On 22 September 2021, the Chamber of Deputies approved a Bill of Law (the ‘Bill’) to modify the profit-sharing legal benefit. The Bill must now continue its processing and discussion in the Senate. This initiative modifies the percentages of profits and amounts to be paid as legal bonuses to which employees are entitled to receive when working in mining, industrial, commercial or agricultural establishments, companies and any other for-profit companies, and cooperatives that are obliged to keep accounting books and that obtain profits or net yearly revenues in their business.
New System and Alternatives
- Variable Legal Bonus (Article 47 of the Labour Code)
The Bill introduces a progressive system according to the employer’s annual turnover, as follows:
|Annual Turnover||Percentage of Net Income to be Distributed|
|From 2,400 UF and less than 25,000 UF
|Between 25,000 UF and less than 100,000 UF||10%
|Equal to or more than 100,000 UF||15%
Note: 1 UF is currently equivalent to approximately USD 38,5.
The current regulation establishes that the amount of the legal bonus for each employee entitled to it will be determined proportionally to the amount earned by each employee in the respective annual period, including those who are not entitled to it. The Bill modifies the above by stating that the net profit to be distributed will be divided equally among all the employees entitled to it. The latter implies that the universe of beneficiary employees is reduced, which generates a higher bonus compared to considering for the calculation those who are not entitled to the benefit (for example, employees who have agreed to higher conventional bonuses).
The Bill establishes a maximum annual amount of payment per worker equivalent to 20 monthly minimum legal wages (MMLG). The Bill exempts from this obligation personnel with general administrative faculties, such as managers.
Note: 1 MMLG is currently equivalent to approximately USD 432.
For these purposes, it is established that the net profit is that resulting from the liquidation made by the Internal Revenue Service for the determination of income tax, applying the normal depreciation regime established in number 5 of Article 31 of the Income Tax Law, without deducting losses from previous years, but eliminating the deduction of 10% of the value of the employer’s own capital.
- Fixed Legal Bonus (Article 50 of the Labour Code)
This modality contemplates the obligation of a fixed monthly payment equivalent to 25% of the respective accrued monthly remuneration. These amounts are imputed to the variable bonus described above (Article 47 of the Labour Code). If the final profit to be distributed to the employee is equal to or less than the amount paid to the employee on a fixed monthly basis, the obligation set forth in said Article 47 will be deemed to have been fulfilled.
In addition, the Project states that the fixed bonus payment shall not exceed 6 MMLG per year.
Companies whose annual turnover is less than 2,400 UF per year will be deemed to have fulfilled the obligation to pay variable bonuses by making the fixed monthly payment described above.
- Employees with less than 1 year of service
The Bill indicates that employees who do not complete one year of service, or whose contracts terminate before the determination of the net profit to be distributed in the respective fiscal year, will only be entitled to the payment of the fixed bonus (article 50 referred to above).
- Validity of the law
The Bill establishes that the new regulation will be in force as from the first day of the subsequent year following its publication in the Official Gazette.
In short, the new profit-sharing system is currently being discussed in Congress. The legal benefit would be increased. The Chamber of Deputies has already approved a Bill of Law, which shall now continue to be reviewed by the Senate.