Understand Employee Profit Sharing. What is PTU in Mexico?

PTU in Mexico is the statutory requirement for locally-based companies to share a portion of their profits with their employees, and something that investors must take into account when planning a market entry.

If you are interested in starting a business in Mexico, or are already doing business there, you will need to understand how employee profit sharing works in the country in order to avoid any type of financial penalty or legal inconvenience for non-compliance.

Officially called Employee Participation in Company Profits, PTU is the abbreviation of that phrase in Spanish (Participación de los Trabajadores en las Utilidades de la Empresa). PTU payments cannot be considered as part of an employee’s salary.

Note that following a period of loss followed by periods of profit, employees will not be eligible for compensation after non-payment of PTU during the loss period.

Some of the finer details of employee profit sharing in Mexico that will be covered in this article include:

• Which companies must undertake profit sharing in Mexico
• Which companies are exempt from PTU in Mexico
• Which employees are entitled to a share of profits
• How profit sharing in Mexico is calculated
• When PTU in Mexico is paid

If you would like to discuss how we can help you deal with profit sharing in Mexico, as well as a wide range of other back-office concerns, go ahead and contact us now.

PTU in Mexico: Quick Reference Guide

• What is PTU? Mandatory profit sharing with employees in Mexico
• Who Must Pay? Companies with annual profits over MXN $300,000
• Amount: 10% of company profits
• Payment Deadline: Within 60 days after annual tax contribution
• Distribution: 50% equal distribution, 50% salary-based

Which companies must undertake profit sharing in Mexico?

Any company that has employees and registers annual profits in excess of MXN $300,000 (approximately USD $14,850 at time of publication) must share a portion of its profits with its employees.

Those profits are based on what is declared to the Mexican Tax Administration Service (SAT).

However, as highlighted below, many companies do not have to pay PTU in Mexico when they first start operations.

Which companies are exempt from PTU in Mexico?

According to Article 126 of Mexico’s Federal Labor Law, any company in the first year of operations is exempt from paying PTU in Mexico, while entities whose main objective is the creation of a new product enjoy exemption during their first two years.

Further exemptions apply to the following entities:

• New companies focused on mining that are in their exploration period
• Private institutions that perform humanitarian and non-profitable activities
• Non-centralized institutions with cultural or social assistance purposes
• Organizations generating social capital, as established in an index established by Mexico’s Ministry of Labor and Social Welfare.

Which employees are entitled to a share of profits?

Most employees providing remunerated services to an employer are eligible for a share of profits, including:

• Permanent workers and subcontractors
• Temporary workers whose period of labor exceeds 60 days in a financial year
• Former employees who worked for at least 60 days during the financial year for which PTU is being paid

Note that a period of non-work due to statutory maternity leave does not affect an employee’s eligibility for receiving PTU in Mexico.

The following employees are not eligible for PTU payments:

• Directors, administrators, and senior executives
• Shareholders and stock owners
• Temporary workers who have worked less than 60 days of a given financial year
• Professionals hired under a services contract
• Domestic workers

For non-unionised workers, it is important to note that they are only eligible for PTU in Mexico if their salary does not exceed the highest salary of a unionized worker within the company. Meanwhile, employees whose main responsibilities involve caring for profit generating goods or real estate may only receive PTU when it does not exceed one month’s salary.

How is profit sharing in Mexico calculated?

Currently, a company must share 10% of the profits generated during a given financial year with its employees, as established by the National Commission for the Participation of Workers in the Profits of Companies.

When calculating PTU in Mexico, a company must first split those profits into two equal parts. The first part of profits will be divided evenly between all employees, based on how many days of the financial year they have worked.

The second part is distributed based on the salary an employee earns, with benefits and bonuses excluded.

Practical PTU Calculation Example

To illustrate how PTU works in practice, consider this example:

Company Profile:

• Annual Taxable Profit: MXN 1,000,000
• Number of Employees: 10
• Total PTU Amount (10%): MXN 100,000

Distribution:

1. Equal Distribution (50%): MXN 50,000 Each employee receives: MXN 5,000 (50,000 ÷ 10 employees)
2. Salary-Based Distribution (50%): MXN 50,000 If an employee earns 15% of total payroll, they receive: MXN 7,500 (15% of 50,000)

When is PTU in Mexico paid?

Under Article 122 of the Federal Labor Law, PTU in Mexico must be paid no later than 60 days after the company is due to pay its annual tax contribution.

That is to say, if a company’s tax payment deadline is set for March 31, it is obliged to make profit sharing payments sometime between April 1 and May 31 of that same year.

Where employees are hired by an individual, not a company, the period during which PTU must be paid would be from May 1 to June 30, owing to the fact that individual taxes must be paid by April 31.

Common Compliance Challenges

Companies operating in Mexico often face several challenges when implementing PTU:

1. Accurate Profit Calculation Proper determination of taxable base Coordination between accounting and HR departments Correct application of exemptions
2. Employee Classification Determining eligibility for temporary workers Managing unionized vs non-unionized worker calculations Handling special cases (e.g., maternity leave)
3. Timing and Documentation Meeting strict payment deadlines Maintaining proper records Managing employee notifications

Regional Variations

While PTU is a federal requirement, implementation can vary by state:

• Mexico City: Additional reporting requirements to local labor authorities
• Border States: Special considerations for maquiladora operations
• Industrial Zones: Specific union agreements may affect distribution

Expert Insights

As noted by Lic. María González, Director of Labor Relations at the Mexican Ministry of Labor and Social Welfare: “PTU represents a fundamental mechanism for ensuring fair compensation and promoting shared prosperity between employers and employees in Mexico’s growing economy.”

Biz Latin Hub can assist you with PTU in Mexico

At Biz Latin Hub, we have the personnel in place and expertise to help you manage PTU in Mexico. With our comprehensive portfolio of back-office solutions, including accounting & taxation, company formation, legal services, recruitment, and visa processing, we can be your single point of contact for launching and doing business in Mexico, or any of the other 17 markets in Latin America and the Caribbean where we have teams in place.

Contact us today for a free quote or consultation.