Every year, thousands of people leave the United States and Canada to live life like a king or queen in Mexico. Over the years I’ve met dozens of expats who now call Tijuana, Rosarito Beach, Ensenada, Cabo San Lucas, or even Mazatlan home. While the slower pace of life and the great weather are definitely attractive, the underlying motivation to living in Mexico is the cost of living.
As you’ll see in this chapter, an American can live comfortably in Mexico for 1/5th of what it would take in the US or Canada. However, you’ll also see why paying a Mexican team a respectable salary that doesn’t break YOUR bank is also great for both you and the Mexican employee.
Cost of Living
Tijuana is typically about 20-30% more expensive than the rest of Mexico, but it’s still a fraction of what we spend in the United States. However, even though the people in Tijuana make less money, their expenses are much, much less than what we pay, too.
Here is a list of expenses that people in Tijuana have to pay (in US dollars)
- Cell Phone Bill: $20/mo
- Electricity, Gas, and Water for a 600 Square Foot Apartment $80/mo
- Internet $60/mo
- Cable TV $15/mo
- Car Insurance $15/mo
- Rent $100-$350/month
One of the biggest benefits in the Mexican system is that the employer pays their health insurance costs (which are nominal due to government subsidies) so they don’t have any monthly insurance fees.
Then there is a cultural tradition in Mexico where people don’t move out of their home until they get married, which we as employers can use to our advantage because younger employees don’t have a rent payment. With no rent/mortgage, a younger employee has almost no expenses so they will accept a typically lower salary than an older employee with a family.
However, I’ve even been able to hire people with a family for $650/mo so don’t rule someone out just because they are seasoned and have a family.
Labor Costs, Taxes, Fees, and Payroll
In our business, labor is typically our biggest expense. Yes, you can do all the work yourself but if you really want to scale and reach your full potential you’re going to need to hire people. Hopefully you’ve already got a few people on your staff that can help you and keep you sane.
It’s no surprise that labor rates in Mexico are cheaper, but you probably don’t know how much cheaper you can find quality talent. Now there are also some things you need to know before you bring in that first hire and we’ll discuss them in this section.
When hiring Mexican employees you need to know how to negotiate salaries. A web designer in the US can cost you about $45,000-$60,000 per year depending on their skill level. In Mexico, you can find web designers for between $10,000 pesos to $13,000 pesos per month.
That equates to about $580-$780 per month US. Typically, you’ll have to hire a graphic designer who knows a little about web design. It’s very easy to train these people so don’t worry if during the interview process the candidate downplays his/her abilities to do web design. You can have a talented designer up and running in a couple of weeks or less.
The next person you’ll want to hire on your team is a web developer. We hire mainly front-end developers and a developer like this in the United States can run between $60,000-$80,000 US Dollars per year plus benefits. This same developer can be hired in Mexico for between $580-$930 US Dollars per month!!! Talk about a cost savings!
Now here’s the catch, though. When we negotiate a salary in the US with an employee, the employee knows that is what they will make BEFORE taxes. In Mexico, when you negotiate a salary with an employee you are negotiating with them NET or AFTER taxes. Furthermore, they don’t ask for their annual salary or even their monthly salary. They negotiate it WEEKLY.
Here’s an example and let’s just use really easy math.
Let’s say that you want to pay someone $52,000 pesos a year. You wouldn’t speak to a candidate and offer them $52,000 a year. You would offer them $1000 pesos a WEEK. Now, here’s the other kicker. You also need to calculate the taxes that you’ll be paying on top of that into your own payroll budget.
Because when you tell them $1000 pesos a week, the candidate expects to have $2000 pesos in their pocket every other week. IF you don’t adhere to this you will have some very, very unhappy employees.
Like I mentioned, employees negotiate their salary weekly and NET. They literally have no idea how much you are paying for their benefits. As the business owner you need to know how much you’re going to be paying for that, though. Medical and retirement will run about 5%. Then a flat tax of $580 pesos is also assessed.
Then if you pay a payroll company to do everything tack on another 10%. THEN on top of all that you’ll need to pay 16% for the IVA tax which is sales tax on pretty much everything in Mexico. When all is said and done, you’re looking at about 31% more in taxes and fees per employee. Just make sure to add that to your payroll budget.
When you look at it, it’s still much more cost effective to hire someone in Tijuana than anywhere in the US and a very good alternative to outsourcing to other countries.
Culture and Language
Communication is a top three component to running a successful digital agency. If you can’t communicate with your clients effectively and if you can’t systematically transfer those conversations to your team then you’ll have major problems and your operation will be very inefficient. However, your team also needs to be able to understand the information that you’re giving to them and although this seems obvious, it’s a constant battle for anyone who has ever outsourced to the Philippines, India, Pakistan, or a number of other countries.
One HUGE benefit to hiring people in Tijuana, Mexico is that many people there speak English AND they understand American culture. In fact, many of them grow up watching American television because they were so close to San Diego and the US border and could get our tv programs. A lot of the cultural references and jargon that we use, they understand because they’ve almost been raised on both sides of the border.
It goes beyond television and movies though. With the right training, your team in Mexico can be just as productive and deliver just as good a product as any American team you employ. You can have your staff in Tijuana be customer-facing and they can be an extension of you so that you have the freedom to focus on the things that you enjoy and that make you money.
They will sound like you, they will act like you (assuming that you act like a good person to begin with), and they will carry out your instructions and get it right the first time.
From my experiences, your team in Tijuana can be some of the most-hardworking, appreciate, and dedicated staff that you will find in any country on earth. In Tijuana, you can get the loyalty of the Philippines, the technical ability of India, the customer service of the United States, and the best labor rates anywhere in North or South America.
Now the ONLY hurdle you’ll have to overcome when hiring employees is building trust with them right after they are hired. Mexican employees are accustomed to being screwed over by their bosses. It’s a cultural thing that drives me insane. In fact, the Mexicans have a saying that you “end up going to work for someone and having to pay them for the pleasure of working there”. Between being lied to, not being paid, and being mistreated by management, Mexican employees are jaded and so you’ll have to show them that you’re different. You need to show them very quickly that you see your new team as a valued part of your business and that you will not only keep your word to them, but that you will trust them and treat them like adults. As soon as your new staff sees that you are the real deal and that you will treat them right, always pay them on time, and will provide a great work environment, then you’ll have the best employees money can buy.
Chris Martinez is the CEO and Co-Founder of DUDEAgency. In 2012, Chris launched a digital agency and after experiencing every possible outsourcing issue associated with the Philippines, India, Pakistan, South America, and Eastern Europe, he took the plunge and built a web design and development team in Tijuana Mexico.
Almost overnight, this team in Tijuana revolutionized his digital agency. No more power outages, no more time zone problems, no more communication issues. No more people disappearing. It was a game-changer.
In 2017 Chris launched "DUDE" which provides unlimited web design and development for digital agencies using the staff in Tijuana. It is the PERFECT outsourcing solution for digital agencies.
Chris has written several books, is a speaker, philanthropist, an avid reader, and occasionally you can find him wearing his "DUDE Beast" luchador costume when promoting DUDE.
Chris Martinez is the CEO and Co-Founder of DUDEAgency. In 2012, Chris launched a digital agency and after experiencing every possible outsourcing issue associated with the Philippines, India, Pakistan, South America, and Eastern Europe, he took the plunge and built a web design and development team in Tijuana Mexico. Almost overnight, this team in Tijuana revolutionized his digital agency. No more power outages, no more time zone problems, no more communication issues. No more people disappearing. It was a game-changer. In 2017 Chris launched "DUDE" which provides unlimited web design and development for digital agencies using the staff in Tijuana. It is the PERFECT outsourcing solution for digital agencies. Chris has written several books, is a speaker, philanthropist, an avid reader, and occasionally you can find him wearing his "DUDE Beast" luchador costume when promoting DUDE.