A Professional Employer Organisation or PEO in Uruguay can offer significant advantages when entering the Uruguayan market. Uruguay’s tranquillity and security have 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 neighbouring countries, have stimulated foreign direct investment (FDI) in Uruguay.
If you are looking to expand abroad, incorporating your business with a PEO in Uruguay can help with the process of hiring local staff without needing to formally consolidate a company. A PEO can support your business with multiple aspects of hiring employees in Uruguay, including employee payroll.
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How does a PEO in Uruguay support business expansion?
A Professional Employer Organisation supports companies with all duties regarding human resources, from the early stages of recruitment to the payment of taxes and benefits. A PEO in Uruguay will hire local staff on behalf of the company, and manage its payroll and social security requirements. In this way, the expanding company can focus on developing its commercial activities.
PEOs can achieve this through a ‘co-employment’ relationship with the hiring company. In hiring staff on behalf of your business, the PEO becomes the Employer of Record in the eyes of the government.
Furthermore, a PEO in Uruguay can undertake essential and time-consuming tasks concerned with 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.
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.
Even if you hire staff through a PEO in Uruguay, you should be informed about the key aspects of Uruguayan labour legislation, such as:
- 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
When the employer decides to terminate the employment contract without a cause, this is considered ‘dismissal.’ Therefore, the employer must pay compensation to the employee. In Uruguayan labour 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.
Resignation is the expressed wish of an employee to end the contractual relationship. The employer must pay severance pay, exempting themselves from payment of compensation for dismissal. On the other hand, abandonment is the tacit wish of the worker not to continue with the labour relationship.
Benefits and rights of employees in Uruguay
When expanding your company and hiring local employees through a PEO in Uruguay, you should also take into account the benefits and rights of employees in the country. These include the following:
Working hours: Employees may work no longer than 8 hours a day. Employees may work between 44-48 hours a week,
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.
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.
Bonuses: Employees receive two instalments of an annual bonus, known as the Annual Complementary Salary (SAC) or Aguinaldo, equivalent to 50% of their best monthly salary.
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 to hire local staff when expanding your company.
Our team of professionals will help you to keep up to date with the new labour regulations that the government have recently implemented in Uruguay. We help our clients to comply with labour and social security regulations, determine payroll taxes and benefits, and perform labour due diligence among other services.
Contact us today to discuss how we can support you.
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