Nothing else changes.

What we do operationally:

• Stand up your S.A. de C.V. through GEMO, typically 6 to 10 weeks, while EOR continues running in parallel.
• Complete SAT RFC registration and IMSS registro patronal for the new entity.
• Register with INFONAVIT and the applicable state payroll tax authority.
• Set up the CFDI payroll stamping provider for the new entity's RFC.
• Novate every active employment contract on a single effective date.
• Migrate ongoing benefits without any lapse.
• File final EOR-period IMSS SUA submissions and open new IMSS registration on the entity from the novation date.
• Provide the same People Ops specialist as the post-graduation primary contact.

The Graduation Model exists because every other EOR makes this hard. We treat the move as something we help you plan for from the day you hire your first employee through us.

real HR and legal experts handle your Mexico hires from the first offer letter through every quincenal CFDI payslip and annual aguinaldo payment. an actual person, not a chatbot or a pooled queue. There is no setup fee and no exit fee. Every employer cost passes through at cost, itemised on every invoice. You see the IMSS employer line at 26.15%, the annual leave entitlement for 12 days, and every mandatory benefit. Nothing is hidden inside the management fee.

EOR payroll, contractor onboarding, and entity setup all live on one platform. Run the Crossover Calculator to see the month the model flips. Start from the Mexico hiring overview. Key sources: IMSS employer portal and SAT employer guidance.