Comprehensive Guide to Hiring Employees in Uruguay

Uruguay’s employment laws are housed in the constitution, regulations from the Ministry of Labor, and the International Labour Organization (ILO). To hire an employee compliantly and offer them mandatory benefits and compliant agreements, you can establish your new legal entity, banking, accounting, and payroll service in Uruguay.

Recruiting employees is a significant undertaking and can expose your business to heightened liabilities and regulations. Still, Uruguay’s flexible hiring options can make it less risky for you and give your talent more options.

Things to Know Before Hiring in Uruguay

Before the hiring process in Uruguay, there are several things to remember.

• One can enter and reside in Uruguay without a visa, thanks to the Mercosur agreements. However, one must identify themselves with a passport, digital ID card, or digital blue booklet ID.
• One must apply for Mercosur legal residency to establish oneself in the country. Before leaving the home country, one can do this in Uruguay or at the Uruguayan consulate.
• Workers in Uruguay are entitled to 20 days of paid vacation per year.
• The current minimum wage in Uruguay is 19,364 pesos per month, equivalent to almost 400 US dollars.

Other Important Things to Consider Before Knowing How to Hire Employees in Uruguay

Labor Laws

Uruguay has a well-developed employee rights, benefits, and protection framework. One needs to familiarize with these laws before hiring employees in the country—some key points to keep in mind.

• A typical work week is 44 hours, and employees who exceed 44 hours a week are entitled to overtime pay at 200% of the regular salary.
• There is no statutory regulation for employee probation, but a common practice stipulates a 3-month trial period.
• There are legal requirements to hire Uruguay workers, and employers must ensure that each applicant gets an equal opportunity to show their skills.
• After 12 months of continuous service with a single employer, an employee is eligible for 15 days of paid vacation leave, which must be utilized within a year. After completing five years of employment, the employee accrues an extra day of paid vacation each year.

Working hours

In Uruguay, the standard working week lasts between 44 and 48 hours, with working days being at most eight hours long. Employees are expected to work eight hours daily, totaling 48 hours weekly. Any overtime work performed during regular working days is remunerated at twice the regular salary rate. Work executed on public holidays or non-working days is compensated at two and a half times the standard rate. It’s crucial to remember that expatriates are considered tax residents in Uruguay if they spend over 183 days in the country during a calendar year. Furthermore, tax rates are progressive, with a range of 0-30%.

Language

The official language of Uruguay is Spanish, so it would be helpful to know Spanish before the hiring process in Uruguay. However, some companies may conduct business in English, especially in the tech industry. It may also be helpful to know Portuguese, as Brazil is a primary trading partner with Uruguay.

Employment contracts

Employers should know that employees are eligible for 12 weeks of fully paid maternity leave, which may be divided into six weeks before and six weeks after childbirth. There are also different types of contracts used by investors in the country, and employees must oversee statutory contributions.

Uruguay also has social security agreements with several countries. If hiring employees is not going according to plan, companies can hire freelancers, remote workers, or independent contractors temporarily or more permanently.

Social Security contributions

Employers in Uruguay must pay social security contributions based on the salary earned, including bonuses and commissions. These contributions are borne by both the employer and the employee.

The social security contributions in Uruguay include health insurance and a labor re-conversion fund, which total 12.625% of an employee’s salary. In Uruguay, social security is funded through contributions from employees, employers, and the government, and immigrants have equivalent rights to Uruguayans.

Termination

Employers in Uruguay are free to fire workers. But they must provide notice time and severance compensation. Both workers and employers are typically given 1.5 weeks‘ notice.

Employees who are terminated (excluding those terminated for grave misconduct) are eligible for severance pay equivalent to one month’s salary for each year of service, capped at a maximum of six months‘ salary. Employers have the right to end a contract for just cause, but they must provide written notification and a reason for the termination. In Uruguay, the usual probation term is three months.

The Cost of Hiring an Employee in Uruguay

To hire employees in Uruguay, the cost is crucial. Some important points for the recruitment fees in Uruguay are:

• Employees in Uruguay pay between 0% and 36% in taxes, depending on their income bracket.
• Employees in Uruguay also pay between 18.1% and 23.1% in social security.
• Employers in Uruguay have the authority to terminate employees, but they are required to provide a notice period and offer severance pay as per local labor laws.
• The employer and employee must agree upon the required notice period in Uruguay in the employment contract.
• The cost per hire in Uruguay can be calculated using the formula: Cost per hire = (Internal recruiting costs + External recruiting costs) / Total number of hires.
• Here are the required social contributions that employers in Uruguay must pay on top of an employee’s salary:

Companies can use employer-of-record services to handle payroll, benefits, taxes, and compliance for their team in Uruguay. Multiplier offers a comprehensive platform that simplifies payroll and compliance for global teams.

What Does a Company Need to Hire Employees in Uruguay?

To hire employees in Uruguay, a company needs to follow certain legal, financial, and cultural requirements. Here are essential points to bear in mind:

• Obtain a taxpayer identification number (RUT): This is a unique number the Uruguayan tax authority (DGI) assigns to the company. The RUT is necessary for the company to carry out any commercial activities in Uruguay, including hiring employees. To obtain a taxpayer identification number (RUT) for a firm from the Uruguayan tax authority (DGI), you need to register your company at the Single Window and the Social Security Administration.
• Comply with labor laws: Companies functioning in Uruguay must abide by the country’s labor regulations, which include measures for minimum wage, working hours, vacations, and other labor-related problems. The World Bank offers information on globally recognized labor standards and norms that regulate individual job contracts, such as ILO conventions.
• Register with the social security system: Companies operating in Uruguay must register with the Social Security System (BPS) and obtain a BPS identification number to ensure that their employees are covered by Uruguay’s social security. This is a necessary step for hiring in Uruguay and is required by law. The BPS is responsible for managing social security contributions and benefits for employees in Uruguay. Employers must register employees with the BPS using the Form Gestion de Afiliaciones.
• Register with the Labor Inspection Office: Companies must register with the Labor Inspection Office (MTSS) and comply with any inspections conducted by this agency.
• Maintain proper employment records: Employers must maintain proper documentation of their workers’ details, job contracts, wages, and working hours.

Various Options for Hiring Employees in Uruguay

In Uruguay, there are various options available for hiring employees. Here are some common ones.

• Full-time employment: Full-time employment in Uruguay typically involves working eight hours a day, 48 hours per week. Overtime work on a working day is paid at two times the regular salary. Employers possess the authority to dismiss workers; however, they must offer a notice period of 1.5 weeks and a severance payment. Employees in this sort of employment usually work between 20 and 30 hours weekly, compared to full-time employees.  Employers may need to use an Employer of Record (EOR) service to hire employees in Uruguay. The minimum onboarding time required by some EOR services is only 15 working days.
• Fixed-term employment: Uruguay has two types of employment contracts: indefinite duration and fixed-term. Fixed-term contracts last for a set period, ranging from days to months but generally not exceeding one year. When an employee is dismissed on personal grounds or due to economic redundancy, they are entitled to an indemnification equivalent to a specific number of months of salary. It is critical to comply with local regulations when hiring and firing employees in Uruguay.
• Part-time employment: Employees are entitled to reduced pay and benefits based on the hours worked. Employees in this type of employment typically work for 20 to 30 hours per week, as opposed to full-time employees.
• Temporary employment: A work visa or a temporary residency certificate make working temporarily in Uruguay feasible. There are also choices for temporary distant employment. In Uruguay, employment agreements can be either long-term or short-term. It’s significant to remember that there are rules governing the extension of impermanent contracts.
• Independent contractors: Hiring independent contractors in Uruguay requires a compliant independent contractor agreement that adheres to Uruguay’s laws. It is also possible to convert independent contractors into employees in Uruguay through PEO & EOR services to avoid misclassification risks and achieve 100% compliance. Nevertheless, it is vital to exercise caution when utilizing independent contractor agreements in Uruguay to avoid breaching employment laws.

The Steps to Hiring in Uruguay

Recruitment and selection in Uruguay can be made more accessible by the following steps:

• Payroll registration: File a tax identity number request on behalf of the employee with the appropriate tax officials.
• Job offer: If the applicant matches the criteria, make them a job offer that includes a wage, perks, and work position.
• Promote the position: To draw in applicants, promote the post on various employment portals, publications, and social media platforms.
• Probationary time: Establish a probationary period during which the employee’s work will be assessed. If the employee fulfills your standards, their position will be verified.
• Screening applications: After getting applications, screen them to find the best prospects.
• Conduct interviews: After narrowing down the list of applicants, question them to assess their skills, credentials, and experience.
• Register the employee: Make sure to register the new employee with both the Ministry of Labor and the Social Security Administration.
• Onboarding and training: Once the new employee begins, provide onboarding and training to ensure they grasp their job and the business culture.
• Contract of employment: Draft an employment contract outlining the employment’s terms and conditions, including compensation, working hours, vacation, and benefits.
• Ongoing compliance: Ensure all work laws and regulations, including wages, social security, and taxation, are followed.

Following these steps will make it much easier for anyone in the recruitment process in the Uruguayan companies.

Let Multiplier be your EOR platform in Uruguay

Multiplier is an Employer of Record (EOR) platform that enables businesses to legally and efficiently engage with overseas workers in a new country without setting up a local entity.

Our innovative HR platform provides companies with a distinctive solution to recruit highly skilled employees in Uruguay, without establishing a separate legal entity. Through our Employer of Record (EOR) platform, businesses can effortlessly hire employees in Uruguay while maintaining compliance with local labor laws.