Employment Act / Labor Laws in Uruguay

Uruguay is a small country that is situated in South America. It is located between Argentina and Brazil; hence it is one of the strategic locations for setting up a business. Political stability backed by a strong democracy and efficient regulations makes Uruguay a perfect country for foreign companies. 

Uruguay’s economic growth can potentially enter the group of high-economic countries. In 2019, Uruguay’s literacy rate was 98.77%, providing skilled and educated youth to establish their business and hire in the country. 

However, employers must understand Uruguay’s labor law while hiring in the country for a compliant hiring procedure. Read on to learn more about the labor code in Uruguay. 

Applicability of the Act

The Ugandan labor law applies to both domestic as well as foreign employees. Foreign nationals need to abide by the labor law of Uganda just like their citizens. The law treats both workers equally, giving them the same rights and duties. 

Employment Contract

Uruguay’s labor law states three main kinds of employment contracts exist. These contracts are mainly implemented for all foreign companies so that they can easily draft an employment contract. The three contracts have been discussed below in detail:

Indefinite employment contract

• The indefinite employment contract is the most commonly used contract under Uruguay’s labor law. 
• This kind of contract can be terminated two ways after its execution. In the first method, an indefinite employment contract can be terminated if the employee and the employer mutually agree on the final termination. The second type of termination takes place when either of the two parties takes any unilateral action.

Fixed-term employment contract

• The second type of contract under Uruguay’s labor law is the fixed-term employment contract. 
• This type of contract usually has a time limitation which will automatically expire once the specified period is over. 
• Fixed-term employment contracts can not have a limitation period of more than a year. The limited period may last for months, weeks, or days. 

Specific task or project contracts 

• Under Uruguay’s labor law, the third kind of contract is the specific task or project contract. 
• This type of contract is also known as the underdetermined contract because it does not possess a specific date of job completion. 
• From the initial phase, the employers must inform the employees about the underdetermined contract to avoid any future ambiguity. 

Key Provisions of the Act

Labor Act rules in Uruguay specify the following provisions for employers to conduct a lawful and legal hiring process. 

Minimum wages 

• Employers are entitled to pay employees the minimum wage as the government specifies. 
• The minimum wage in Uruguay is 21,106.00 UYU per month. 

Working hours

• Labor regulation in Uruguay allows employees to work 44 hours per week and 8 hours per day over a five-day week. 
• Employees from the industrial sectors can work for 48 hours per week. Therefore, they follow a six-day week, working 8 hours per day.

Overtime

• Overtime is when employees choose to work over the standard working hour. 
• Overtime is not mandatory under Uruguay’s employment act; therefore, employers can not force employees to overwork. 
• An employee can only work for an extra 8 hours a week. They will receive a payment of 200% of their standard salary rate. 
• Employees working on a holiday receive a payment of 250% of their standard salary rate.

Payroll 

• A foreign company must follow Uruguay’s labor law while calculating the payroll of its employees.
•  In Uruguay, employees receive their remuneration on the 5th of every month. 
• Apart from the monthly remuneration, labor regulations in Uruguay allow an annual statutory bonus, also known as the 13-month salary. The 13th-month salary is given to the employee in two halves. The first half is paid during June. At the same time, the other half is credited in December. 

Public holidays

• In Uruguay, there are 12 public holidays. 

Paid holidays

• The labor code of Uruguay allows 20 paid holidays for each employee.
• Employees can get paid holiday after completing the first year of employment. 
• They must earn or collect these paid holidays during the first year. 
• Employees can get an extra paid holiday if they work with the same company for over five years. 

Sick leave

• Employees can take three days of paid sick leave in Uruguay. 
• A practicing doctor must authorize this leave, and the employee must provide a valid medical certificate.
• If the sick leave exceeds the third day, Uruguay’s social security system or government social fund, the Banco de Previsión Social (BPS) will provide a 70% compensation of the employee’s remuneration. 

Maternity leave

• Uruguay’s paid maternity leave applies to all female employees. 
• Maternity leave lasts up to 14 weeks. A female employee can take maternity leave six weeks before the due date and continue it up to eight weeks post-delivery. 
• Uruguay’s social security system, the Banco de Previsión Social (BPS), will compensate the employee. Maternity leave in Uruguay for foreigners is the same as for the country’s citizens.

Paternity leave

• Uruguay’s employment act also provides paternity leave to those male employees who have newly embraced fatherhood. 
• They are eligible for paid leave for 13 days. These leaves are compensated under Uruguay’s social security system, the Banco de Previsión Social (BPS). 

Marriage leave

• Uruguay’s employment act allows employees to take paid marriage leave. 
• This paid leave will be valid for up to three days. 
• An employee needs to inform this with a notice before 30 days and provide an official document of the marriage as evidence. 

Study leave

Employees are eligible to study leave if they have worked with their employers for over six months. This leave depends on the employee’s weekly working hours. 

Bereavement leave

• Employees can claim bereavement leave if their parent, spouse, or child has expired. 
• They can take a day’s leave and also have to show legal evidence of the death. 

Gynecological examination leave

• The labor act rules in Uruguay allow female employees to take leave for one day of leave provided for a gynecological examination. They have to show evidence of the appointment. 

Termination

• Uruguay’s labor law allows an employer to terminate an employment contract for valid reasons. 
• A contract can be terminated if the employee has committed any misconduct or there might be any business reason. If any misconduct has taken place, then the employee must receive a warning. 

Notice period 

• Under Uruguay’s labor law, the notice period is around 1.5 weeks. 

Severance pay

• Severance pay is the pay that an employee receives after the employer has terminated the job contract for unjust reasons. 
• It is paid at the rate of one month’s salary for service up to six months. 

Penalties

Failing to adhere to the regulations imposed by the labor code in Uruguay can lead to severe penalties for employers. This law prioritizes the data of the employees, so if the employer fails to protect them, they have to undergo punitive punishment. On the nature of the non-compliance, the employer needs to pay 550,000 index units or USD 48,000. Their data will be suspended for five days.

Compliance Strategies for Employers

Companies must strictly follow the employment law Uganda guide for a legitimate hiring process. Here are some compliance strategies that a foreign company can abide by

• A company in Uganda can hire Human Resource Management or HR manager to manage the employees in the Ugandan subsidiary. An HR is responsible for looking after all the matters related to their employees, like an appraisal or recruitment of new employees.
• A company must use the standard contract templates widely used in Uganda. Using a top-notch template of basic documents like an employment contract, offer letter, etc will enhance the relationship between the employee and the employer.
• A company must hire an outsourcing company to tackle all their auditory work so they are not penalized. 

How Can Multiplier Help?

Multiplier is the ultimate solution for all your needs if you want to set up a business in Uruguay. Our experienced experts assist and guide many businesses willing to set up foreign subsidiaries worldwide. 

Multiplier has assisted numerous businesses with drafting contracts, international payroll management, employee onboarding, etc. Multiplier helps businesses to avoid mistakes while expanding their horizon at an international level.