Employee Participation in Profit-Sharing Payments, also known as PTU for its acronym in Spanish, is a benefit all employers are obliged to give to their employees. Only if the company registers losses in a given fiscal year can an exception be made and profits not be shared with its personnel. But if the company’s earnings surpass the MX$30,000 threshold, then profits must be distributed.
Also read: Why do the best employees quit?
Is profit-sharing a right?
It is. Employee participation in profit-sharing payments is required by law, as established in Article 123 of the Mexican Constitution and Article 120 of the Federal Labor Law.
Failing to distribute profits could lead to penalty fees equivalent to fifty to five thousand minimum wages, according to the Federal Labor Law.
Profit distribution incentivizes employees and rewards them for their efforts. However, the Tax Administration Service (SAT) specifies that it can only be carried out sixty days after the company has filed its tax returns or actually made the payment.
Therefore, profits should be paid sometime between April 1st and May 30th. If an employee does not claim their payment for the current year, it should be added to their share of the distributable profit for the following year. Have you paid your employees already? Let us know in the comments.
You might be interested in our video: Common mistakes in the recruitment and selection process.
At QuAdrans Law and Finance remember that profit-sharing payments include all employees (both the temporary and the permanent), as long as they have worked at the company for at least 60 days in a given year. We offer the accounting service. Learn more about it by clicking here.
