Section IX of Article 123 of the Mexican Federal Constitution (“CPEUM” for its acronym in Spanish) establishes that all employees are entitled to receive a percentage of their employer company’s profits (“PTU” for its acronym in Spanish), which is determined by a National Commission comprised of representatives of employees and employers who conduct research and studies to fix the corresponding percentage as per article 118 of the Mexican Federal Labor Law (“LFT” for its acronym in Spanish). Such figure is based on each company’s income, in accordance with the Income Tax Law (“LISR” for its acronym in Spanish).
Pursuant to section VIII of Article 127 of the LFT, the percentage of profit sharing will have a maximum limit of three months’ wages or the average of the PTU received by the employee over the last three years, whichever is most favorable to the employee.
Further to the applicable legal provisions of the CPEUM, the LFT and the LISR, the amount of PTU is to reviewed from a tax and labor perspective to determine the implications of its calculation and sharing for the employees. The following considerations must also be included in such review:
a) profit sharing payments will be paid within 60 days after the company’s annual income tax due date;
b) outsourcing is now prohibited in accordance with the Decree published on April 23, 2021 in the Official Journal of the Federation amending various provisions of the LFT and other laws governing outsourcing; and
c) that as to the outsourcing prohibition, several companies performed employer substitutions, mergers, and other legal acts, to be in compliance with the new legal requirements governing outsourcing.
Based on the above considerations it is important for all employers to review and understand the process of how to calculate and pay mandatory PTU to their employees.
Contact Information:
Miriam Name | mname@ccn-law.com
Pablo Sáenz | psaenz@ccn-law.com.mx
Javier Zapata | jzapata@ccn-law.com.mx
Fernanda Magallanes | fmagallanes@ccn-law.com.mx
Esteban Gómez Aguado | egomez@ccn-law.com.mx
