Note published on March 23, 2022 in El Economista, Capital Humano [Human Capital] Section by Gerardo Hernández.
The changes to the LFT [Federal Labor Law] approved in 2021 to prohibit labor subcontracting included a cap on the sharing of the profits that workers have a right to, which will start to be applied this year.
Companies have a deadline of March 31 to file their annual tax returns before the Tax Administration Service (SAT). Once this procedure is completed, companies must cover the payment of Employee Participation in Company Profits (PTU) by May 30, at the latest; this will be the first time that the amount is covered with a cap established in the reform on subcontracting.
Profit sharing was one of the central elements in the discussion of the reform on outsourcing in 2021 and a demand on the employer sector. As part of the negotiations for the modifications to the law, a cap was set on the amount to be distributed among the workers, with two possibilities: the equivalent of three months of salary or the average of the PTU received in the last three years, whichever was most favorable for the worker.
This was established after the private sector showed the distortions that would be caused by the labor subcontracting schemes on the PTU.
The Department of Labor and Social Welfare (STPS) estimates that as a result of the reform and the acknowledgment of the workers by their true employers, the proportion of earnings to be distributed among the labor force will go from 2.8 to 7.7% in 2022. This represents an increase of more than 100,000 million pesos. Additionally, the payment will go from 22 to 57 days of salary in average.
However, specialists agree that the cap set in the reform opens the door to different scenarios and questions in regard to the compliance with this obligation and constitutional right.
“There is going to be a significant impact on the amount of the participation of workers in company profits as an immediate consequence of the elimination of subcontracting, particularly the internal type”, states Óscar de la Vega, partner at D&M Abogados.
From the perspective of Jorge Sales Boyoli, partner at the Littler México Firm, the different scenarios that may arise were not taken into consideration at the time in which the caps were set. “A recurring question, for which there is no uniform criterion, is that if the change or transfer of the workers was made on the ninth month of 2021, should the workers have access to the PTU for the entire year or from the date on which they were transferred? This is an item not regulated by the reform.”
According to the consulted specialists, these are the scenarios for profit sharing in 2022:
The payment of two PTUs
For Luis Enrique Cervantes, partner of the Labor Area at the González Calvillo Firm, all companies that transferred personnel in order to comply with the reform must be “careful”, because if the workers were migrated to a company within the same group, they have to distribute two PTUs: the one from the company that provided the labor subcontracting services and the one from the company who received the employees after the reform.
“What is a fact is that the workers have a right to both PTUs because the worker had two employers and these employers must pay the corresponding PTU. In the first case, with their former employees; in the second case with their new employees”, the specialist explains.
According to the Mexican Social Security Institute (IMSS), 2.9 million workers were acknowledged by their true employers as a result of the reform on subcontracting. This universe could be subject to the payment of two amounts for the concept of profit sharing.
Same salary and position, but a lower PTU
As a result of the new regulation, even though companies must distribute 10% of their earnings, workers cannot receive an amount that exceeds three months of salary or the average of the amount received during the past three years. Nevertheless, in the case of workers who have not been in a company for more than three years, the limit of three months of salary will apply and they will receive a lower amount even if they have the same salary and position as other colleagues, states Óscar de la Vega.
“Let us imagine the social and labor inequity and the problems that will be generated in companies when, in the case of a worker with more than four year’s seniority, the average of his PTU surpasses by far the cap of three months, but this limit has to be applied to new workers”, the specialist points out.
The right to the PTU, but not for the entire year
Another situation that may arise, in the opinion of Jorge Sales Boyoli, is that companies cover the PTU based on the months that people were in the company. That is, the workers that were migrated during the course of 2021 to another organization will receive profit sharing from their new employer but individualized from the date in which they were transferred.
“This is a benefit that, in its legitimate form, seeks that workers participate in the wealth generated by the company. If that is the spirit, it gives the impression that the employer must distribute the PTU in proportion to the period of time in which you contributed to the generation of wealth. That is, to the period in which you were transferred.
Merger of companies, one single PTU
If compliance with the reform on outsourcing took place through the merger of companies, Luis Enrique Cervantes considers that two payments of profit sharing will not be generated, “because the assets are absorbed by the acquiring company.”
However, adds the specialist, in these situations only one payment of PTU would be made, but it would have to be calculated based on the profits of both of the merged companies.
“This year will be an irregular one for many companies because they will have to take this type of circumstances into consideration. They will have a normal operation in the future”, says the specialist.
What you didn’t know about profit sharing
Profit sharing was established in our Constitution in 1962 and it is a right that every worker in Mexico has to receive part of the profits generated by the company in response to his efforts in generating said profits. In Latin America, countries like Chile, Brazil, Peru and Venezuela have similar programs.
Juridical persons (companies) have until May 30 to cover the payment of the benefit and natural persons with business activities have a deadline of June 29, this as a consequence of the deadlines that they have for filing their annual return with the SAT.
Manuel Fuentes Muñiz, professor at the Universidad Autónoma Metropolitana, says that the PTU is one of the most contentious issues in the labor arena, although the culture of complaint is not widespread because it involves very technical details.
From the perspective of the specialist, the cap on profit sharing was “a bargaining chip” for the reform on subcontracting to reach a tripartite agreement but, in some cases, it will involve a decrease of the amount received by the workers.
In accordance with the provisions of Article 123 of the Federal Labor Law (LFT), the amount of profits to be distributed is divided into two equal parts. The first part is distributed equally among all workers taking into consideration the number of days worked during the year, regardless of the amount of their wages. The second is based on the salaries received by the workers.
The LFT establishes exceptions in which companies do not have to pay PTU, among them:
- Newly created companies in their first year of operation are exempt from payment.
- Directors, administrators and general managers do not participate in profit sharing.
Fines for not sharing company profits with the workers range from 24,055 to 481,100 pesos. The consulted specialists agree that profit sharing in 2022 will be a challenge for companies and will require in-depth analyses as a result of the different scenarios generated by the changes in the context of the prohibition of labor subcontracting.