Payroll Outsourcing in Uruguay: A Fast Route to Market

For anyone interested in doing business in Uruguay and seeking quick market entry, one of the best options available could be payroll outsourcing. When you choose payroll outsourcing in Uruguay, you contract a local partner to take care of the administration of staff, saving you time and potentially providing you with staff in only the time it takes to find the right personnel.

Uruguay borders Argentina and Brazil

Payroll outsourcing in Uruguay is particularly attractive to anyone planning a limited-scale operation in the country, or as a stop gap while getting more familiar with the market.

Payroll outsourcing can be provided by a company offering professional employer organization (PEO) services or employer of record (EOR) services. Such providers are sometimes referred to as a ‘PEO firm.’

Bordering Argentina and Brazil, the nation of Uruguay is known as the “Switzerland of South America” because of its banking secrecy and adherence to the rule of law. A member of the Southern Common Market (Mercosur), along with Paraguay and its two neighbors, Uruguay’s economy has experienced consistent annual growth in GDP since 2003.

According to the United Nation’s 2020 World Investment Report, in 2019 the country saw foreign direct investment (FDI) inflows total $189 million (all figures in USD), marking a significant turnaround after three years of negative growth. The total stock of FDI was estimated at $28.3 billion — more than double that of ten years previous, and over thirteen times that registered two decades before.

In 2019, the South American country reported a gross national income (GNI) of $16,230 per capita — making it one of the most prosperous nations in Latin America. Uruguay also ranks third in the region in the Human Development Index, with an estimated 60 percent of its population considered ‘middle class.’

If you are looking to do business in Uruguay or have already started a commercial venture in the country, read on to understand the advantages of payroll outsourcing in Uruguay. Or go ahead and contact us now.

Understand payroll outsourcing in Uruguay

Payroll outsourcing in Uruguay refers to the use of a service provider or a third party to manage administrative and payroll duties for the employees of a company operating in the country. By choosing to outsource payroll, your company will be able to avoiding having to hire local payroll professionals or deal with the sometimes complex administration it involves.

The level of service provided as part of payroll outsourcing can vary, with some organizations only offering a basic administrative service. A PEO, meanwhile, will be able to offer a more comprehensive service, overseeing the likes of recruiting, hiring, and firing, on top of managing employee payroll, including meeting all tax and statutory social benefit requirements.

A PEO will also handle employee on-boarding and off-boarding, drafting employee contracts and related paperwork, as well as keeping you informed about legislative changes that could affect your enterprise.

Some of the principal tasks you can expect a company offering payroll outsourcing in Uruguay to undertake include:

  • Calculation of wages and salaries
  • Withholding of income taxes, social security, and pension contributions
  • Printing and delivery of salary receipts
  • Making direct deposits of wages and benefits
  • Development of management reports
  • Presentation of required government reports

Benefits of payroll outsourcing

A woman and a man in an office high-fiving hands, representing two people discussing the benefits of payroll outsourcing in Uruguay.
Payroll outsourcing will save you time

Some of the main benefits of choosing payroll outsourcing in Uruguay include:

Reduced administration: By outsourcing payroll in Uruguay, your company’s administrative burden will be reduced as you or your team will not have to manage employees’ benefits deductions, hiring, and dismissals. In addition, you will not have to stay aware of changes in labor regulations, which are not uncommon in the South American nation.

Good standing: Fines imposed by Uruguayan authorities for errors, omissions, or late payment of payroll taxes can put your reputation — or worse, your business operations — at risk. An experienced payroll provider will guarantee your company’s good health by fully complying with all corporate requirements.

Expert advice: By outsourcing payroll in Uruguay, you will be able to rely on ongoing legal advice and the business wisdom comes with having significant experience in the local market. Payroll outsourcing companies usually have a team of experts who handle various areas of human resources and payroll.

Latest software: By hiring a reliable company experienced in managing payroll, you should be able to count on them using the latest human resources management software, guaranteeing the proper, efficient administration of your staff.

Payroll regulations in Uruguay

Gavel of judge, representing the labor laws that have to be complied with by companies when choosing payroll outsourcing in Uruguay,
Avoid fines and penalties with payroll outsourcing

Employers in Uruguay are responsible for calculating and withholding income tax from employees’ wages and making those payments to the relevant authorities, as well as additional contributions to other government agencies.

In Uruguay, there are minimum wages for workers that are adjusted regularly. In December 2020, the Uruguayan government announced a 10% increase in the value of the national minimum wage to be implemented the following month, taking it to UYU 17,930 per month (approximately $423 at the date of publication).

The standard workday is eight hours long, with a maximum of 48 hours per week for industrial workers and 44 hours for commercial workers. Law 12.590 states that “all workers hired by individuals or private companies of any nature are entitled to an annual paid leave for at least twenty days.

In addition, all dependent workers are entitled to what is commonly known as the ‘thirteenth salary.’ This is a twice-per-year bonus common to many countries in Latin America that corresponds to one average month’s salary, paid in June and in December.

Keep in mind that if the termination of an employment contract is due to the voluntary resignation of the employee, the employer will have to pay the following:

  • Salary: the employee must receive the salary corresponding to the days worked in the month in which they resigned
  • Bonus: the employee must receive the bonus generated in the last December-May or June-November semester prior to the resignation date
  • Leave not taken: The employee must be paid for the leave not taken up to the date of resignation

What happens if a company fails to comply with regulations?

On a monthly basis, the employer must liquidate the items to be paid to the employee and make the corresponding payments to social security through the sending of payroll. There are fines in case of failure to comply with these legal obligations, based on the ‘re-adjustable units’ (unidades reajustables — UR) a unit of measurement based on the country’s national salary index. Those include:

  • 0.1 URs per undeclared worker the first time of failure to comply
  • 0.5 UR per undeclared worker the second time of failure to comply

Another sanction for not adhering to proper payroll practices is established in Law 18.752, which indicates that the omission of the payment of labor credits will automatically generate a fine of 10% on the amount of the credit owed by the employer.

Biz Latin Hub can help with your operations in Uruguay

At Biz Latin Hub, our team of multilingual specialists is equipped to deliver excellence and help you manage employee payroll to ensure the success of your commercial operations in Uruguay. With our full portfolio of hiring and international PEO services, we can be your single point of contact to incorporate your business in Latin America and the Caribbean.

Reach out to us now to receive personalized assistance.

Learn more about our team and expert authors.

The information provided here within should not be construed as formal guidance or advice. Please consult a professional for your specific situation. Information provided is for informative purposes only and may not capture all pertinent laws, standards, and best practices. The regulatory landscape is continually evolving; information mentioned may be outdated and/or could undergo changes. The interpretations presented are not official. Some sections are based on the interpretations or views of relevant authorities, but we cannot ensure that these perspectives will be supported in all professional settings.
Legal Team Uruguay
Legal Team Uruguay

Legal Team Uruguay is the Biz Latin Hub leading experts on doing business in Uruguay The Team writes on the news, doing business, law, and changing regulations. The team are experts in corporate law, Administrative law, Employment law, Immigration law and legal advisory services. Read more about them here. You can contact Legal Team Uruguay via our "contact us page".

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