Numerous factors such as skilled workforce, export-oriented agricultural sector, and inclusive social policies have made Uruguay a top-tier country in South America according to the Economic Freedom Index, the Human Development Index, and the Human Opportunity Index. It is a high-income country, and an average growth rate of 4.54% between 2003 and 2016, and mostly between 0.5% and 1.5% since then, has bolstered the country’s economy. Uruguay is a sought-after destination for foreign investments due to its relatively liberal approach and reforms in recent years aimed at improving the regulatory environment.
Currency: Uruguayan Peso (UYU)
Principal language: Spanish
Government: Presidential Representative Democratic Republic
Capital City: Montevideo
Major Cities: Salto, Paysandú, Las Piedras, Rivera
It is not mandatory for employers and employees to enter into an employment contract, though it has been a common practice. Employment contracts are subject to the country’s laws, collective bargaining agreements, and international norms including International Labor Organization’s conventions. Both written and verbal contracts are considered to be indefinite unless clearly stated that they are for a fixed term. Commonly, workers are employed for a trial period prior to entering into an employment contract. This trial period should not be more than 3 months and must be agreed to in writing. The employment contract can be terminated by either of the parties during the trial period without any cause or liability for severance pay. After the trial period is completed successfully, the employment contract comes into effect automatically.
Regular work schedule in Uruguay contains 8 hours in a day and 44 hours in a week for employees in the commercial sector and 48 hours for those who work in the industrial sector. In the industrial sector, 9-hour work shifts are allowed, from Monday to Friday, including a 3-hour shift on Saturdays to complete 48 hours of work in a week. For apprentices, underage workers, employees in telecommunications, and workers in hazardous occupations, the daily work shift is 6 hours and the weekly work hours cannot exceed 36 hours. Employers are required to provide weekly rest periods, and the exact provisions industry-wise are:
- Industrial Sector: 1 day of rest, usually a Sunday.
- Commerce Sector: 36 hours of continuous rest after 44 hours of work
- Domestic Workers: 36 hours of continuous rest including a Sunday
Employees must be provided rest periods of 2 hours to 2.5 hours each day so that employees do not have to work for more than 5 hours per day. The Inspector General of Work and Social Security must be reported if this rest period is reduced to 1 hour by agreement.
Work done beyond 8 hours per day or 44 hours in a week by employees in the commercial sector or 48 hours by those in the industrial sector is considered overtime. Overtime pay is 200% of the regular pay.
The following national holidays are observed in Uruguay:
- Jan. 1: New Year's Day
- May 1: Labor Day
- July 18: Constitution Day
- Aug. 25: Independence Day
- Dec. 25: Christmas Day
Work done on national holidays is compensated at 200% of the regular pay.
Employees are entitled to 20 days of paid annual leave in a year. The leave must be taken continuously or split into two periods of 10 days each. After first 5 years of service, an additional day of vacation is given for every 4 years of service. Employees who have worked for only a part of the year are given annual leave on pro-rata basis. National holidays or Sundays cannot be included while calculating the leave period.
Pregnant employees are entitled to 14 weeks of maternity leave, 6 weeks before the childbirth and 8 weeks after that. During the maternity leave, they are entitled to their regular wages, year-end bonus, vacation pay, and vacation bonus. If the child is born before the expected date of delivery, postpartum leave is extended to complete 14 weeks of maternity leave. If the child is born after the expected date of delivery, 8 weeks of leave will be available to employees. The leave can also be extended if employees suffer a pregnancy-related illness. Mothers can take the entire maternity leave after the childbirth.
Male employees in the private sector can take a maximum of 3 days of paternal leave for the birth of a child – 1 day on the date of the childbirth and 2 days after that.
Employees who fall sick are entitled to 70% of their regular pay for a maximum of 1 year from the 4th day of absence or the date of hospitalization. To qualify for salary during sick leave, employees are required to have made social security contributions for at least 3 months or 75 days in the 12 months before the date of illness. However, employees are entitled to pharmaceutical, medical, and surgical benefits from the first day of employment. Employees on sick leave cannot be terminated while they are receiving health care benefits or during the following 30 days except for non-medical reasons.
Newly married employees are entitled to 3 days of marriage leave starting on the wedding day if they give a minimum of 30 days’ notice.
Employees who experience the loss of a mother, father, spouse, sibling, or partner can take 3 days of leave.
Blood Donation Leave
Employees who donate blood can take 1-day leave.
Employees who adopt an under-aged child or children are entitled to 6 weeks of continuous leave.
Pension and Social Security
The legal retirement age in Uruguay is 60 for employees who have made contributions for at least 30 years to the social security system. Employees working in hazardous conditions are credited extra years of contributions. All employees except foreign workers who render services in the Free Zones are required to contribute to the social security system. The social security administration or BPS, which is responsible for the Uruguayan social security system, collects contributions from employees and employers and maintains employment history of all employees.
The pension system covers old age, retirement, and disability benefits while the social security covers unemployment, pension, sickness, maternity, and paternity benefits.
Old-age Pension (Individual Account)
Old-age pension is provided to individuals aged 60 if they have made contributions for at least 30 years or those aged 65 without any particular requirement related to years of contributions.
Advanced-age Pension (Social insurance and individual account)
The advanced-age pension is provided to individuals aged 70 if they have made contributions for at least 15 years. The age is reduced to 69 for those with 17 years of contributions, and to 65 for those with 25 years of contributions.
Noncontributory means-tested Pension (Social Assistance)
The social assistance is given to individuals aged 70 who have resided in Uruguay for at least 15 years and are assessed as needy.
Permanent Disability Pension (Social insurance and individual account)
The insured employees who are incapable of performing any work and have at least 66% degree of disability qualify for the permanent disability pension. The Social Security Bank’s District medical commissions assess the degree of incapacity.
If the disability is not due to an accident, employees aged less than 26 must have completed at least 6 months of service and those aged 26 or more must have completed at least 2 years of service before the disability began. Coverage is increased by 2 years if insured employees have made at least 10 years of contributions.
Partial Disability Benefit (Social insurance and individual account)
The insured employees who are unable to perform any work and have a 50% to 66% degree of disability qualify for partial disability benefit. If the disability is not due to an accident, employees aged less than 26 must have completed at least 6 months of service and those aged 26 or more must have completed at least 2 years of service before the disability began. This benefit is temporary and subject to reassessment of the disability.
Noncontributory means-tested Pension (Social Assistance)
Individuals with a permanent disability who have been residing in Uruguay for at least 15 years and are assessed as needy qualify for social assistance.
Survivor pension (Social insurance and individual account)
Survivor pension is given if the deceased
- was employed at the time of the death
- was receiving a partial disability, maternity, work injury, sickness, or pension benefit
- during 12 months after the unemployment benefits ceased
Survivors include a widow/widower, unmarried orphans aged no more than 21, divorced spouse, and dependent and disabled parents. A widow/widower earning a monthly remuneration that is more than the specified limit in the 12 months before the insured died does not qualify for the survivor pension.
Employers are required to purchase insurance against work-related illnesses and accidents from the National Bank of Insurance (Banco de Seguros del Estado) which pays for employees’ medical care and allowance during unemployment.
How GPS can Help
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Spin Off/M&A Support
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Ready for Growth When You Are
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