Uruguay Labor Law Guide for Hiring Employees and Contractors
Uruguay, with a population of approximately 3.5 million people, is a stable and progressive country in South America.
As of 2023, Uruguay’s economy had a GDP of around $60 billion, making it one of the wealthier nations per capita in the region. Key sectors driving the economy include agriculture (particularly beef, soybeans, and rice), services (including finance and tourism), and renewable energy. The country has also seen growth in the technology and innovation sectors.
The official currency of Uruguay is the Uruguayan Peso (UYU).
Minimum Wage
UYU 22,751 per month
Overtime Wage
150% of the regular hourly rate
Meal Breaks
1 hour
Rest Breaks
15 minutes
Working hours
8 hours/day, 48 hours/week
Salary Payment Cycle
Monthly
Payroll Taxes
BPS (Banco de Previsión Social)
Paid Vacation
20 days
Overtime Hours
After 8 hours per day
Night Shift Hours
120% of the regular hourly rate
Holidays
11 holidays
No Work Days
Sunday
To hire employees in Uruguay, businesses must register locally and establish a legal entity. The cost of setting up a business entity generally ranges from $2,000 to $5,000, and the process takes about 30 to 45 days.
Employment contracts must be in writing and include key details such as job description, salary, working hours, and conditions for termination. The contracts should also specify probationary periods, if applicable. Uruguay’s labor laws differentiate between employees and contractors, with employees typically enjoying more comprehensive labor protections, including social security benefits and severance pay.
Uruguay has a national minimum wage law, with the minimum wage set at UYU 22,751 per month as of July, 2024. This rate applies across the country without regional variations. There are no exceptions to the minimum wage law, meaning all workers are entitled to at least the minimum wage. Employers are required to provide holiday pay to employees for all public holidays.
The standard working hours in Uruguay are 8 hours per day, totaling 48 hours per week. Overtime is compensated at 150% of the regular hourly rate and applies to any work exceeding 8 hours per day. Night shift work, typically between 10 PM and 6 AM, is paid at 120% of the regular hourly rate.
The legal minimum age for employment in Uruguay is 15 years, and there are stringent regulations against child labor, especially in hazardous industries.
In Uruguay, employers are required to make several payroll deductions, including contributions to the Banco de Previsión Social (BPS), which covers social security benefits such as retirement, healthcare, and unemployment insurance.
Employers must also withhold income tax from employees’ salaries. The Uruguayan income tax system is progressive, and the tax rates for 2024 are as follows:
Income Level (UYU) | Tax Rate |
0 – 100,000 | 10% |
100,001 – 300,000 | 15% |
300,001 – 600,000 | 20% |
600,001 – 1,200,000 | 22% |
1,200,001 and above | 30% |
Uruguayan law mandates several types of leave for employees:
Paid Vacation: Employees are entitled to 20 days of paid vacation after completing one year of service.
Maternity Leave: 14 weeks, with 6 weeks before and 8 weeks after childbirth.
Paternity Leave: 13 days for the birth of a child.
Sick Leave: Paid sick leave is available, with the first three days covered by the employer and subsequent days covered by social security.
Adoption Leave: Similar to maternity leave, applicable when adopting a child.
Mandated Holidays: Uruguay observes 11 public holidays each year.
Holiday | Date |
New Year’s Day | January 1 |
Carnival | February/March |
Good Friday | April |
Labor Day | May 1 |
Independence Day | August 25 |
Christmas Day | December 25 |
And others… | Various Dates |
Employers in Uruguay must provide a comprehensive benefits package, including social security contributions through BPS, which covers healthcare, retirement, and unemployment benefits. Employees are also entitled to a year-end bonus, known as the “Aguinaldo,” equivalent to one-twelfth of their annual earnings.
Additionally, severance pay is required in cases of dismissal, calculated based on the employee’s length of service and salary.
Uruguay does not follow At-Will Employment laws. Employers must have a valid reason for terminating an employee, such as misconduct, breach of contract, or redundancy due to economic reasons.
The termination process typically involves a notice period of 30 days, and employees are entitled to severance pay based on their tenure. In cases of unjust dismissal, employees have the right to challenge the termination in court, and the employer may be required to pay additional compensation or reinstate the employee.
Employers can legally terminate an employee under conditions such as the completion of a fixed-term contract, mutual agreement, or severe misconduct. However, terminations must be well-documented to avoid legal disputes.