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Hiring in Uruguay

Hiring employees compliantly in Uruguay means doing it yourself or using an Employer of Record like Global Expansion. You should be careful using independent contractor agreements in Uruguay so that you don’t run afoul of employment laws. To hire an employee compliantly and offer them mandatory benefits and compliant agreements, you can:

(a) Establish your own new legal entity, banking, accounting and payroll service in Uruguay; or

(b) use an Employer of Record like Global Expansion who can handle all of the details for you.

Need assistance hiring in Uruguay? Contact us about our International EOR  Service

Labor Laws in Uruguay

Employee Probation Period

  • No statutory regulation in Uruguay.
  • Common practice is to stipulate a 3 months’ trial period as a clause of the employment agreement.
  • The jurisprudence has accepted the validity of this clause.

Annual Leave in Uruguay

  • In their first year of employment, employees are not entitled to paid holidays.
  • After that, every employee in Uruguay receives a minimum of 20 days of paid vacation each year.
  • After five years of work with the same employer, the employee is entitled to an additional paid vacation day for every four years worked.
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Holidays in Uruguay

New Year’s Day 1st January
Epiphany 6th January
Shrove Tuesday 25th February
Maundy Thursday 9th April
Good Friday 10th April
Labor Day 1st May
Battle of Las Piedras Day 18th May
Constitution Day 18th July
Independence Day (of Uruguay) 25th August
Columbus Day 12th October
All Souls Day 2nd November
Christmas Day 25th December

 

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Maternity Leave Uruguay

  • Maternity leave is 12 weeks (6 weeks pre natal and 6 weeks post natal leave).
  • It can be extended to 18 weeks in case of health complications.

Paternity Leave Uruguay

  • Fathers are entitled to 10 days of paternity leave.

Sick Leave in Uruguay

  • Employers do not have to provide sick leave, so instead, employees can get paid sick time through the Institute of Social Security (BPS).
  • The employee certified for non-occupational illness will receive from the Social Security Bank a subsidy equivalent to 70% of the employee's usual salary or wage for each day of incapacity due to common illness.
  • The certified employee will also receive an amount corresponding to the Christmas bonus proportional to the time the illness lasts.

Work Hours in Uruguay

  • The normal working hours are 8 hours per day

Overtime in Uruguay

  • Overtime work is generally compensated at twice the normal wage, and work on public holidays is paid at 2.5 times the regular compensation.

Termination of Employment in Uruguay

  • In case a just cause for termination arises, such as a material breach of the contract, the agreement can be terminated without prior notice or indemnification, subject to a conclusive evidence of the just cause.
  • On the other hand, termination is considered abusive and subject to indemnification when one or some of the following circumstances occur:
    • absence of a just cause
    • notification of termination is not given on time; and /or
    • termination is done in bad faith.
  • Employers must provide one day’s written notice.
  • There is no regulation on notice of resignation.
  • Employees are entitled to severance payments which includes one month’s salary for every year employed up to 6 months of salary.

Notice Period in Uruguay

  • Employers must provide one day’s written notice.
  • There is no regulation on notice of resignation.

Severance in Uruguay

  • Employees are entitled to severance payments which includes one month’s salary for every year employed up to 6 months of salary.

Uruguay Salary and Wages

13th / 14th Month Salary in Uruguay

  • Yes (Mandatory)
  • There is a statutory requirement to pay the 13th month salary.
  • Which it is paid in two instalments named as supplementary annual salary, one in June and one in December.
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Income Tax in Uruguay

  • Under the personal income tax law, effective from 1 July 2007, individuals are subject to income tax in Uruguay.
  • Resident individuals are subject to tax on their Uruguayan-source income.
  • They are also subject to tax on certain foreign-source income, such as capital gains and work income, if certain conditions are met.
  • Income subject to the tax is divided into the categories of capital gains (Category I) and labor income (Category II).
  • The basic rate of personal income tax on capital gains is 12%.
  • Tax on labor income applies to income derived from dependent or independent work.
  • The tax is imposed at progressive rates ranging from 10% to 36%.
  • Nonresident individuals are subject to income tax on their Uruguayan-source income at a rate of 12%.
  • They are also subject to tax on their income from technical services performed abroad if certain conditions are met.
  • Income tax rates for 2023 are as follows: -

Monthly Progressive Income Scale

BPC Range From To Rate (%)
Up to 7 BPC 0 39.62 0
7 to 10 BPC 39.621 56.600 10
10 to 15 BPC 56.601 84.900 15
10 to 15 BPC 56.601 84.900 15
15 to 30 BPC 84.901 169.800 24
30 to 50 BPC 169.801 283.000 25
50 to 75 BPC 283.001 424.500 27
75 to 115 BPC 424.501 650.900 31
Over 115 BPC 650.901   36
Effective: 1/2023. Value of the benefits and contributions base (BPC): $ 5.660
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Social Security in Uruguay

  • Social security contributions are compulsory, based on the salary earned, including bonuses and commissions, and are borne by the employer and the employee.
  • Self-employed individuals pay social security taxes on notional amounts of income rather than on actual earnings, except for professional self-employed individuals to whom a different regime applies.
  • The amounts are established by law.
  • Contributions are paid by employers and employees at the rates set forth in the following table.

Contribution

Employer

Employee

Self-employed 

Pension fund 7.5% (a) 15% (a) Variable (c)
Medical care 5% 3% to 8% 3% to 8%
Work Reconversion
Fund (b)
0.1% 0.1% -
Labor Credits Guarantee
Fund (b)
0.025% - -

 

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Immigration Uruguay

  • To work in Uruguay, an employee must have a Uruguayan permit.
  • Although Uruguayan regulations do not provide a “work permit” as such, a foreign national may work in Uruguay under a permanent residence visa, or under one of the temporary visas, for a period lasting the length of the employment contract.
  • If the period is less than 180 days, a provisional identity sheet of the identity card should be requested.
  • An applicant may work in Uruguay while his or her work permit application and other papers are being processed.
  • No limitations are imposed on foreign nationals wishing to start businesses or head subsidiaries in Uruguay
  • Temporary visas are available to the following temporary resident individuals:
    • Migrant workers
    • Scientists, researchers and academics
    • Professional, technical and skilled personnel
    • Students, trainees and interns
    • Businesspersons, entrepreneurs, directors, managers and consultants
    • Journalists
    • Sports persons
    • Artists
    • Religious individuals
  • Temporary visas are available to the following nonresident individuals:
    • Tourists (foreigners entering the country for recreation, leisure or rest)
    • Individuals invited by public or private entities because of their profession or art
    • Businesspersons
    • Members of public, artistic or cultural performances
    • Members of international transport crews
    • Passengers in transit
    • Individuals in local border traffic
    • Members of crews of fishing vessels
    • Members of crews performing transshipments in the country
    • Individuals who come for medical treatment
    • Athletes
    • Journalists and other professionals in the media
    • All persons not included in the preceding items who are expressly authorized by the National Directorate of Immigration
  • Permanent visas are issued to foreign nationals who intend to establish permanent residence in Uruguay.
  • To obtain a permanent visa, an application must be filed either in the foreign national’s home country or in Uruguay, accompanied by the following documents:
    • Passport or equivalent document
    • Health certificate
    • Proof of financial means
    • Criminal records
    • Identity card or document
    • Birth certificate
    • Uruguayan address certificate
Need assistance hiring in Uruguay? Contact us about our International EOR  Service

Type of Visa/Permit

Documentation

Validity

Eligibility

Temporary Visa
  • Application form
  • Employment Contract
  • Passport or equivalent document
  • Health certificate
  • Proof of financial means
  • Criminal records
  • Identity card or document
  • Birth certificate
6 months to

1 year (can be extended)
  • A foreign national may work in Uruguay under a permanent residence visa, or under one of the temporary visas, for a period lasting the length of the employment contract.
Permanent Residence Visa
  • Passport or equivalent document
  • Health certificate
  • Proof of financial means
  • Criminal records
  • Identity card or document
  • Birth certificate
  • Uruguayan address certificate
Indefinitely
  • Permanent visas are issued to foreign nationals who intend to establish permanent residence in Uruguay.
  • Permanent residency can only be granted in Uruguay to those who live in the country and can show that they have spent time in the country (exceeding 2 years)
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Value Added Tax (VAT) in Uruguay

  • The Uruguayan value-added tax (VAT) is based on the value-added method.
  • All business undertakings that are income taxpayers are defined as VAT payers.
  • VAT also applies to self-employed individuals and legal entities in general (including foreign ones) rendering personal services in Uruguay.
  • VAT standard rate is currently 22 percent.
  • A reduced rate of 10 percent applies to certain goods and services such as basic food items, medicines and services rendered by hotels.
  • Goods subject to higher rates are: alcoholic beverages, tobacco, gasoline, fuel, lubricants and other petroleum products.
  • The maximum rates are 80 percent for alcoholic beverages and 70 percent for tobacco.

VAT

Luxury Rate

Group 1083

80% (Alcohol)

70% (Tobacco)

Standard Rate Group 1083 22%
Reduced Rate Group 1083 10%
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Mandatory Benefits in Uruguay

  • These are mandatory benefits as postulated by law
  • These include annual leave, public holidays, maternity leave, paternity leave, sick leave, overtime pay, notice period, severance pay, 13th month pay
  • Statutory benefits also include social security benefits
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Mandatory Benefits overview

  • Annual Leave

  • Public Holidays

  • Maternity Leave

  • Paternity Leave

  • Sick Leave

  • Overtime Pay

  • Notice period

  • Severance Pay

  • 13th month pay

  • Social Security Benefits

Payments And Invoicing

  • Married persons have the option to be taxed jointly or separately for purposes of the personal income tax Category II and the net worth tax.
  • The tax year ends on 31st December
  • The taxpayer has to register at the tax office, following the procedures and formalities established by law and regulations.
  • Non-resident individuals are subject to non-resident income tax on their Uruguayan-sourced income.
  • In most cases, this tax applies through local withholdings; otherwise the non-resident will have to file their own tax return (personally or by means of an appointed representative).

Payroll Accrual in Uruguay

Country Accruals Additional Information

Social Security 12.625%
maternity leave 14 weeks
sick leave 12 weeks
Christmas Bonus 8.33%
Vacations 6.85%
Medicare 1.45%
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Description

The Uruguayan social security system is comprehensive, covering retirement pensions, health insurance, sick pay, and unemployment Insurance. Social security contributions are compulsory, based on the salary earned, including bonuses and commissions, and are borne by the employer and the employee.The employer contributes an amount equivalent to 12.625% and withholds 18.1% to 23.1% from the employee

Payroll Accruals Additional Information

 

 

Employment Accruals

Annual Leave In their first year of employment, employees are not entitled to paid holidays.
After that, every employee in Uruguay receives a minimum of 20 days of paid vacation each year.
This equals 5.47% (20/365 days) of annual income
Maternity Leave Since 1 June 2017 civil servants of the Central Administration are entitled to 14 weeks of Maternity leave (as well as private sector workers) This equals 26.9% (14/52 weeks) of annual income
Overtime Overtime work is generally compensated at twice the normal wage, and work on public holidays is paid at 2.5 times the regular compensation. Depends on the number of overtime hours worked
Severance Employees are entitled to severance payments which includes one month’s salary for every year employed up to 6 months of salary. This equals 8.33% (1/12 months) of annual income
13th Month Pay Workers in Uruguay are entitled to Aguinaldo, which is an annual bonus payment equal to one month's salary, commonly known as 13th salary. This equals 8.33% (1/12 months) of annual income
Social Security Employers must make the following contributions: - Pension fund 7.5%; Medical care 5%; Work Reconversion Fund 0.1%; Labor Credits Guarantee Fund 0.025% This equals 12.625% of annual income

Accrued Benefits in Uruguay

Christmas Bonus %

Based on one year of service ( 50% of the monthly wage)

4.16%
Christmas Bonus Over Vacations % 0%
Severance per Year%

Employees are entitled to severance pay equal to one month's pay after completion of one year of employment (8.33% of annual salary)

8.33%
of annual salary
Vacations %

After the completion of the first year of employement, an employee is entitled to 20 days of paid leave a year (5.49% of annual salary)

5.49%
Of annual
salary
Notice %

No statutory requirement

 
Christmas Bonus Over Notifications % 0%
Vacations Plus %

Based on 50% of the June wage

4.16%

Total percentage of Salary (yearly)

The total employment accruals as a percentage of salary per anum are equal to 22.14%

22.14%

Why use Global Expansion to hire in Uruguay

Establishing a branch office or subsidiary in Uruguay can be time-consuming, expensive and complex. With such a robust labor market in place, one must pay great attention to detail when structuring employment because Uruguay labor laws are complex.

The company also has a responsibility to comply with specific employment practices dictated by Uruguay law to maintain its good standing as an equal opportunity employer.

Global Expansion makes it easy for you to expand into Uruguay. We'll help you hire your candidate of choice, handle HR matters and payroll, and ensure that you comply with local laws without the burden of setting up a foreign branch office or subsidiary. In addition, you'll have complete control and direction over your employees.

We enable you to stay in control of everything. Our Uruguay Global Professional Employer Organization (PEO) and Employer of Record (EOR) solution provides you with peace of mind to focus on running your company and the security to enter new markets.

 

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