Employer of Record EOR Uruguay
Employing in Uruguay
Argentina has proudly declared itself the birthplace of tango, but it’s little known that it actually shares the honour with Uruguay, a small country that often sits in the shadows of its neighbours: Argentina and Brazil. But don’t be fooled — the small nation has an advantageous geographic location and is home to one of the most important ports in South America: Montevideo.
Uruguay’s political and economic stability also make the country seriously attractive for foreign investors looking to do business in the region. In recent years, the country has also made substantial progress in tax regulations that have stimulated foreign investment. The Uruguayan government is constantly working on creating new incentives to encourage investment in the country, including establishing various free trade zones and trade agreements with other major economies in Latin America.
An overview of employing in Uruguay
Uruguayan Peso — UYU
National minimum wage
The national minimum wage is 16,300 Uruguayan pesos per month.
The Ministry of Labour fixes a minimum national salary. Additionally, each area of business activity has its own minimum salary for workers in that field. These minimum salaries are set out in collective agreements negotiated in wage panels (Consej os de Salarios), made up of employers, employees and government representatives.
Payment of salary
Salaries can be paid monthly, weekly or daily. Under a new law which has just come into force, all payments must be made by means of a financial instrument, such as a cheque or bank transfer. Except for minor exceptions, cash payments are no longer allowed.
‘Aguinaldo’ is a legally required bonus payment equal to one month’s salary (known as a 13th-month salary). It’s payable in two instalments: part in June and part in December.
All employers must enrol with the DGI (Dirección General Impositiva) at a DGI office or online. Employers can register with DGI and the Institute of Social Security (BPS) at the same time.
In addition, employers register with the Register for Contributors (RUT), upon which they will receive a RUT number. To register, employers submit either Form 0351 or Form 0352, and Form 205 between 10 days prior to the start of business activities. The form must be submitted in person at the local RUT office. RUT is run by the Ministry of the Economy and Finance.
The income tax rates applicable to resident employees from January P 1 2020 will be the following:
|Employer cost||Permanent contract (%)||Fixed-term contract (%)|
Employers must make monthly remittances and file monthly returns. Dates of when payments are due vary based on the employer’s RUT number.
All employers withholding income taxes must file an annual return using Form 1104, Declaration of Taxes. Employers are also given different due dates to file an annual return based on their RUT number. The return must be filed using the Sigma computer application and submitted online or using a CD.
The fiscal year runs from 1 January to 31 of December.
The Institute of Social Security (BPS) generally serves as the administrator of the social insurance scheme in Uruguay, with involvement by BSE (the National Bank of Insurances). All employers are required to withhold social security contributions from all employees and make additional payments.
The social security rates applicable to resident employees from January P 1 2020 will be the following:
|Type of insurance||Paid by employer||Paid by employee||Total|
|Labor reconversion fund||0.125%||0.125%||0.250%|
Unions and right to strike
Uruguay has a culture of collective negotiation. Article 57 of the Constitution contains the right for employees to participate in collective action, the right to strike and the right to organise unions.
Employees have the right to take part in union activities and become union leaders. Employers cannot take any action to prevent an employee from joining or leaving a union. As mentioned above, there are wage panels which set minimum salary levels. Additionally, unions are entitled to negotiate working conditions with employers.
Uruguay has special employment courts with special procedures for employees, which are much quicker than other court cases and free for employees. In general, the burden of proof is on the employer to refute a claim, rather than for an employee to prove a claim. Prior to filing any claim, there’s an obligatory mediation stage at the Labour Ministry (MTSS).
An overview of the main statutory benefits
Employees are entitled to paid sick leave provided by the Institute of Social Security (BPS). Starting on the fourth day of absence from illness (or from the first day of hospitalisation), employees may claim a social security benefit of 70% of their salary for up to one year, which can be extended. To be eligible for salary replacement, an employee must have made social security contributions for at least 75 days or three months within the 12 months prior to the date of illness.
Employers are not required to provide any paid sick leave.
Maternity & paternity
Maternity leave (public sector)
All women working in the public sector are entitled to 13 weeks of maternity leave (one week must be taken before the birth but up to six weeks can be taken at this time) at 100% of earnings with no ceiling on payments. This is funded from general taxation. In the case of multiple or premature births or disability, the leave is extended to 18 weeks.
Maternity leave (private sector)
Women working in the private sector are entitled to 14 weeks of maternity leave (it’s obligatory to take the full period, and up to six weeks can be taken before the birth). Eligibility extends to all employees, including self-employed workers with no more than one employee who are covered by the social security system and other self-employed workers who pay social security contributions.
Employees are entitled to 100% of earnings, with no ceiling on payments, based on average earnings in the six months before taking leave. For self-employed workers, this is based on average earnings over the 12 months before taking leave. Funding is provided by the social security system, which is financed by contributions; for sickness and maternity benefits, 3–6% of employee earnings and 5% of payroll from employer, plus earmarked proceeds of certain taxes.
If labour occurs before the expected date, the mother starts leave immediately and post-natal leave is extended to complete the 14 weeks or eight weeks after the original scheduled delivery date. In the case of illness resulting from pregnancy or childbirth, the mother is entitled to an extension of pre- or post-natal leave.
Paternity leave (public sector)
All partners in the public sector are entitled to 10 calendar days of paternity leave at 100% of earnings with no ceiling on payments.
Paternity leave (private sector)
All partners in the private sector (including self-employed workers with no more than one employee who are covered by the social security system and other self-employed workers who pay social security contributions) are entitled to seven calendar days of paternity leave at 100% of earnings with no ceiling on payments. For employees, this is based on average earnings in the six months before taking leave. For self-employed workers, this is based on average earnings over the 12 months before taking leave.
Paid parental leave
Parental leave may be paid via the social insurance scheme.
Contract of employment
There are no formal requirements to establish an employment relationship. As a matter of good practice, a written contract should be signed, in order to be clear about the rights and obligations of each party, which can be essential for the employer in the event of a dispute arising.
In principle, employment contracts are for an indefinite period of time. However, the parties can agree on a specific period. It’s common practice to have a probation period of up to three months to see if an employee is suitable for the job.
Rules on registration
It’s obligatory to register the employee for social security purposes (BPS) and in the list of employees, which is open to inspection by the Ministry of Labour (MTSS) at any time. Employees must also be insured at the State Insurance Bank (Banco de Seguros del Esta do — BSE) in order to cover any illness or workplace accident.
The normal working day is fixed at eight hours and 48 hours per week or 44 hours for retail workers. The parties can agree to work less, but not more.
This must be paid at double the normal rate when it’s on a working day. When it’s a non-working day, the rate is two and a half times the normal rate.
All workers are entitled to at least 20 days of paid annual leave. During the first year of employment, the employee isn’t entitled to any holiday (but they accumulate the right to take holiday in the following year).
Workers are entitled to an additional day of holiday for every five years of work with the same employer. Employees are also entitled to five paid public holidays.
All employees are entitled to paid holidays (in addition to their right to 20 days of paid holiday leave, they must be given an additional payment equivalent to 100% of their take-home pay for those 20 days). The idea being that they need their normal salary to pay their basic needs and this additional money is to enable them to actually take a holiday.
Employees are entitled to additional leave (paid) as follows:
Apart from fixed-term contracts, when the relationship is terminated by the employer, the employee is entitled to compensation equivalent to one month’s salary for every year worked, up to a maximum of six months’ salary. (The calculation includes holiday pay, other benefits, commissions and aguinaldo). The exceptions to this are in cases of serious misconduct (but this can be very difficult to prove), seasonal workers and those on probation.
Additional payments are due in some cases (e.g., firing of a pregnant woman, firing for illness or after a work accident or for union-related activity).
Rural employees who live on the work premises must be given 30 days of notice prior to dismissal. There are no other mandated notice periods.
After having suspended or terminated an employee, employers must provide terminated employees with unemployment papers within 10 days.