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No staffing agencies or employer of record for core work: Mexico's outsourcing ban

Last verified: 2026-10-27 · Status: Stable

Abroad, a staffing agency or employer of record can employ people who work for you; in Mexico supplying one's own workers to benefit another party is prohibited. Only specialized services outside the client's corporate purpose and main activity may be subcontracted, to a contractor registered in the Ministry of Labor's REPSE registry, under a written contract. Breaking the rule costs a fine of 2,000 to 50,000 UMA for both sides, joint liability for the workers, and the loss of the income tax deduction and VAT credit.

USD conversions use MXN 18.6638 per US dollar, the US Federal Reserve H.10 noon buying rate in New York for 23 October 2026 (FRED series DEXMXUS), the latest observation available when this page was verified. Mexican law uses the Banxico FIX rate published in the DOF for foreign currency amounts, which differs slightly. Conversions are for orientation only.

Key facts

Subcontracting of personnel (supplying workers to another)	Prohibited; only REPSE registered specialized services outside the client's core activity textLFT arts. 12 and 13, as of 2026-10-27 · in force
Specialized services registry (REPSE) renewal period	3 yearsLFT art. 15, as of 2026-10-27 · in force
STPS deadline to rule on a REPSE application	20 daysLFT art. 15, as of 2026-10-27 · in force
Minimum fine for prohibited subcontracting, 2026 (2,000 UMA)	234620.00 MXNLFT art. 1004-C; UMA 2026 MXN 117.31, as of 2026-10-27 · in force
Maximum fine for prohibited subcontracting, 2026 (50,000 UMA)	5865500.00 MXNLFT art. 1004-C; UMA 2026 MXN 117.31, as of 2026-10-27 · in force
Unit of Measure and Update (UMA), daily value from 1 February 2026	117.31 MXNINEGI publication DOF 9 January 2026, as cited by IMSS, as of 2026-10-27 · in force

The rule

1. Subcontracting of personnel is prohibited: a person may not provide or make available its own workers for the benefit of another. Employment agencies and intermediaries may recruit, select and train, but they are not the employer; the employer is whoever benefits from the services.
Cost to do it: No fee; the compliant route is to hire through your own Mexican entity, with its payroll, social security, housing fund and profit sharing obligations.
Example: A foreign company wants ten developers in Guadalajara. Software development is its core activity, so a local agency cannot employ them and lend them out; the company must employ them through its own Mexican entity. / No direct US dollar effect; see the fine below.Ley Federal del Trabajo (LFT), DOF 1 April 1970 (Chamber of Deputies consolidated text, last reform DOF 14 May 2026), Art. 12, 2021-04-23 official text · verified 2026-10-27 · changed: The DOF 23 April 2021 reform replaced the earlier permissive outsourcing regime with this general ban.

2. Subcontracting of specialized services or specialized works is allowed only if they are not part of the client's corporate purpose or main economic activity and the contractor is registered in the public registry. Complementary or shared services between companies of the same group are also treated as specialized under the same conditions. The contract must be in writing, state the services or works and the approximate number of workers, and the client is jointly and severally liable if the contractor fails its obligations to those workers.
Cost to do it: No government fee for the contract; due diligence on the contractor is a professional cost.
Example: A plant contracts a REPSE registered firm for specialized industrial cleaning with an estimated 12 workers. If the contractor stops paying them, the plant answers for their wages. / No direct US dollar effect.Ley Federal del Trabajo (LFT), DOF 1 April 1970 (Chamber of Deputies consolidated text, last reform DOF 14 May 2026), Arts. 13 and 14, 2021-04-23 official text · verified 2026-10-27

3. Contractors must register with the Ministry of Labor (STPS), proving they are current on tax and social security obligations. Registration must be renewed every three years. STPS must rule within 20 days; if it does not, the applicant may demand a ruling within three days, after which registration is deemed granted. STPS can refuse or cancel registration at any time if requirements are not met, and the registered contractors appear in a public online registry (REPSE).
Cost to do it: The LFT sets no government fee for REPSE registration.
Example: Before paying a facilities contractor, the client checks the contractor's REPSE registration on repse.stps.gob.mx and confirms it covers the contracted service. / No US dollar effect.Ley Federal del Trabajo (LFT), DOF 1 April 1970 (Chamber of Deputies consolidated text, last reform DOF 14 May 2026), Art. 15, 2021-04-23 official text · verified 2026-10-27

4. A fine of 2,000 to 50,000 UMA applies to anyone who subcontracts personnel in breach of art. 12, to contractors without registration, and equally to whoever benefits from prohibited subcontracting. With the 2026 UMA of MXN 117.31 that is MXN 234,620.00 to MXN 5,865,500.00.
Cost to do it: MXN 234,620.00 to MXN 5,865,500.00 per infraction for each side.
Example: A client using an unregistered agency to supply its sales force faces a fine of at least MXN 234,620.00, plus joint liability for the workers. / Between about USD 12,571 and USD 314,271.Ley Federal del Trabajo (LFT), DOF 1 April 1970 (Chamber of Deputies consolidated text, last reform DOF 14 May 2026); UMA 2026 published by INEGI in the DOF on 9 January 2026, as cited by IMSS, LFT art. 1004-C, 2021-04-23 official text · verified 2026-10-27 · changed: The DOF 23 April 2021 reform extended the fine to the beneficiary of prohibited subcontracting.

5. For tax purposes, payments for subcontracting of personnel performing activities related to the client's corporate purpose and main activity have no deduction or VAT credit effect. Specialized services may be deducted and credited only if the contractor has the REPSE registration; when paying, the client must verify the registration and obtain from the contractor copies of payroll invoices, social security and housing fund payment evidence and its VAT return, by the last day of the following month.
Cost to do it: Lost deduction at the 30 percent corporate rate plus lost VAT credit at 16 percent.
Example: A company pays MXN 1,000,000 plus MXN 160,000 VAT to an agency that supplies its core staff. It loses the MXN 300,000 income tax effect of the deduction and the MXN 160,000 VAT credit, MXN 460,000 in total. / About USD 24,647 of extra tax on USD 53,580 of fees.Código Fiscal de la Federación (CFF), DOF 31 December 1981 (consolidated text, last reform DOF 9 April 2026); Ley del Impuesto sobre la Renta (LISR), DOF 11 December 2013 (consolidated text, last reform DOF 1 April 2024); Ley del Impuesto al Valor Agregado (LIVA), DOF 29 December 1978 (consolidated text, last reform DOF 12 November 2021), CFF art. 15-D; LISR art. 27, section V; LIVA art. 5, section II, 2021-04-23 official text · verified 2026-10-27 · changed: The DOF 23 April 2021 decree added CFF art. 15-D and the REPSE checks in LISR art. 27 and LIVA art. 5.

Model used abroad	Allowed in Mexico?	Condition
Staffing agency supplying core staff	No	Prohibited subcontracting of personnel (LFT art. 12)
Employer of record for staff doing the client's main activity	No	Same prohibition; client is the employer in law
Recruitment or headhunting firm	Yes	Recruits and selects only; the client hires directly (art. 12)
Specialized service outside the core activity (security, cleaning, IT maintenance for a manufacturer)	Yes	Contractor in REPSE, written contract, client jointly liable (arts. 13 to 15)
Intragroup shared services company	Yes, if specialized	Not part of the receiving company's corporate purpose or main activity, contractor in REPSE (art. 13)

Common abroad models versus the Mexican rule. Sources: LFT arts. 12 to 15; CFF art. 15-D.

Worked example

A European retailer opening in Mexico wants store staff hired by a payroll provider.
Selling is its main activity, so the provider would be supplying personnel, which LFT art. 12 prohibits. The retailer must hire store staff through its own Mexican company.
It may contract REPSE registered firms for security and cleaning. If instead it used the payroll provider, both would face fines from MXN 234,620.00 (USD 12,571), and the retailer would lose the deduction and VAT credit on the fees.

Step by step

1. Map every outside contractor whose people work on your premises or for your business.
2. Classify each service: core activity (must be in house) or specialized (may be subcontracted).
3. For specialized services, verify REPSE registration and that it covers the service, and sign a written contract stating the service and approximate number of workers (arts. 14 and 15).
4. Each month, collect the contractor's payroll, IMSS, INFONAVIT and VAT evidence before the last day of the following month (LISR art. 27 V; LIVA art. 5 II).
5. Calendar the contractor's three year REPSE renewal.

Common traps

Corporate purpose clauses are read broadly: a service listed in your own bylaws cannot be subcontracted even if you see it as support.
Intragroup service companies that employ staff working in the operating company's main activity fall within the ban.
The client is jointly liable for the contractor's workers even if the contract says otherwise.
Without REPSE evidence at the time of payment, the deduction and VAT credit are lost even for genuinely specialized services.

Sources

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