Enter the Market With a Professional Employer Organisation (PEO) in Uruguay

A Professional Employer Organisation (PEO) in Uruguay can offer significant advantages when entering the Uruguayan market. Uruguay’s tranquility and security has led foreigners from different parts of the world to do business in the country. Additionally, its attractive business environment and lower costs of production compared to struggling neighbor Argentina is enticing businesses across its borders.

If you are looking to expand abroad and do business in Uruguay, a PEO can help with the process of hiring staff without needing to formally incorporate a company. A PEO supports your business with the all aspects of hiring employees in Uruguay, from payroll to employee benefits. 

How does a PEO in Uruguay support business expansion?

Man standing in an office smiling at the camera
A PEO in Uruguay relieves the burden of hiring and managing staff in a new and unfamiliar market, where a foreign business may otherwise struggle to understand their legal obligations.

A PEO supports companies with their human resources functions, from the early stages of recruitment to the payment of taxes and benefits. A PEO in Uruguay will hire staff inside the country on behalf of the company, and manage their payroll, social security contributions and other needs within the country, so the hiring company has a presence in the market and can focus on developing their commercial activities.

PEO companies can achieve this through a ‘co-employment’ relationship with the hiring company. In hiring staff on behalf of the company, the PEO becomes the employees’ Employer of Record in the eyes of the government. This means that they are liable for all employment obligations of that employee in the country.

PEOs undertake the fundamental and time-consuming tasks of a business’ human resources needs and legal obligations, allowing companies to focus on the growth and success of their business.

Benefits of working with a PEO in Uruguay

Expanding into Uruguay through a PEO enables companies to make a smaller-scale investment into their market entry process. Costs to hire one or two new employees in Uruguay will be lower than entering the market through formal company incorporation and setting up a permanent location, such as an office.

Other benefits of hiring a Professional Employer Organisation 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.

In other words, a PEO in Uruguay relieves the burden of hiring and managing staff in a new and unfamiliar market, where a foreign business may otherwise struggle to understand the legal obligations and required procedures of hiring and managing employees.

Key obligations when hiring employees in Uruguay

In 2016, the International Trade Union Confederation (ITUC) rated Uruguay 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.

The following is a summary of the most important aspects of Uruguayan labor legislation.

Employment contracts

  • Indefinite duration contracts: There is no legal requirement to have a written agreement. However, we recommend to sign a contract in order to clarify the terms and conditions of the employment relationship.
  • Term contracts: It is mandatory to have a written employment contract, since the rule is the indefinite employment relationship.
  • Temporary or seasonal contracts: The law requires a written employment contract, justifying the term, given that the rule is the indefinite employment relationship.

In employment contracts (whatever their modality), the employer may establish a trial period. It may not exceed 90 days (3 months).

Termination of the employment relationship

When the employer decides to terminate the employment contract without a cause, this is considered ‘dismissal.’ The employer must pay the employee compensation for dismissal.

In Uruguayan labor legislation there is no formal requirement to give prior notice of dismissal. The general principle is that any one sided breach by the employer causes consequent indemnification for dismissal; unless there has been notorious misconduct by the employee. The amount of the severance payment depends on whether the worker is a monthly or a daily worker, or, whether they receive their salary monthly or per day (or hour).

Resignation is the expressed wish of an employee to end the work relationship. The employer must pay severance pay, exempting themselves from payment of compensation for dismissal.

Abandonment is the tacit wish of the worker not to continue with the labor relationship.

Benefits and rights of employees in Uruguay

Employee hired by a PEO in Uruguay
In terms of workers’ rights, Uruguay ranked as the best in Latin America in 2016.

Working hours/working day: Employees may work no longer than 8 hours a day. Employees may work between 44-48 hours a week, depending on the industry of the company.

Overtime: Overtime is considered to be the time which exceeds the legal or conventional limit set for the employee’s specific activity and work category. Overtime must be paid at 100% of the value of a regular hour, when performed on working days. On holidays, the surcharge will be 150% over the hourly wage. Fractions of less than 30 minutes’ work are counted as half an hour and those of more than 30 minutes as one full hour.

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 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.

Bonuses: Employees receive two installments of an annual bonus, known as the Annual Complementary Salary (SAC) or Aguinaldo, equivalent to 50% of their best monthly salary, within the period of the last six months. The employer must pay the first installment on 30 June and the second before 20 December.

Hire staff through an experienced PEO 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 Organisation (PEO) in Uruguay can be the perfect solution for expansion from a financial growth and business perspective.

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

Contact our team of local experts in Uruguay at [email protected] for more information on how we can help you throughout the recruitment and hiring process in Uruguay.

Learn more about our team and expert authors.

Infographic: Explaining international professional employer organization or PEO in Uruguay

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