How Profit Sharing (PTU) Affects Remote and Hybrid Teams in Mexico
Profit Sharing, or Participación de los Trabajadores en las Utilidades (PTU), is a mandatory benefit in Mexico that requires employers to distribute a portion of their annual profits to employees. While this obligation is well known for on-site teams, the rise of remote and hybrid work arrangements has created legal and operational gray areas that foreign employers must address.
This article explores how PTU affects remote and hybrid workers in Mexico, what risks foreign companies may face, and how to ensure compliance.
What is PTU in Mexico?
PTU is a constitutionally mandated benefit in Mexico. All private employers that generate taxable income are required to share 10% of their net profits with employees annually, based on their salary and time worked. This distribution is regulated by the Mexican Federal Labor Law (Ley Federal del Trabajo).
Exceptions:
- Newly formed companies are exempt for their first year.
- Non-profit organizations and government institutions are not required to pay PTU.
- Directors, general managers, and shareholders do not receive PTU.
For more background, you can refer to Article 123 of the Mexican Constitution and the Federal Labor Law (in Spanish).
PTU for Remote and Hybrid Workers
As work becomes increasingly decentralized, many foreign companies now employ remote and hybrid teams in Mexico. But even if the company is not incorporated in Mexico, it may still be subject to PTU obligations under certain conditions:
When PTU Applies to Remote Workers:
- The worker has a labor relationship governed by Mexican law.
- Payments are made in pesos or regularized through Mexican tax mechanisms (e.g., withholding of ISR).
- The worker is classified as an employee, not a contractor.
Key Risk Areas:
- Misclassification: Treating a full-time remote worker as a contractor to avoid PTU can lead to labor lawsuits, fines, and retroactive liabilities.
- Shadow Payroll: If the employee works in Mexico but is on the payroll of a foreign entity, it may still trigger PTU requirements if tax or labor authorities deem the relationship as local.
- Hybrid Confusion: PTU must be calculated based on days worked and wages, so determining accurate PTU for hybrid workers who split time between Mexico and abroad can be complex.
How Is PTU Calculated?
The 10% profit-sharing pool is divided in two:
- 50% based on salary: Higher-paid employees receive a larger share.
- 50% based on days worked: More consistent work time = larger PTU share.
PTU must be paid within 60 days of filing the annual tax return—generally by the end of May each year.
Enforcement and Audit Risk
Mexico’s tax (SAT) and labor (STPS) authorities have intensified audits around remote labor compliance, especially in cross-border work structures. Failure to pay PTU when legally required can result in:
- Back payments + interest
- Fines
- Legal disputes
- Reputation damage
Foreign employers working with local talent must ensure that PTU is considered in their employment agreements and payroll setup.
How to Comply as a Foreign Employer
- Work with an Employer of Record (EOR) in Mexico to manage local labor and tax compliance.
- Define the employment relationship clearly: contracts must state whether the worker is subject to Mexican labor law.
- Use local payroll systems: ensure that profit-sharing is properly calculated and reported.
- Consult a local labor attorney or HR consultant for remote and hybrid worker classification.
Helpful Resources
Conclusion
Profit sharing in Mexico is not just a local concern—it affects all teams with ties to the Mexican labor system, including remote and hybrid arrangements. Employers that ignore PTU risk costly consequences. Whether you manage payroll in-house or partner with a provider, staying compliant with PTU regulations is essential to protect your operation and your talent in Mexico.
