If you are interested in doing business in the Uruguayan market, or are already active there, you will need to understand employment law in Uruguay.
Employment law in Uruguay is overseen by the Ministry of Labor and Social Security, and while it shares many similarities with employment regulations found in other countries in Latin America, it also includes its own idiosyncrasies.
For anyone considering a short-term or limited-scale engagement with the Uruguayan market, hiring staff via a professional employer organization (PEO) in Uruguay could be a good solution, and will come with the benefit of guaranteed compliance with all aspects of employment law.
However, if you are planning to make a deeper commitment to the market, you will need to oversee the proper implementation of employment law in the country, which will mean securing the services of a reliable corporate lawyer in Uruguay.
Below, a basic guide to employment law in Uruguay is provided, covering standard working hours, the most common types of contracts used by investors doing business in the country, vacation and other leave allowances, and statutory contributions that employees must oversee.
If you would like to know more about how we can help you navigate employment law in Uruguay, or any other aspect of doing business in the country, contact us today.
Standard working hours under Uruguayan employment law
According to employment law in Uruguay, a standard working week lasts for between 44 and 48 hours, based on the type of work being undertaken, with working days being no longer than eight hours long, meaning that all employees should have at least one day off per week.
Supplementary hours must be remunerated accordingly, based on the average rate earned during normal hours.
Note that in Uruguay there are usually between eight and 10 national holidays that fall on weekdays per calendar year.
Employment law in Uruguay: common contract types
There are three main contract types used by foreign companies and investors in accordance with employment law in Uruguay.
- Indefinite employment contracts are the most common type of contract used in Uruguay, and can only be terminated when the employee and employer reach mutual agreement or when one of the parties can act unilaterally, such as if the employee resigns or the employer has just cause to terminate the contract.
- Fixed-term employment contracts last for a set period of time set out within the contract. That can be any period lasting days, weeks, or months, but generally would not exceed one year.
- Specific task or project contracts — regarded as an “undetermined contact” — have no specific or clear date for when the task or project will be completed. That means that clear makers or thresholds must be set out in order to eliminate any doubts or ambiguities regarding the completion of the project.
Vacations, leave, and other absences
According to employment law in Uruguay, after 12 months of service with the same employer, an employee is entitled to 15 days of paid vacation leave, which must be taken within the following 12 months.
After five years of employment, an employee gains one additional day of paid vacation per year. After that, one additional day of seniority leave is added to their allowance for every subsequent four years worked.
Employers are obliged to pay an employee’s salary for the first two days of work missed due to illness, however it must be authorized by a registered doctor. From the third day onwards, the employees salary will be covered by the government social security fund.
Maternity and paternity leave
Maternity leave allowance totals 13 weeks, and can begin between one and six weeks before the due date, with the remainder taken after the child’s birth. Paternity leave totals 10 working days. In both cases, salary costs associated with this leave are covered by the government social security fund.
Under employment law in Uruguay, employees are entitled to three days of paid leave when they get married, of which one of the days should coincide with the marriage itself if it is being held on a normal working day. Note that an employee must provide at least 30 days of notice in order to be entitled to marriage leave, and must also provide documentary evidence of the marriage afterwards in order to be paid for the days of absence.
Employees are entitled to three working days of bereavement leave in the event of a parent, child, spouse/civil partner, or sibling passing away. Legal documentation offering proof of the death must be presented within 30 days of that leave being taken, and failure to present such documentation will result in that leave being discounted from the employee’s annual allowance.
Employment law in Uruguay states that after completing six months of service with the same employer, an employee is entitled to paid leave in order to participate in an educational course. The leave allowance is based on how many hours they work per week and set out as follows:
- Under 36 hours per week: six days of leave per year
- Over 36 hours but under 48 hours per week: nine days of leave per year
- Working 48 hours per week: 12 days of leave per year.
Note that this leave cannot last for more than three consecutive days at a time.
Gynecological examination leave
Female employees are entitled to one day of paid leave per year in order to undertake a gynecological and/or mammary examination, however evidence of the appointment must be provided.
Employees are entitled to one day of paid leave per year for blood donation, for which they must provide evidence.
Statutory contributions under Uruguayan employment law
According to employment law in Uruguay, the following deductions from employee salaries and contributions from employers must be made:
Employee deductions generally total between 18.125% and 23.125% must be taken from employee salaries.
Those are made up of a 15% deduction that goes towards the pension fund chosen by the employee, as well as a deduction of between 3% and 8% — based on salary level — that goes to the national health fund. Finally, a 0.125% deduction is taken for the government labor retraining fund.
Note that the minimum wage according to employment law in Uruguay was set at 10,000 Uruguayan pesos (approximately US $231) in 2021.
Employer contributions total at least 10.5% of an employee’s salary, with a contribution equal to 7.5% of the salary going towards the employee’s pension fund.
A further contribution of between 3% and 8% — based on the employee’s salary — must also be made to the national health fund.
A final contribution must be made for accident insurance, based on the level of occupational risk associated with the role being undertaken.
Biz Latin Hub can assist you doing business in Uruguay
At Biz Latin Hub, our multilingual team of corporate support experts is available to help you understand and fully implement employment law in Uruguay.
We offer tailored packages of integrated back-office services to suit every need, with a portfolio that includes company formation, visa processing, accounting & taxation, legal services, and hiring & PEO.
As well as Uruguay, we have teams in place in 15 other markets around Latin America and the Caribbean, meaning that we can help you effectively manage your taxes across multiple markets, and provide multi-jurisdictional market entry support.
Contact us today to find out more about how we can support you doing business in Uruguay.
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