On March 31, 2022, the term for legal entities to submitt the tax return corresponding to fiscal year 2021 expires and related to it, there is the obligation of companies to give their employees the corresponding participation in the profits obtained, as well as, consequently, the right of employees to receive, and even to demand, said participation. The distribution of profits is regulated, both by the Constitution and by the Federal Labor Law (LFT) and is considered a right of the employees of the so-called inalienable. In accordance with the applicable regulations, the employees will participate in the profits of the companies, according to the percentage determined by the National Commission for the Participation of Employees in the Profits of the Companies (the “Commission”. The Commission established 10% in 2019, percetange that continues in force. For purposes of the law, profit in each company is considered to be the taxable income in accordance with the regulations of the Income Tax Law.

On the other hand, all economic units of production or distribution of goods or services and, in general, all employers, whether individuals or entities, who have salaried employees at their service, are obliged to distribute profits, although there are certain exceptions. As an additional obligation, the employer shall prepare and sign the following respective minutes: (a) Minutes to Install the Profit Sharing Commission; (b) Minutes of the Commission for the Formulation of the Distribution of Profits; (c) Minutes of Notice of the Company to the Union; and (d) Minutes of Notice to the Union or Employees when there are no Profits.

The distributable profit will be divided into two equal parts: (i) the first will be distributed equally among all employees, taking into account the number of days worked by each one in the year, regardless of the amount of wages; and (ii) the second will be distributed in proportion to the amount of wages earned for the work performed during the year.

Salary is understood as the amount received by each employee in cash per daily fee. Therefore, the bonuses, perceptions and other benefits referred to in article 84 of the LFT, nor the amounts received by the employee for extraordinary work, are not considered as part of the salary. In the cases of salary per unit of work and in general, when the remuneration is variable, the average of the perceptions obtained in the year will be taken as the daily salary.

The right of employees to participate in the distribution of profits, recognized in the Constitution, shall be adjusted to certain regulations, among which are the following: (i) the amount of profit sharing will have a maximum limit of three months from the the employee’s salary or the average of the participation received in the last three years, whichever is more favorable to the employee; (ii) there will be no compensation of the years of loss with those of gain; and (iii) the amount established as profits will not be computed as part of the salary, for the purposes of the indemnities that must be paid to the employees.

In the labor subcontracting reform, published on April 23, 2021 in the Federal Official Gazette, is established, among other cases, the one included in subsection (i) immediately above. However, it is somewhat confusing to calculate the amount of the profit sharing based on the maximum limit of three months of the employee’s salary or on the average of the participation received in the last three years, if we take into consideration that the factors of calculation for profit sharing, are based on pesos obtained and days worked, multiplied by the days and pesos of each employee. The amount to be paid resulting from this multiplication is not equal to the maximum payment established in the referred subsection. Therefore, it is very important to clarify the formula that should be used to calculate the amount of the employees’ profit sharing.

In addition to the above, it is worth highlighting the issue of vulnerable personnel, who as a result of the COVID-19 pandemic were sent home with salary. These personnel received the salaries of the days of leave with pay and those days shall count for the calculation of days worked. Finally, the terms and activities corresponding to the profit sharing process are detailed below.

	Stages	Terms	Deadlines
1	Fiscal Year 2021	January 1 to December 31	December 31, 2021
2	Submission of the Annual Tax Return and payment of ISR by the company before the SHCP	Within 3 months following the end of the fiscal year	March 31, 2022, last day
3	Delivery of the copy of the Tax Return and the annexes to the employees	Within 10 days as of the date of filing of the Annual Tax Return	April 10, 2022
4	Integration of the Mixed Commission for the provision of the Profit Sharing project	It is not foreseen in the Law, but it is recommended to do it within a period of 10 days as of the delivery of the copy of the Tax Return to the employees	April 20, 2022
5	Review of the annexes of the company’s Tax Return by the employees	During the 30 business days as of the delivery of a copy of the Tax Retur	May 20, 2022
6	Payment of profits	Within 60 days following the date on which the company filed or should have filed the Tax Return before the SHCP	May 30, 2022
7	Submission of written objections to the SHCP	30 business days as of the expiration of the term stipulated for the review of annexes	July 1, 2022

At Trejo Gutiérrez Abogados, we have a group of experts in labor matters with more than 20 years in the market. Please do not hesitate to contact us, we will be glad to provide the personalized legal advice that you require.