Companies with no resources to pay profit sharing

The month of May is the period during which companies usually pay profit sharing on profits recorded for the previous year; however, the outlook for this year’s profit sharing is not very promising.

The Council of Business Institutions of Southern Tamaulipas considers that there will be many companies that did not generate any profits and, therefore, they have no resources to distribute.

“Profit sharing depends on the performance of companies in 2021; if the companies were still negatively affected by the pandemic in the previous year, it is then difficult that they comply with the payment of profits and it is even possible that there are none; it is a possibility that the company did not generate any profits, depending on the situation of each one of them”, pointed out Íñigo Fernández, president of the Ciest [Council of Business Institutions of Southern Tamaulipas].

He said that, in general terms, last year was not one of the best ones, even though it was better than 2020.

“Because of the issue of sanitary restrictions on business activities due to the pandemic that had an impact on companies’ incomes, however, it cannot be similar to 2019 or previous years; the economy is just recovering in 2022 and many lines of business were hard hit, specifically, those relating to events and tourism, which are the ones that were most affected in their activities in the last two years.”

He said that a reflection of this are the statistics on airport traffic, which have been relatively low in comparison to normal years without a pandemic; he said that that this is a sign that companies focused on providing service, commerce and tourism activities, being the ones that were hit the hardest will surely have no profits.

“There will be others that, given the situation or because of their recovery, have had a very complicated start of 2022; due to inflation, which is undermining companies, some companies will be in a very tight position to comply with this obligation; nevertheless, the law establishes that it must be complied with.

For his part, Christiaan Pérez, secretary of Finance of the Federation of Chambers of Commerce in Tamaulipas said that, given the economic situation that the country is going through, it will decrease.

“This is more common in the maquila industry and the transformation sectors, but many companies have reported that their profit margins were much lower than those of other years due to the pandemic and other factors.”

He said that profit sharing is expected to be lower in 2022; it was an atypical year and commerce does not distribute profits, as it does a year-end bonus and other benefits by law.

HOW IS PROFIT SHARING CALCULATED?

Workers will participate in the employer’s profits in accordance with the percentage determined by the National Commission for Employee Participation in Company Profits which, to this date, is equivalent to 10% of the net profits.

GUIDE ON COMPLIANCE WITH THE PTU [EMPLOYEE PROFIT SHARING]

On the occasion of the reform, the Department of Labor published a Guide on how to comply with the obligations in profit sharing matters; the  De la Vega & Martínez Rojas, S.C. Law Firm conducted an analysis of this guide:

“Upon the amendment of the text of Article 127 of the Federal Labor Law, emphasizing the right of workers to participate in profit sharing, acknowledged in the Political Constitution of the United Mexican States, Section VIII was added to Article 127 with the objective of establishing the bases for the application of the amount of profit sharing, establishing a ceiling with the limit of 3 months of the worker’s salary or the average of the profit sharing of the last three years, whichever is most favorable to the worker.

“These amendments do not change the mechanism established both in the Federal Constitution and in the Federal Labor Law and the formulas used in their calculation; therefore, all of those established in Article 125, the exceptions included in Article 126 and the provisions of Sections I to VII of Article 127 of said Law will continue to be used.”

The percentage will continue to be 10% of the company’s taxable income, as determined by the Sixth National Commission on Employee Participation in Company Profits.

A mixed commission comprised by representatives of the employer and representatives of the workers will determine the individual profit sharing to be received by each worker.

The distributable amount will be divided into two equal parts, one factor will be calculated based on the number of days worked and the other half by applying a factor based on the received salary, understanding that the salary is the one corresponding to the daily wage.

Non-union workers will participate in profit sharing with the exception of the general director, manager or administrator of the company.

For the purposes of calculating the salary based on the daily wages of non-union employees, this salary cannot exceed the highest union or base worker’s salary by more than 20%.

Once the individual calculation of the amount to be received by each individual worker as profit sharing has been made, if 10% exceeds the amount of 3 months of his salary, this will be the limit of what the worker can receive.

If the company has a history of profit sharing in previous years that exceeds 3 months of the workers’ salaries, this will be the limit to be applied in the event that it is more favorable to the workers.

The criterion of the Department of Labor according to the Guide, is that the seniority of the worker does not make a difference in the application of this limit of the average of the profits of the last three years; that is if a worker joined the company in the last year, but the company distributed profit sharing that exceeds 3 months of salary during the last three years, this is the limit that will apply to the newly hired worker.

Another aspect that needs to be highlighted is the criterion by the department in the sense that the limits for individual profit sharing established in Section VIII of Article 127 of the Law are only the minimums, as the participation determined by the Sixth Commission is of 10% and, therefore in the event that a company wants to grant the 10% without applying the limits, it can do so by reaching a mutual agreement in collective bargaining and it will maintain the legal nature of the PTU.