Employee Profit Sharing (PTU) in Mexico
Employee Profit Sharing (PTU) in Mexico is a mandatory benefit that impacts all businesses operating in the country. Rooted in the Mexican Constitution, this obligation ensures that workers receive a fair share of company profits. For both local and international employers, understanding PTU is key to maintaining legal compliance and employee satisfaction.
📖 For a complete overview of mandatory benefits, refer to our comprehensive guide on Employee Mandatory benefits in Mexico.
In this guide, we break down how PTU works, who qualifies, how to calculate it, and what changed in recent years. Let’s dive in.
Key Takeaways
✔️ Mandatory Benefit: Employers in Mexico must distribute 10% of their taxable profits to eligible employees each year.
✔️Capped by Law: PTU payments are limited to three months’ salary or the employee’s three-year PTU average, whichever is higher.
What Is Employee Profit Sharing (PTU) in Mexico?
PTU stands for “Participación de los Trabajadores en las Utilidades.” It refers to the legal obligation for employers to share 10% of their annual net taxable income with their employees.
This benefit is deeply embedded in Mexico’s labor framework. This system aims to promote equitable wealth distribution and recognize employees’ contributions to a company’s success. Established in the Mexican Constitution since 1962, PTU is unique to Mexico and reflects the country’s commitment to social justice in the workplace.
Who Must Pay PTU?
Most companies operating in Mexico must comply. However, there are exceptions. Let’s clarify who is obligated:
Required to Pay PTU
In Mexico, all private companies generating taxable income are legally required to pay PTU. This applies to both domestic and foreign businesses with legal presence in the country. Even companies that hire talent through an Employer of Record must comply, since the EOR becomes the legal employer.
Exempt from PTU
Certain entities are exempt from PTU obligations:
Newly formed companies: Exempt during their first year of operation.
Companies developing new products or services: Exempt for the first two years.
Non-profit organizations and government institutions: Exempt due to their non-commercial nature.
Mining companies: Exempt during the exploration phase.
These exemptions aim to encourage innovation and investment while maintaining fair labor practices.
Which Employees Are Eligible for PTU?
Not all employees receive PTU equally. Here’s what you need to know about eligibility:
Included:
- All formal employees under an individual or collective employment agreement
Workers employed for at least 60 days during the fiscal year
Excluded:
The following individuals are not entitled to PTU:
- Company directors, general managers, and board members.
- Shareholders and partners.
- Independent contractors and freelancers.
- Domestic workers.
- Employees who worked less than 60 days in the fiscal year.
It’s crucial for employers to accurately classify workers to ensure compliance and avoid potential legal issues.
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How Is PTU Calculated?
PTU is calculated based on the company’s taxable income as reported to the Mexican Tax Administration Service (SAT). The total PTU amount is 10% of this income and is divided into two equal parts:
Equal Distribution: 50% is distributed equally among all eligible employees, regardless of their salary.
Proportional Distribution: The remaining 50% is distributed in proportion to each employee’s earned wages during the fiscal year.
This dual approach ensures both fairness and recognition of individual contributions.
Example
If a company has a taxable income of MXN 1,000,000:
Total PTU = MXN 100,000 (10% of taxable income).
Equal Distribution = MXN 50,000 divided equally among eligible employees.
Proportional Distribution = MXN 50,000 distributed based on each employee’s salary proportion.
Recent Legal Reforms and Supreme Court Ruling
In 2021, Mexico implemented labor reforms prohibiting outsourcing practices that previously allowed companies to circumvent PTU obligations. To mitigate the financial impact on employers, a cap was introduced:
PTU payments are limited to the higher of:
- Three months of the employee’s salary, or
- The average PTU received by the employee over the past three years.
This cap was challenged in court, but in April 2024, the Mexican Supreme Court upheld its constitutionality, affirming the legislature’s authority to impose such limitations to balance employee rights and economic considerations.
Deadlines for PTU Payment
Employers must distribute PTU within 60 days after filing their annual tax returns:
Corporations: Deadline is May 30.
Sole proprietors: Deadline is June 29.
Timely payment is essential to avoid penalties and maintain good labor relations.
Compliance Best Practices
To ensure compliance with PTU regulations:
- Maintain accurate records: Keep detailed records of employee workdays and salaries.
- Communicate transparently: Inform employees about PTU calculations and distributions.
- Consult legal experts: Seek guidance on complex cases or when implementing changes.
Plan financially: Allocate funds in advance to meet PTU obligations without disrupting operations.
How Does PTU Affect Foreign Companies and EOR Models?
If you use an Employer of Record (EOR) in Mexico, the EOR becomes the legal employer. That means the EOR is responsible for calculating and distributing PTU. However, the financial obligation may still fall on your company through the service contract.
Key Takeaways for Foreign Employers:
Include PTU costs in your annual HR and tax planning.
Clarify PTU responsibilities in your agreement with your EOR provider.
Review your structure to avoid non-compliance or unexpected liabilities.
Final Thoughts
Understanding and complying with PTU requirements is vital for businesses operating in Mexico. By staying informed about legal obligations, calculating distributions accurately, and engaging with employees transparently, companies can foster a positive work environment and avoid legal complications.
For global companies expanding in Mexico, partnering with a local expert like Europortage simplifies the entire process. From payroll to compliance, we help you hire confidently and stay in line with local laws.
Frequently Asked Questions (FAQ)
What does PTU mean in Mexico?
PTU stands for Participación de los Trabajadores en las Utilidades. It’s a law that requires companies to share 10% of their annual taxable profits with eligible employees.
Who qualifies for PTU in Mexico?
Employees who worked at least 60 days in the fiscal year under a formal employment contract are eligible. Directors, contractors, and workers with under 60 days of service are excluded.
When is PTU paid in Mexico?
PTU must be paid by May 30 for corporations and June 29 for individual employers, based on the company’s annual tax filing.
What is the PTU cap in 2025?
VEmployees may receive no more than three months’ salary or their average PTU from the last three years, whichever is higher. This cap remains valid after being upheld by Mexico’s Supreme Court in 2024.
Do companies using an EOR need to pay PTU?
Yes. When using an Employer of Record in Mexico, the EOR is responsible for handling PTU payments and legal compliance on behalf of the client company.
