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Uruguay is a thriving country in Latin America, known for its strong democratic values, low corruption, peaceful environment, advanced e-governance, high Human Development Index, impressive GDP growth, innovation, and press freedom – leading in these aspects among neighboring nations. The primary industries driving exports are agriculture and textiles, while over 70% of the workforce is engaged in the service sector. Given its favorable political, institutional, and social conditions, Uruguay is recognized as an excellent choice for establishing new and innovative businesses. When it comes to managing a workforce, especially for international companies, considering an Employer of Record in Uruguay can provide a reliable solution for navigating the country's business landscape.

Grow your team in Uruguay seamlessly with Gloroots, your trusted ally in overcoming local employment complexities. Our customized solutions are designed to harmonize with your business goals, simplifying the hiring process. Leveraging our comprehensive Employer of Record (EOR) service, we expertly handle compliance, payroll, tax obligations, and benefits administration. With Gloroots at your side, you can focus on fostering your team and spearheading company growth in the vibrant Uruguayan market, ensuring that your operations align with local regulations.

In Uruguay, misclassifying employees carries significant legal risks, jeopardizing essential protections. To proactively address this, businesses should consider a Professional Employer Organization (PEO) or Employer of Record (EOR) for precise classification, compliance, and benefits administration. Partnering with experts allows companies to concentrate on core operations while ensuring legal compliance and prioritizing the well-being of the workforce.

Employment contract

Uruguay's labor law introduces three main types of employment contracts for foreign companies.

• Indefinite employment contracts allow termination by mutual agreement or unilateral action by either party.
• Fixed-term employment contracts automatically end after a specified period, not exceeding one year. Time limitations for fixed-term contracts may vary from months to weeks or days.
• Specific task or project contracts, known as underdetermined contracts, lack a specific completion date. Employers must inform employees about underdetermined contracts at the outset to avoid future uncertainties.

Essential information required by employment law includes:

• Company details: Name, registered office address, registration number, etc.
• Employee details: Date of birth, current address, nationality, job designation, etc.
• Start date of employment
• Nature of the employment
• Employee duties
• Duration of employment for determinate contracts
• Payroll cycle and monthly salary disbursement date
• Compensation structures
• Length of the probationary period, if applicable
• Leave details
• Notice period
• Applicable collective bargaining agreements

Working time

In Uruguay, the standard working hours consist of 44 hours per week, distributed over eight hours per day. However, employees in the industrial sector may be mandated to work 48 hours, with eight hours per day scheduled over a six-day week.

Overtime

Any work exceeding the standard 44 hours per week qualifies as overtime and is governed by the employment contract or collective agreements. Typically, the maximum allowable overtime is set at 8 hours per week, remunerated at 200.00% of the regular salary rate. Overtime worked on non-working days, such as holidays, is compensated at 250.00% of the employee's standard earnings.

Public Holidays

Uruguay observes a total of 12 public holidays.

Minimum Wage

Uruguay's minimum monthly wage is 21,107 UYU.

Annual Leave

In Uruguay, employees are typically entitled to 20 working days of annual leave after completing one year of service. This entitlement can increase by one day for every four years of service, reaching a maximum of 25 days.

Paid Sick Leaves

Employees are eligible for up to one year of sick leave, with the employer providing full compensation (100% of the salary) for the initial three days of sickness. Subsequently, compensation is managed by Uruguay's social security system, Banco de Previsión Social (BPS), at a rate of 70% of the employee's average earnings. A valid medical certificate is required to justify the need for sick leave.

Maternity leaves

Female employees in Uruguay are granted a 14-week maternity leave, with six weeks to be taken before the due date and eight weeks after the birth. Compensation during this period is managed by Uruguay's social security system, Banco de Previsión Social (BPS).

Paternity leaves

Fathers or parents have the right to 13 days of paid paternity leave.

Tax and Social Security contribution:

Employer

Employee

Employee Income tax

Termination 

Employers can end a fixed-term contract due to business needs, personal reasons, or worker misconduct. Termination mandates both notice and a written explanation. In cases of misconduct, a prior warning is necessary, allowing the employee an opportunity to clarify their actions. Every terminated employee is entitled to receive both a notice of termination and severance payment.

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Severance Pay

Terminated employees are eligible for severance pay, calculated at the rate of one month's salary for each year of service, with a maximum limit of six months.

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Notice Period

In Uruguay, the standard notice period for both the employee and employer is usually 1.5 weeks.

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Probation period

In Uruguay, the standard probationary period typically spans up to three months.