Sharing of Profits

2024

As per the resolution of the Sixth National Commission for Workers’ Participation in Company Profits, which was published in the Official Gazette of the Federation on September 18, 2020, the percentage of profit distribution will remain at 10% of those generated by the employing entity. In accordance with the Federal Labor Law, all workers will have the right to participate in profit sharing, subject to certain rules and exceptions.

  • The directors, administrators and general managers of the companies will not participate in the profits.
  • The other workers in positions of trust shall participate in the profits of the companies, but if the salary they receive is higher than that corresponding to the highest paid unionized worker within the company, or in the absence of such worker, to the plant worker with the same characteristic, this salary shall be considered increased by twenty percent, as the maximum salary.
  • Temporary workers will be entitled to share in the company’s profits when they have worked at least sixty days during the year in which the profits were generated.
  • Working mothers, during pre- and post-natal periods, and workers who are victims of an occupational hazard during the period of temporary disability, shall be considered as workers in active service.
  • The amount of profit sharing will have a maximum limit of three months of the employee’s salary, or the average of the profit sharing received in the last three years; the amount that is more favorable to the employee will be applied.

The distributable share will be divided equally into two parts; the first will be equally distributed among all workers, taking into account the number of days worked by each in the year, regardless of the amount of their salaries; the second part will be distributed in proportion to the amount of salaries earned for work performed during the year.

The distribution of profits among workers must be made within the sixty days following the date on which the annual tax must be paid.

The process for distributing profits can be summarized as follows:

  • Upon presentation of the annual statement, a copy of the statement must be delivered to the Union that holds the Collective Bargaining Agreement or to the Majority of the Workers within a period not to exceed 10 days, and the attachments included therein must also be made available to the union and/or workers.  
  • After the delivery of the Annual Statement, the Union Holder or the majority of the workers will have a period of 30 days to file objections on its content, before the Ministry of Finance and Public Credit.
  • If the objections are accepted, the employer shall comply with the resolution issued within 30 days after the resolution. 
  • Regardless of any objections that may be raised, the profit sharing must be made within 60 days following the date on which the annual tax is due. 
  • Derived from the previous point, as of the delivery of the annual statement to the Union that holds the Collective Bargaining Agreement or to the majority of the workers, the Joint Commission must be constituted to formulate the profit-sharing project. Even in the case of work centers that do not have a Union, the Commission may be formed for the purpose of delivering the annual statement and its attachments to the Union within 10 days of its presentation. 
  • The Joint Commission must formulate the profit-sharing project and post it in a visible place within the work center. For this purpose, the employer must provide an attendance and/or payroll list of the workers. 
  • Workers will have 15 days to object to the profit-sharing plan. 
  • Objections to the project must be resolved by the Commission within 15 days.
  • Once the 15-day period for objections to the project has elapsed and, if applicable, the commission’s resolution on the objections made, the profits must be paid (within the 60-day period indicated).
  • The 60-day term for the payment of profits applies to both active and non-active workers.

In order to prove compliance with the obligations contained in the Federal Labor Law regarding profit sharing, we recommend having the following documentary information:

  1. Act of incorporation of the Joint Commission for Profit Sharing. 
  2. Receipt of delivery of the cover page of the annual statement to the Joint Commission.
  3. Profit sharing project, with minutes prepared by the Joint Commission for such purposes.
  4. Posting in a visible place of the profit-sharing project. 
  5. Receipts showing the payment of profit sharing.

 

At ILC we can help you prepare and review the necessary documentation to comply with this labor obligation. 

Tips and/or practical comments

Taking into consideration that last year, there were many incidents in different work centers and in different states of the Mexican Republic, derived from workers’ disagreements about the amount to be distributed or the determination that there were no profits, we recommend taking the following preventive actions:

  • Evaluate with union representatives the results of the profits, prior to making them known to all workers, defining together the best route to follow. 
  • In the event that profits are lower than those generated in previous years, have clear information to be able to explain to employees the reason for the decrease. 
  • Evaluate the results that other work centers in the environment where the company is located may have.
  • Identify personnel that could generate a negative environment when disclosing the results of the utilities. 
  • In the event that profits are lower than those generated in previous years, have communication strategies for employees. 
  • Have a contingency plan in case of work stoppages.

 

We hope you find this information useful, and we remain at your disposal for any questions or comments you may have regarding this information.

Following on from what we have referred to in the “practical advice” section, a strategy that should be used by those work centers that commonly generate few profits to be distributed, is to periodically indicate to all their workers, during the same year in which profits should be generated, the results of the company’s operations, The aim is to ensure that employees are aware of the situation at all times, so that they do not generate a false expectation about the distribution, or a mistaken one based on indicators that are wrongly taken as a reference on the company’s status, such as, for example, continuous and/or constant overtime work.

Sincerely yours,

ILC Integral Legal Consulting, S.C.