Profit sharing in Mexico: a constitutional right that took 45 years to work

Mexico is one of the few countries where sharing profit with employees is not a benefit an employer designs. It is a line in the constitution. Every profitable company distributes 10 percent of its taxable profit to its workers each year, the rate is fixed nationally, and no employer can opt out of it. For anyone running Mexican payroll, PTU (Participación de los Trabajadores en las Utilidades) is the one annual event where a labor obligation and a tax figure meet, and getting it wrong is expensive because it lands on every eligible employee at once.

What makes PTU worth understanding is not just the arithmetic. It is that the right sat in the constitution, largely unused, for nearly half a century before it became the concrete obligation it is today. That history explains why it is so hard to dislodge now.

A right written in 1917, dormant until the 1960s

The 1917 Constitution, the product of the revolution, put profit sharing into Article 123, the article that defines labor rights. The principle was there from the start: workers should participate in the profits of the companies they work for. What was not there was a mechanism. No percentage, no commission to set one, no procedure, and no real enforcement. For decades the right existed on paper and did almost nothing in practice. Companies were not distributing 10 percent of anything, because nothing in the law told them how much, to whom, or when.

That changed under President Adolfo López Mateos. On 20 November 1962 he issued a decree reforming Article 123, including the fractions that govern profit sharing, to create a national commission whose job was to set the percentage. At the end of that year the Federal Labor Law was expanded with the detailed rules, the eligibility tests, the distribution formula, and the deadlines, that turned the principle into a working system. The first Comisión Nacional para la Participación de los Trabajadores en las Utilidades then met and, on 12 December 1963, set the share at 20 percent. The first actual distribution happened in 1964, 47 years after the right was written into the constitution.

The percentage itself is not in the constitution: it is set by the national commission, and over the years it has moved. The second commission lowered it to 8 percent in 1974, and the third commission raised it to 10 percent in 1985, where it has stayed ever since. What the 1917 constitution fixes is the right to a share, not the size of it. A government can have the commission revisit the percentage, but it cannot remove the obligation without amending the constitution, which is why PTU has outlasted every administration that might have preferred to be rid of it.

How the 10 percent is calculated and shared

The base is not accounting profit or the number a company reports to shareholders. It is the renta gravable, the taxable profit determined under the income tax law and declared to the tax authority (SAT). Ten percent of that figure becomes the distributable pool (LFT Art. 120).

The pool is then split in two equal halves, and the halves are shared on different bases (LFT Arts. 123-124):

• Half is distributed by days worked during the year, so an employee who worked more days receives more of this half, regardless of pay.
• Half is distributed by wages earned, using the daily wage only. Overtime, the aguinaldo, and other extraordinary amounts are excluded from this calculation.

The result is that a lower-paid worker who was present all year can receive a meaningful amount from the days-worked half even if their wage-based half is small. That is the design: the two halves pull in slightly different directions on purpose.

Eligibility is broad. Almost anyone who worked at least 60 days in the year qualifies, whether the 60 days were continuous or spread across the year, and whether the person is still employed or left mid-year (LFT Art. 127-VII). Trust employees (empleados de confianza, such as managers) are included, but their salary is capped for the calculation at 120 percent of the highest-paid unionized worker, so a high manager's PTU is limited (LFT Art. 127-II). The people fully excluded are the top of the company, directors and general managers who legally represent the entity, plus temporary workers under 60 days. New companies are exempt in their first year of operation (LFT Art. 126).

The 2021 cap: the important recent change

For most of PTU's history there was no ceiling on an individual worker's share. The 2021 outsourcing reform added one, and it matters because the same reform pushed many workers who had been employed through staffing companies back onto the payrolls of the businesses they actually worked for, which changed who was suddenly entitled to PTU.

The cap works in the employee's favor. Each worker's PTU is limited to the greater of two amounts (LFT Art. 127 fraction VIII, added by the reform published in the DOF on 23 April 2021):

• three months of the employee's salary, or
• the average PTU the employee received over the previous three years.

The worker gets whichever of those two is higher, and anything their raw calculation would have paid above that ceiling is redistributed among the other eligible workers.

Here is how that plays out. Suppose a worker's share, calculated from the two halves, comes to 60,000 pesos. Their three-months-of-salary figure is 45,000 pesos, and their average PTU over the last three years was 30,000 pesos. The cap is the greater of those two, so 45,000 pesos. The worker receives 45,000, and the remaining 15,000 goes back into the pool for everyone else. A worker with no cap that bites simply receives their full calculated share. So payroll has to compute each person's raw share, compute each person's individual ceiling, apply the lower of the two, and then redistribute the leftovers, which changes everyone's number again.

When it is paid, and what payroll has to handle

PTU is an annual payment tied to the prior year's tax return. Companies taxed as legal entities (personas morales) must pay within 60 days of the 31 March filing deadline, so by around 30 May. Businesses taxed as individuals (personas físicas) file by 30 April and pay by around 29 June (LFT Art. 122). If a worker does not claim their PTU, the amount is added to the following year's distributable pool, and the worker keeps the right to claim it for a year.

PTU is taxable pay, though the income tax law exempts a portion of it (15 days of the UMA), so the withholding is calculated on the amount above that exemption rather than on the whole payment. It is a once-a-year lump rather than part of the regular monthly run, which is exactly why it tends to be handled separately and error-prone: the days-worked count, the daily-wage base, the trust-employee cap, the individual 2021 ceiling, and the redistribution all have to be right in the same calculation, once, for every eligible person.

Why this is worth automating

The striking thing about PTU is how much precise, per-employee calculation sits behind a single constitutional sentence written in 1917. The rate is simple and has not moved since 1985. Everything around it is not: who counts as eligible, how the two halves are apportioned, where the trust cap and the 2021 ceiling apply, and how leftovers are redistributed. Done by hand once a year, those are the pieces that produce underpayments, and an underpaid PTU is not a rounding error, it is a labor claim from a group of employees at the same time.

This is the kind of annual, rules-heavy calculation Flux is built to run: the eligibility tests, the 50/50 split, the trust and 2021 caps, and the redistribution applied consistently to every worker, from figures that are already in the payroll record. The 10 percent has been settled for four decades. The work is in everything that surrounds it.