Is a PEO/EOR in Uruguay right for you?

When entering new markets, a Professional Employer Organization (PEO) or Employer Of Record (EOR) can provide noteworthy benefits. These companies act as local legal employers while you concentrate on your core business. A PEO/EOR in Uruguay will allow you to hit the ground running and start operations as fast as possible.

The country’s secure and peaceful environment has attracted entrepreneurs from various regions worldwide to conduct business. However, not everyone will want to fully commit from the start, as the market may not be for everyone. That’s where a PEO/EOR in Uruguay can step in to help out.

At Biz Latin Hub, we can act as a PEO/EOR in Uruguay, as our array of back office services can help you in a variety of areas. We can also help you set up a business in Uruguay if you decide that your company needs a more solid in-country base for the long term. That also goes for the rest of Latin America and the Caribbean, where we have a further 17 dedicated local offices across the region.

Why invest in Uruguay?

Uruguay’s impressive and sustained GDP growth since the turn of the millennium is noteworthy. The country achieved growth of 4.4% in 2022 and has maintained positive growth since 2003, reaching peaks of over 7% in 2005 and between 2008-2010 despite the global recession.

Additionally, Uruguay boasts a very high level of human development compared to other countries in the region. This not only provides investors with an abundance of excellent human capital but also offers residents a pleasant, flourishing society to live in. A quality PEO/EOR in Uruguay can assist your company in taking advantage of the highly skilled talent pool in the country.

An infographic titled "Employment Law in Uruguay" detailing statutory contributions and working hours. Employee and employer contributions include pension and health funds. Working hours for hiring in Uruguay should not exceed 48 hours weekly, with at least one rest day per week. Updated December 2021. — *Learn about the benefits of hiring through a PEO/EOR in Uruguay*

What does a PEO/EOR in Uruguay do?

A professional employer organization (PEO) provides comprehensive assistance to companies with HR including recruitment, tax, and benefits payment. By using a PEO/EOR in Uruguay, the company outsources local staff recruitment, payroll, and social security management, allowing you to concentrate on growing your business activities.

PEOs can help by hiring staff on behalf of your business, creating a ‘co-employment’ relationship. This makes the PEO/EOR the employer of record in the eyes of the government.

Benefits of working with a PEO/EOR in Uruguay

Expanding into the region with an existing PEO in Uruguay enables companies to make a smaller-scale investment in their market entry process. Hiring one or two employees in Uruguay is cheaper than setting up a permanent location through company incorporation.

Other benefits of hiring through a PEO/EOR in Uruguay include:

Hiring the right people according to the profile required by the client.
Apply and implement institutional policies in employment contracts.
Pay staff in accordance with local law.
Payment of national taxes and taking out compulsory employment insurance.
Perform due diligence.

Simply put, a PEO in Uruguay can help foreign businesses navigate the complexities of hiring and managing staff in a new market, removing the burden of legal obligations and procedures that may be unfamiliar to them.

The graphic above highlights when it is best to use a Professional Employer Organization in Chile, or any country. PEO Chile — *This may help you decide if PEO/EOR in Uruguay is right for you*

What labor laws will a PEO/EOR in Uruguay cover?

In 2016, the International Trade Union Confederation (ITUC) rated Uruguay as one of the best countries in terms of workers’ rights. Uruguay was the only country in Latin America to receive the best possible rating by ITUC, and is in the same category as Germany, Finland, Iceland, or the Netherlands.

Even if you hire staff through a PEO in Uruguay, you should be informed about the key aspects of Uruguayan labor legislation, such as:

Employment contracts

Indefinite duration contracts: There is no legal requirement to have a written agreement. However, we recommend signing a contract in order to clarify the terms and conditions of the employment relationship.
Term contracts: It is mandatory to have a written contract when engaging in an indefinite employment relationship.
Temporary or seasonal contracts: The law requires a written employment contract.

Termination of the employment relationship

In Uruguay, if an employer terminates an employee’s contract without a valid reason, it is called ‘dismissal,’ and compensation must be paid to the employee. There is no formal requirement for prior notice of dismissal under Uruguayan labor law. Generally, the employer is required to compensate the employee for dismissal unless the employee has engaged in notorious misconduct. A PEO in Uruguay can help your company conduct dismissals within compliance standards.

Biz Latin Hub’s Snapshot of Employment Law in Uruguay Working hours The standard working week ranges from 44 to 48 hours long, based on the nature of the work, while a standard working day should be no longer than eight (8) hours long. In all cases, it is mandatory to have at least one rest day per week. Timeliness of salary payments Weekly salaries should be paid at the end of the week of work for which payment is due, while fortnightly and monthly salaries should be paid within five working days of the end of the period for which payment is due. Types of employment contracts: There are three (3) main types of employment contract in Uruguay: Fixed-term employment contract: Last for a period of time specified in the contract, which can be days, weeks, months, or years. Generally such contracts do not exceed one (1) year. Indefinite-term employment contract: This is the most common type of contract in Uruguay. These contracts will only terminate when both parties agree or when one can legally act unilaterally, such as in the case of a resignation or termination by just cause. Specific task or project employment contract: This is regarded as an “undetermined contract” as there is no specific or clear date for when the task or project will be completed. It is key to determine a priori clear objective markers or thresholds so there are no ambiguities regarding when a project will be completed. Termination and severance Under Uruguayan law, there is no mandatory notice period that an employee must provide when they intend to vacate a job, however it is generally recommended that a period of 30 days notice is established in the company’s internal guidelines or the employment contract, especially in the case of managerial roles. When an employee vacates their role voluntarily, they must be paid for all hours worked, as well as being compensated for any outstanding vacation they have accrued, as well as a proportion of their annual bonus, based on how much of the year they have worked. In the case of an employee being dismissed without just cause, they must similarly be paid all outstanding salary and benefits, as well as a severance payment based on their length of service and their type of employment. For salaried employees paid on a monthly basis, severance totals one month of pay for every year of service provided, up to a maximum of six months of pay. For those who are paid daily, such as laborers, they will only be eligible for severance pay if they have worked at least 100 days. For such workers, the severance payment is a more complex calculation, but essentially totals 25 days of pay for every year in which they have worked at least 240 days, or two days of pay for every 25 days worked, with a maximum severance equal to 150 days of pay. In the case of gross misconduct, an employee can have their contract terminated without the right to severance or a proportion of their annual bonus. Vacations , Leave , and Other Absences Statutory vacation allowance / paid time off (PTO) After 12 months of service, an employee receives 15 PTO days per calendar year, which must be taken within a year of being accrued. Seniority leave: After five years of employment, one (1) day of seniority leave is granted and added to an employee's annual leave allowance. After that, one (1) day is added after every additional four (4) years of work. Maternity and paternity leave Maternity leave allowance totals 13 weeks, and can be between one and six weeks before the due date, with the remainder taken following the child’s birth. This is paid by the Government social security fund. Paternity leave totals 10 working days. Sick leave The employer is obliged to pay the salary for the first two (2) days of an employee's doctor-authorised sick leave, after which it will be covered by the Government social security fund. Study leave After six (6) months of service, an employee is eligible for leave to partake in educational courses based on how many hours they work per week. Up to 36 hrs per week: six (6) days of leave annually. Over 36 but under 48 hrs per week: nine (9) days of leave. Working 48 hrs per week: 12 days of leave. Such leave can not extend for more than three (3) consecutive days at a time. Gynecological examination leave: Female employees are entitled to one (1) day of paid leave per year in order to undertake a gynecological and/or mammary examination, however they must provide evidence of the appointment. Blood donation Employees are entitled to one (1) day of paid leave per year for blood donation, for which they must provide evidence. Marriage leave: Three (3) days of leave is provided for marriage, one (1) of which must coincide with the date of the marriage itself. Such leave must be requested with at least 30 days of notice and subsequently supported by legal documentation to demonstrate the marriage took place. Bereavement leave: Three (3) working days of bereavement leave are provided in the event of a parent, child, spouse/civil partner, or sibling passing away. Legal documentation proving the death must be presented within 30 days of the leave being taken, with failure to do so resulting in that leave being discounted from the employees standard annual allowance. STATUTORY CONTRIBUTIONS Employee Deductions: Pension Fund contribution: Paid to the pension fund previously selected by the employee, at a rate of 15% of their salary National Health Fund: Paid at a rate of between 3% and 8% of the employee’s salary, based on how much they earn. Labor retraining fund: Paid by an employee at a rate of 0.125% of their salary Employer Contributions: Pension Fund contribution: Paid to the pension fund previously selected by the employee, at a rate of 7.5% of the employee’s salary National Health Fund: Paid at a rate of between 3% and 8% of the employee’s salary, based on how much they earn Accident insurance: Calculated based on the level of risk associated with the role the employee is undertaking — *Employment law snapshot for PEO/EOR in Uruguay*

Resignation is the expressed wish of an employee to end the contractual relationship. The employer must pay liquidation pay. On the other hand, abandonment is the tacit wish of the worker not to continue with the labor relationship. Similar to what was mentioned above, a PEO in Uruguay will be able to effectively handle employee terminations and within legal frameworks to maintain compliance.

When expanding your company and hiring local employees through a PEO in Uruguay, it’s important to consider the benefits and rights entitled to employees in the country, including:

Working hours: Employees may work no longer than 8 hours a day. Employees may work between 44-48 hours a week,

Overtime in Uruguay refers to work exceeding the legal or conventional limit set for the employee’s activity and category. Payment for overtime is 100% of the regular hourly rate on working days and 150% on holidays. Less than 30 minutes of work is counted as half an hour, while more than 30 minutes is counted as one full hour.

Additionally, decree 611/80 establishes the cases in which overtime is exempted, e.g. “senior personnel of commercial, industrial and service establishments. Senior personnel are considered to be employees who hold positions above that of a section chief”.

Holidays and bonuses

Paid holidays/leave of absence: All employees working for private individuals or private companies of any kind, including domestic service, are entitled to at least 20 days’ paid annual leave.

Vacation Salary: All workers engaging in a private commercial activity receive a sum equivalent to 100% of the liquid vacation day. The employer must pay this before the beginning of the leave and in proportion to the corresponding days. A PEO in Uruguay can make sure your company compensates employees correctly and mitigates potential issues related to salary concerns.

Bonuses: Employees receive two installments of an annual bonus, known as the Annual Complementary Salary (SAC) or Aguinaldo, which is paid twice a year, in June and in December, and corresponds to the sum of the last 6 months of work divided by 12.

How to use a payroll calculator

If you are keen to get an idea of the possible costs involved in payroll outsourcing in Uruguay, using a payroll calculator is one way to get a very good estimate.

Use Biz Latin Hub Payroll Calculator. — *Use Biz Latin Hub Payroll Calculator for costs of PEO/EOR in Uruguay*

Because while a payroll calculator won’t be completely accurate, it will give you the opportunity to search according to the salary, the number of employees, the country you want to enter, and the currency you wish to work in. As such, you will be able to understand your likely costs across a range of salaries, while also being able to compare other countries as potential alternative destinations.

You can find the BLH payroll calculator at the bottom of our Hiring & PEO Services page. The calculator will allow you to make good estimations of the costs involved in hiring in Latin America and the Caribbean based on country, currency, and salary, with the calculator factoring in local statutory deductions.

To use the BLH payroll calculator, you will need to undertake the following steps:

Step 1: Select the country

Choose the country where you are doing business, or planning to launch. This feature will be useful when it comes to comparing potential alternative markets.

Step 2: Select the currency you wish to deal in

You can choose between US dollars (USD), British Sterling (GBP) and Euros, as well as the local currency for the country you are looking at, based on that which is most convenient to you. Note that for Ecuador, El Salvador, and Panama, the local currency is also USD, as they have dollarized economies.

Step 3: Indicate an employees monthly income

Here you can indicate the expected salary you will be paying an employee, in the currency of your choice.

Step 4: Calculate your estimated costs

Based on all of the information you have provided, you will receive results indicating your estimated costs, including a breakdown for estimated statutory benefits you will be liable for.

Step 5: Compare your costs to other options

With a good estimate at hand of how much your staff in Uruguay would be, if you are flexible about your expansion into Latin America and the Caribbean, you can use the BLH payroll calculator to compare those costs to other jurisdictions.

FAQs when using a PEO/EOR in Uruguay

Based on our experience these are the common questions and doubts of our clients.

1. How to hire employees in Uruguay?

You can hire an employee by incorporating your own legal entity in Uruguay, and then using your own entity to hire employees or you can hire through an Employer of Record (EOR), which is a third party organization that allows you to hire employees in Uruguay by acting as the legal employer. This means you do not need an Uruguayan legal entity to hire local employees.

2. What is in a standard employment contract in Uruguay?

A standard Uruguayan employment contract should be written in Spanish (and can also be in English) and contain the following information:

-ID and address of the employer and employee
-City and date
-The location where the service will be provided.
-Employee position and responsibilities
-Payment frequency.
-Social benefits.
-Probation period
-Work hours
-Specific agreements or pacts.

3. What are the mandatory employment benefits in Uruguay?

The mandatory employment benefits in Uruguay are the following:

-Social Security Contributions (health, pension, reconversion fund, and IRPF)
-Vacation
-Holidays Bonus
-Christmas Bonus

For more information on mandatory employment benefits read our recent article on Employment laws in Uruguay

4. What is the total cost for an employer to hire an employee in Uruguay?

The total cost for an employer to hire an employee in Uruguay can vary based on the salary; however, indicatively the employer cost for mandatory employment benefits is 12.7% of the gross employee salary, which is additional to the employee’s gross salary.

Please use our Payroll Calculator to calculate employment costs.

What is the difference between a PEO and an EOR in Uruguay?

While a PEO functions as co-employer, an EOR assumes the role of the formal employer for your staff. Typically, an EOR provides a wider array of services compared to a PEO.

Biz Latin Hub can be your PEO/EOR in Uruguay

Understanding local laws, regulations, processes, and requirements is at the core of what we do at Biz Latin Hub. We help you reduce risk, simplify operations, and ensure a smooth launch into the Uruguayan market.

Working with a Professional Employer Organization (PEO) in Uruguay can be the perfect solution to hiring local staff when expanding your company.

Our team of professionals will help you to keep up to date with the new labor regulations that the government has recently implemented in Uruguay. We help our clients to comply with labor and social security regulations, determine payroll taxes and benefits, and perform labor due diligence among other services.

Contact us today to discuss how we can support you.

Learn more about our team and expert authors.

Is a PEO/EOR in Uruguay right for you?

Why invest in Uruguay?

What does a PEO/EOR in Uruguay do?

Benefits of working with a PEO/EOR in Uruguay