Both employers and employees should understand how this process works to ensure a fair distribution that complies with the law. The key points are outlined below:
Determining the profit-sharing percentage: the National Commission for Employee Profit Sharing sets the percentage of profits payable to employees, taking into account Mexico’s economic situation and other factors relevant to business development.
Calculating distributable profits: the profits to be distributed are based on the company’s taxable income under the Income Tax Law.
Employees’ right of review: employees are entitled to review the company’s tax return and, if necessary, submit objections to the Ministry of Finance and Public Credit. This promotes transparency in the calculation of distributable profits.
Profit-sharing deadlines: payment must be made within 60 days following payment of the company’s annual tax, with a May 30 deadline.
Allocation among employees: profits are divided into two parts, one distributed equally among all employees and the other in proportion to the salaries earned during the year.
Exemptions: certain companies, including newly established businesses and non-profit private welfare institutions, are exempt from profit sharing.
Special considerations: specific rules apply to certain groups, including directors and general managers, who do not participate in profit sharing, and employees in positions of trust, who are subject to particular conditions.
Both employers and employees must understand and comply with these provisions to foster a fair and equitable working environment.
Do you need legal advice to ensure correct profit sharing at your company? Our Firm provides legal solutions tailored to your business. Contact us to learn how we can help you comply with your legal obligations and foster harmonious employment relations.