Employer of Record in Uruguay

Hiring independent contractors has boomed in popularity because of the cost savings and flexibility they offer. It can be a great option if you require niche skills or short-term project support. Contractors allow businesses to access specialized skills quickly, without the time and cost of setting up a local entity.

However, it’s important to know the limits of this model: contractors are not a substitute for full-time employees. Relying on them for ongoing, long-term roles can create serious compliance risks, including employee misclassification, which can lead to fines, back taxes, and reputational damage.

Playroll’s contractor management solutions make it simple to compliantly engage, onboard, and pay contractors around the world. We provide clear visibility into agreements, streamline payments, and reduce compliance risks – so you can focus on getting the work done. And when you’re ready to take the next step, we can help seamlessly convert contractors into full-time employees through our global Employer of Record service.

Businesses can only operate smoothly in Uruguay if they comply with local labor laws including drafting compliant employment contract agreements and meeting taxation and payroll obligations. Learn more about the employment laws and regulations in Uruguay below, to avoid any compliance issues.

Employment Contract Requirements

In Uruguay, written employment contracts aren't legally required. However, it's common to use them, with fixed-term contracts typically lasting up to one year. Though not obligatory, it's recommended to provide a written record detailing basic employment details, including:

• Identification of both parties
• Basic wage
• Workplace and working hours
• Probation period
• Benefits
• Termination terms
• Reference to other collective agreements

Onboarding Process

We can help you get a new employee started in Uruguay quickly, with a minimum onboarding time of just 1-2 working days. The timeline starts once the employee submits all required information onto the Playroll platform and completes any necessary local authority registrations.

For non-nationals, the Right to Work assessment (if applicable) may add up to three extra days. Additional time may be needed for follow-ups on this assessment. Please note, payroll cut-off dates can impact the actual start date. Playroll's payroll cut-off date is the 10th of each month unless otherwise specified.

Working Hours in Uruguay

In Uruguay, the standard working hours amount to 44 per week, distributed over 8 hours each day. However, individuals in the industrial sector may be required to work 48 hours, with an 8-hour daily schedule, spread across a six-day week.

Overtime in Uruguay

In Uruguay, employees in both agricultural and non-agricultural sectors are entitled to a minimum rest period of 36 hours per week. Overtime worked on a regular working day must be compensated at 200% of the hourly wage. For overtime on public holidays or non-working days, the compensation increases to 250% of the hourly wage‹.

Probation Period in Uruguay

In Uruguay, the standard probation period is generally limited to three months.

Hiring in Uruguay means navigating local labor laws, mandatory employee benefits, payroll taxes, and strict employment regulations. These requirements aren’t always intuitive, especially if your team lacks in-country legal or HR expertise. An Employer of Record steps in as the legal employer for your hires, managing all compliance-related responsibilities. This includes issuing locally compliant contracts, registering employees with relevant authorities, processing payroll, and handling social security contributions and taxes in line with national laws.

By handing over these complexities to an EOR, your business avoids costly compliance errors and the time required to master local employment standards. You can focus on growing your team and operations while trusting that the legal and administrative foundation is solid. Whether you're making one strategic hire or building out an entire team, the EOR keeps you compliant, removes guesswork, and reduces the risk of legal or financial penalties, without requiring you to open a legal entity or maintain a local HR team.

Fiscal Year in Uruguay

1 January - 31 December is the 12-month accounting period that businesses in Uruguay use for financial and tax reporting purposes.

Payroll Cycle in Uruguay

The payroll cycle in Uruguay is usually monthly, with employees being paid by the 5th day of the following month.

Minimum Wage in Uruguay

As of January 1, 2025, Uruguay's minimum wage is set at UYU 23,604 per month. This rate applies to all workers, and the government periodically reviews and adjusts it based on inflation and economic conditions.

Bonus Payments in Uruguay

Employees in Uruguay receive a 13th-month salary (known as Aguinaldo) which are distributed in two halves: one in June and the other in December.

Employer Tax Contributions

Employer payroll contributions are generally estimated at an additional 12.63% on top of the employee salary in Uruguay.

Employee Payroll Tax Contributions

In Uruguay , the typical estimation for employee payroll contributions cost is around 18.10% - 23.1%.

Individual Income Tax Contributions

Income tax in Uruguay follows a progressive rate structure. The overall rates can be influenced by additional factors such as household status and the number of children.

Pension in Uruguay

Uruguay adopts a mixed pension system, consisting of the solidarity regime provided by the Social Security Bank and the individual savings regime managed by the Administrators of Social Security Savings Fund (AFAP). Eligibility for pension benefits typically starts at the age of 63-65 for employees.

Running payroll in Uruguay is complex, especially when you're hiring without a local entity. Local laws determine everything from tax withholdings and reporting deadlines to benefit contributions and currency requirements. Missteps can lead to fines, payment delays, or unhappy employees. An Employer of Record takes this burden off your plate by handling the full payroll process. Acting as the legal employer, the EOR ensures you remain compliant with all payroll-related obligations, while still allowing you to manage your team’s day-to-day work and performance.

Key Ways an EOR Supports Payroll in Uruguay:

• Compliance Assurance: Ensures payroll aligns with local tax laws, labor regulations, and statutory deadlines.
• Payroll Processing & Tax Management: Calculates salaries, applies correct tax withholdings, and submits required reports.
• Benefits & Social Security Contributions: Manages employer obligations for pensions, health insurance, and other legal entitlements.
• Contract Generation & HR Administration: Drafts compliant employment contracts and supports onboarding, terminations, and HR tasks.
• Currency Payments: Issues timely salary payments in local currency, ensuring employees are paid accurately and on time.

In Uruguay, work permits and visas are crucial for employers hiring foreign workers or relocating international talent. The process involves obtaining a job offer, preparing required documentation, and adhering to legal procedures. Key visa types include the Temporary Work Permit, which allows employment for a specific duration, the Permanent Work Visa for long-term residency and employment, and the Provisional Identity Card for short-term contracts. Employers must also navigate visa sponsorship requirements, fees, and renewal processes to ensure compliance with Uruguay's labor and immigration laws. Visa processing typically takes 30 to 90 days depending on visa type and nationality, with application fees ranging between US$100-$250. Employer sponsorship is required, with companies needing to prove legal incorporation in Uruguay or work through a compliant third-party partner.

Mandatory Leave Entitlement in Uruguay

The annual leave entitlement in Uruguay is 20 days for a full time worker. These can include public holidays on top of that or within those days, which would otherwise be unpaid.

Public Holidays In Uruguay

Uruguay observes 15 holidays in a calendar year, with some (*) included in mandatory paid leave and eligible for holiday pay at double the salary.

Paid Time Off in Uruguay

In Uruguay, employees who have completed one year of service are entitled to 20 working days of annual leave. This entitlement increases by one day for every four years of service, with a maximum limit of 25 days.

Maternity Leave In Uruguay

Pregnant employees in Uruguay are entitled to 14 weeks of maternity leave, with 6 weeks taken before the due date and the remaining 8 weeks after childbirth. The Banco de Previsión Social (BPS) provides compensation for this maternity leave.

Paternity Leave In Uruguay

Fathers or parents in Uruguay are entitled to 13 days of paid paternity leave.

Sick Leave In Uruguay

Employees in Uruguay are entitled to a year of sick leave, during which they receive compensation at 100% of their regular salary. The employer covers the first 3 days of sickness, and the Banco de Previsión Social (BPS) compensates 70% of the employee's average earnings. Qualification for this leave requires the presentation of a medical certificate.

Parental Leave In Uruguay

After the conclusion of maternity leave, parents are entitled to a Parental Care Allowance. This benefit allows either parent to work part-time while receiving a subsidy equivalent to 50% of their salary, enabling them to dedicate time to childcare. The leave can be utilized interchangeably and alternately by both parents until the child reaches six months of age.

Administering employee benefits in Uruguay requires more than just offering a standard package. Local labor laws often mandate specific entitlements, from health insurance to paid leave, and the rules can change without warning. Uruguay also has unique standards for what an attractive, competitive benefits package looks like. For businesses without in-country expertise, meeting these obligations and expectations can quickly become risky and expensive. An Employer of Record acts as your compliance partner, ensuring all benefits are provided according to the latest legal requirements and without administrative strain on your internal team.

Beyond compliance, an EOR brings clarity and consistency to a process that’s often complex and fragmented. They handle enrollments, ensure accurate employer contributions, manage communications with local providers, and keep everything properly documented. This means employees get what they’re entitled to, and you avoid the headache of navigating benefits systems in a foreign market. Whether you're hiring one person or building a larger team, an EOR provides a clear, dependable structure that lets you offer competitive benefits without taking on unnecessary risk or workload.

Termination Process in Uruguay

In Uruguay, employers cannot terminate employment at will outside of the probation period; terminations must be based on just cause. Compliant terminations include:

• Voluntary employee resignation
• Mutual agreement
• Unilateral decision by the employer (based on probation period, objective reasons, disciplinary dismissal, unsuitability for the job)
• Contract expiration
• Force majeure events

Notice Period in Uruguay

In Uruguay, the standard notice period is typically 1.5 weeks for both employees and employers.

Severance in Uruguay

Terminated employees in Uruguay are entitled to severance pay at the rate of one month's salary for each year of service, capped at a maximum of six months.