Employer of Record in Uruguay: how to hire compliantly without an entity.
Employ full-time employees in Uruguay without setting up an entity. Locally compliant contracts, monthly payroll, statutory benefits, taxes. Below: what the law actually requires, in plain English.
- Country
- Uruguay
- ISO code
- UY
- Region
- South America
- Phone code
- +598
- Employ Latam coverage
- Full EOR + contractor payments
Last updated July 2026
Overview
Uruguay is a small, stable market on the southeastern tip of South America. It has strong institutions, predictable labor law, and a well-educated workforce. For companies hiring remotely across Latin America, it is often overlooked in favor of larger markets. That is a mistake. Uruguay offers genuine rule of law, straightforward payroll mechanics, and a workforce comfortable working with international teams.
The labor framework is built around the Labour Code and overseen by the Ministry of Labour and Social Security (MTSS) and the Banco de Previsión Social (BPS). Sector-specific wage councils (Consejos de Salarios) set minimum pay by industry. Those rates take precedence over individual contract terms, so you cannot simply agree on a salary below the applicable council floor.
Indefinite-term contracts are the default. Fixed-term contracts exist but convert automatically to indefinite if renewed without a clear, documented reason for the time limit. Written contracts are strongly recommended and must be registered with BPS before the employee starts work.
The minimum wage is UYU 23,604 per month (approximately USD 545) as of January 2025. Actual salaries for skilled roles run considerably higher.
Country at a glance
| Currency | Uruguayan peso (UYU) |
| Working week | Monday to Friday |
| Standard workday | 8 hours (48 hours per week maximum) |
| Probation period | Up to 90 days |
| Notice period | 15 days (under 1 year of service) to 6 months (over 10 years) |
| 13th-month salary | Yes: aguinaldo paid in two parts (June and December) |
| Payroll cycle | Monthly |
A few things stand out for first-time hirers in Uruguay. The aguinaldo is mandatory and equals one full month's salary, split proportionally across the year. Vacation pay is also mandatory: employees receive a 100% vacation bonus on top of their 20 days of paid annual leave. Overtime is capped and must be paid at a premium. These are not optional benefits. They are statutory, and the BPS tracks compliance closely.
For foreign nationals, Uruguay requires work authorization through the National Migration Directorate. Mercosur citizens (Argentina, Brazil, Paraguay, and others) go through a simplified process. Non-Mercosur hires require employer sponsorship and a labor market test before a permit is issued. Processing time adds lead time to any hire involving a foreign national.
If you do not have a local legal entity in Uruguay, you cannot run compliant payroll or sign a locally valid employment contract on your own. An employer of record handles that structure for you: the contract, BPS registration, payroll in UYU, statutory contributions, and benefits.
Employment contracts and worker types
Uruguay's Labour Code presumes every employment relationship is indefinite unless you explicitly document otherwise. That default protects workers and creates real risk for companies that rely on informal arrangements or misclassified contractors.
Contract types at a glance
| Contract type | Typical use | Max duration | Probation allowed |
|---|---|---|---|
| Indefinite | Standard ongoing hire | No limit | Up to 90 days |
| Fixed-term | Time-bound project or specific task | Generally up to 1 year; renewing converts it to indefinite | Up to 90 days |
| Part-time | Reduced-hours role | No limit | Up to 90 days |
| Seasonal | Recurring work tied to a season (agriculture, tourism) | Duration of the season | Up to 90 days |
| Internship | Young workers combining training with work under Youth Employment Law | Set by program terms | Not applicable |
What goes in the contract
Verbal agreements are technically valid in Uruguay, but written contracts are strongly recommended and operationally necessary. A compliant contract must state:
- Job title and duties
- Gross salary and currency
- Working hours and location
- Probation period, if used (maximum 90 days; termination during probation carries no severance obligation)
- Applicable wage council (consejo de salarios) agreement for the sector
Sector wage councils set minimum pay and conditions by industry. Those council agreements take precedence over individual contract terms, so the contract must sit at or above those floors.
Registration before day one
Before the worker starts, the employer must register them with the Banco de Previsión Social (BPS). There is no grace period. Late registration creates back-contribution liability and can expose the company to MTSS inspection.
Contractor vs. employee
Uruguay does not have a formal freelancer or gig classification equivalent to some other LATAM markets. If the work looks like employment (fixed hours, supervision, integration into the business), authorities will treat it as employment. Misclassified contractors can claim full employment rights retroactively, including severance and unpaid social security contributions. If the person is doing ongoing work for your company, an employment contract is almost always the right structure.
Fixed-term contracts: the renewal trap
A fixed-term contract that is renewed or extended without a genuine new justification converts automatically to an indefinite contract under Uruguayan law. If you need the person long-term, start with an indefinite contract. Using fixed-term contracts to avoid severance obligations is a known audit trigger.
How Employ Latam handles this
We issue a locally compliant employment contract matched to the correct contract type for your hire. Statutory contributions are handled, BPS registration runs before the start date, and payroll runs in Uruguayan pesos. Onboarding is live in 72 hours. You focus on the work.
Pricing starts from $349 per employee per month, varying by country and team size.
Payroll, taxes, and the 13th-month salary
Uruguay's payroll rules are specific and non-negotiable. Getting them wrong triggers BPS penalties and employee claims. Here is what you need to know before you run your first payroll.
Pay cycle and currency
Salaries are paid monthly in Uruguayan pesos (UYU). The minimum wage is UYU 23,604 per month (approximately USD 545 as of January 2025). All statutory contributions are remitted monthly to the Banco de Previsión Social (BPS).
The 13th-month salary (aguinaldo)
Uruguay mandates two bonus payments, both equal to one month's salary, paid in two separate tranches:
- Aguinaldo de Navidad: paid in December, covering the second half of the year.
- Aguinaldo de vacaciones: paid before the employee takes annual leave, covering the first half of the year.
Both are proportional. An employee who joins mid-year receives a prorated amount. These are not discretionary. They are statutory and must be reflected in your total cost of hire from day one.
Employer and employee contributions
| Contribution | Employer rate | Employee rate |
|---|---|---|
| Social security (BPS, general) | 7.5% | 15.0% |
| Health insurance (FONASA) | 5.0% | 3.0–8.0% (income-based) |
| Pension (AFAP, mixed system) | 0.0% | 15.0% (split BPS/AFAP) |
| Unemployment fund | 0.125% | 0.0% |
| Occupational accident insurance | 1.0–5.0% (risk-based) | 0.0% |
| Total (approximate) | 12.55–17.5% | 18.0–23.0% |
Employee income tax (IRPF) is withheld separately on a progressive scale, reaching up to 36% at higher income levels. The employer handles withholding and remittance.
What this means for your total cost
On a gross monthly salary, you should budget an additional 12.5% to 17.5% in employer contributions on top. The occupational accident insurance rate depends on the risk classification of the role. Office-based roles sit at the lower end; field or industrial roles can push toward 5%.
Key payroll obligations at a glance:
- Register the employee with BPS before their first day of work.
- Withhold IRPF and employee social security contributions each month.
- Remit all contributions to BPS by the deadline for that month.
- Pay the aguinaldo tranches on time; late payment is a compliance breach.
- Include proportional 13th-month and vacation bonus in any termination settlement.
Employ Latam runs payroll in UYU, handles BPS registration, withholds IRPF, and manages both aguinaldo payments. Pricing starts from $349 per employee per month.
Mandatory benefits, vacation, and parental leave
Uruguay's labor law sets a solid floor of statutory benefits. Every employee is entitled to these regardless of what a contract says. As the employer of record, Employ Latam handles all contributions, accruals, and filings so nothing gets missed.
Leave entitlements
| Leave type | Entitlement | Paid by |
|---|---|---|
| Annual leave | 20 working days after one year of service | Employer |
| Sick leave | Days 1-3 paid in full; from day 4, BPS pays 60-100% of salary (up to one year) | Employer (days 1-3), BPS (day 4 onward) |
| Maternity leave | 14 weeks total (6 weeks pre-birth, 8 weeks post-birth) | Social security (BPS) |
| Paternity leave | 10 days | Employer/BPS (shared depending on scheme) |
| Public holidays | 13-14 days per year | Employer |
Working on a public holiday triggers double pay. That obligation sits with the employer and needs to be tracked carefully.
Vacation bonus (aguinaldo de vacaciones)
Annual leave in Uruguay comes with a 100% vacation bonus. Before an employee takes leave, you pay an extra month's salary on top of their regular wage. This is not optional and not negotiable. Budget for it when you calculate total employment cost.
13th-month salary (aguinaldo de Navidad)
Uruguay mandates a 13th-month payment equal to one month's salary, paid in December. It accrues monthly, so if an employee leaves mid-year, you owe a proportional amount. Combined with the vacation bonus, total annual compensation is effectively 14 months of base salary.
Sick leave structure
The three-day employer-funded period is a common catch for new employers. You cover days one through three in full. From day four, BPS takes over and pays between 60% and 100% of the employee's salary depending on tenure, for up to one year. Your payroll process needs to handle the handoff correctly.
Parental leave
Maternity leave runs 14 weeks, with six weeks taken before the expected birth date. BPS funds the benefit through social security contributions, but the employer handles the administrative side. Paternity leave is 10 days. Both parents also have job protection during and after leave.
Other statutory items to know
- Maximum working hours: 8 per day, 48 per week.
- Overtime is capped and must be paid at a premium rate.
- Sector-specific wage council agreements (consejos de salarios) can set higher minimums than the national floor. The current national minimum wage is UYU 23,604 per month (roughly USD 545 as of January 2025).
Employ Latam handles all BPS filings, accruals for the vacation bonus and aguinaldo, and payroll runs in Uruguayan pesos. Onboarding can go live in 72 hours, from $349 per employee per month.
Severance, termination, and notice periods
Uruguay uses a straightforward indemnity model for indefinite-term contracts. When you terminate without cause, you owe notice (or pay in lieu) plus a severance calculation based on tenure. Get either wrong and the Ministry of Labour and Social Security (MTSS) can pursue the difference.
Notice periods and severance at a glance
| Tenure | Notice period | Severance owed (without cause) |
|---|---|---|
| Under 1 year | 15 days | 1 month's salary (minimum) |
| 1 to 3 years | 30 days | 1 month per year of service |
| 3 to 5 years | 45 days | 1 month per year of service |
| 5 to 10 years | 60 days | 1 month per year of service, capped at 6 months |
| Over 10 years | Up to 6 months | Capped at 6 months' salary |
Notice can be worked or paid out. Most employers pay in lieu and end the employment immediately.
What gets added on top
Severance is not the only cost. At termination you also owe proportional amounts for any accrued but unpaid:
- Aguinaldo (13th-month pay, calculated on the portion of the year worked)
- Vacation bonus (one month's salary, proportional)
- Unused annual leave (20 working days per full year, prorated)
Run these calculations before you make a termination offer. Underpaying any of them creates a liability.
Termination with just cause
Uruguay's Labour Code allows immediate termination without notice or severance when the employee commits a serious fault: theft, repeated insubordination, or conduct that materially harms the business. The burden of proof sits with the employer. Document the incident thoroughly and keep records. Wrongly classified just-cause terminations are treated as without-cause dismissals, and the employee can claim full indemnity through MTSS.
Fixed-term and probationary contracts
Fixed-term contracts end automatically at the agreed date. No severance is owed if the contract was genuinely time-bound and not renewed repeatedly. Renewing a fixed-term contract without a legitimate project reason risks automatic conversion to indefinite status.
Probationary periods run up to 90 days. Terminating during probation carries no indemnity obligation. Once probation ends and the employee moves to indefinite status, the full severance rules apply from day one of employment, not from the end of probation.
How Employ Latam handles this
We run the termination math, prepare the locally compliant documentation, and process final payroll in Uruguayan pesos. You decide to end the employment; we handle the mechanics. Pricing starts from $349 per employee per month.
Recent regulatory changes
Uruguay's labor framework is stable compared to other LATAM markets. There are no sweeping reforms pending, but two practical updates in the past 24 months affect payroll planning directly.
Changes in the past 24 months
| Date | Change | Impact on employers |
|---|---|---|
| January 2024 | Minimum wage increased to UYU 22,268/month | All employment contracts must meet or exceed this floor; sector wage councils may set higher rates |
| January 2025 | Minimum wage increased to UYU 23,604/month (approx. USD 545) | Payroll and severance calculations tied to minimum wage must be updated; affects proportional 13th-month and vacation bonus bases |
| Ongoing 2024-2025 | BPS and MTSS reinforced wage council compliance audits | Employers (and EORs acting on their behalf) must confirm each hire's sector award applies correctly before onboarding |
| Ongoing 2024-2025 | Youth Employment Law incentives continued | Companies hiring workers under 29 in formal internship roles retain partial contribution relief; documentation requirements apply |
What this means in practice
Uruguay sets its minimum wage nationally, but wage councils (consejos de salarios) negotiate sector-specific floors that almost always sit above the national minimum. The January 2025 increase to UYU 23,604 is the headline number. The number that actually governs your payroll is the council rate for your worker's industry.
The BPS audit emphasis matters for foreign companies hiring remotely. Registration must happen before the first day of work. Late registration triggers back-contributions plus interest. There is no grace period.
A few things have not changed and are unlikely to in the near term:
- Severance structure: 1 month per year of service, capped at 6 months
- Aguinaldo: mandatory, split between December and vacation periods
- Employer social security contributions: approximately 12.55% to 15%+ depending on occupational risk category
- Maximum working hours: 8 per day, 48 per week
No digital labor platform legislation or gig-worker reclassification rules have passed as of mid-2025, though the MTSS has signaled interest in that area. Companies using contractors for ongoing operational work should treat that as a risk to monitor.
Frequently asked questions
- Do I need a local entity to hire someone in Uruguay?
- Yes, a legal entity registered in Uruguay is required to employ someone there directly. Without one, you cannot sign a compliant employment contract, register with BPS, or run local payroll. An employer of record like Employ Latam acts as the legal employer on your behalf, so you can hire without setting up a local company.
- What is the most common employment contract in Uruguay?
- The indefinite-term contract is the default and by far the most common structure. Uruguay's Labour Code presumes indefinite employment unless a fixed-term or project basis is clearly documented and justified. For most ongoing hires, starting with an indefinite contract is both legally safer and operationally simpler than trying to structure around fixed terms.
- What is the total employer cost on top of gross salary in Uruguay?
- Expect to add roughly 12.5% to 17.5% on top of gross salary for employer-side contributions, covering social security, health insurance, the unemployment fund, and occupational accident insurance. The exact rate depends on the risk classification of the role. You also need to budget for the two mandatory 13th-month bonus tranches, which together add the equivalent of one full month's salary spread across the year.
- How many vacation days are employees in Uruguay entitled to?
- Employees in Uruguay earn 20 working days of paid annual leave after completing one year of service. The entitlement accrues from the start of employment, and when leave is taken, the employer must also pay a vacation bonus equal to one full month's salary. This bonus is a statutory obligation, not a discretionary benefit.
- How much severance is owed for terminating an employee without cause in Uruguay?
- The base calculation is one month's salary per year of service, with a minimum of one month and a cap of six months. On top of that, you owe proportional aguinaldo, vacation bonus, and any unused leave accrued up to the termination date. Notice of 15 to 60 days (depending on tenure) must also be given or paid out in lieu.
- What is the current minimum wage in Uruguay and how does it affect my payroll?
- As of January 2025, the national minimum wage is UYU 23,604 per month (roughly USD 545). That figure sets the floor, but the wage council rate for your worker's sector almost always applies instead and is typically higher. Severance, the 13th-month bonus, and vacation pay are all calculated from the actual salary paid, so any minimum wage increase flows through to those obligations automatically.
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