Labor Law Compliance Guide for Uruguay

Uruguay, with a population of approximately 3.5 million people, is a stable and progressive country in South America.

Category	Details
Minimum Wage	UYU 24,572 per month (Jan 2026)
Overtime Wage	200% of the regular hourly rate (weekdays); 250% on Sundays/holidays
Meal Breaks	1 hour
Rest Breaks	15 minutes
Working hours	8 hours/day; 44 hours/week (commerce), 48 hours/week (industry)
Salary Payment Cycle	Monthly
Payroll Taxes	BPS: ~12.6% employer, ~18-20% employee
Paid Vacation	20 days
Overtime Hours	After 8 hours per day (max 8 extra hours/week)
Night Shift Hours	120% of the regular hourly rate
Holidays	15 holidays
No Work Days	Sunday
Minimum Wage	Uruguay has a national minimum wage law, with the minimum wage set at UYU 24,572 per month as of January 2026 (rising to UYU 25,383 in July 2026). 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.

As of 2025, Uruguay's economy had a GDP of approximately $85 billion (GDP per capita ~$24,380), making it one of the wealthier nations per capita in the region. GDP growth was 3.1% in 2024 and is projected at around 2.4% for 2026. 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).

Hiring Laws

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.

Working Hours

The standard working hours in Uruguay are 8 hours per day, totaling 44 hours per week for commerce and 48 hours per week for industry. Overtime is compensated at 200% (double) of the regular hourly rate on weekdays and 250% on Sundays and public holidays. A maximum of 8 extra hours per week of overtime is permitted. Overtime is voluntary and employers cannot compel employees to work overtime. 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.

Payroll and Taxes

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.

BPS Employer Contributions (~12.6% of gross salary):

Component	Rate
Pension fund (jubilación)	7.5%
Health insurance (FONASA)	5.0%
Labor Reconversion Fund (FRL)	0.125%

BPS Employee Contributions (~18-20% of gross salary):

Component	Rate
Retirement (BPS pension)	15.0%
FONASA (health) - no dependents	3.0%
FONASA (health) - with dependents	4.5% - 6.5%
Labor Reconversion Fund (FRL)	0.125%

FONASA employee rates vary by income level and whether the worker has dependent children or a spouse without their own health coverage.

Employers must also withhold income tax (IRPF) from employees’ salaries. The Uruguayan income tax system is progressive, and the tax brackets for 2026 (BPC = UYU 6,864) are as follows:

Monthly Income Range (UYU)	BPC Range	Tax Rate
$0 - $48,048	Up to 7 BPC	0%
$48,049 - $68,640	7 to 10 BPC	10%
$68,641 - $102,960	10 to 15 BPC	15%
$102,961 - $205,920	15 to 30 BPC	24%
$205,921 - $343,200	30 to 50 BPC	25%
$343,201 - $514,800	50 to 75 BPC	27%
$514,801 - $789,360	75 to 115 BPC	31%
$789,361+	Over 115 BPC	36%

Statutory Leave Policies

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: 20 days for the birth of a child (expanded from 13 days as of January 2026). A 30-day dismissal protection ("paternal fuero") applies after returning from leave.

• 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 15 public holidays each year.

Non-working holidays (inamovibles):

Holiday	2026 Date
New Year’s Day	January 1 (Thu)
Labor Day	May 1 (Fri)
Constitutional Oath	July 18 (Sat)
Independence Declaration	August 25 (Tue)
Christmas Day	December 25 (Fri)

Working holidays (laborables):

Holiday	2026 Date
Día de los Niños (Epiphany)	January 6 (Tue)
Carnival	February 16-17 (Mon-Tue)
Semana de Turismo (Tourism Week)	April 2-3 (Thu-Fri)
Landing of the 33 Orientals	April 19 (Sun)
Battle of Las Piedras	May 18 (Mon)
Artigas’ Birthday	June 19 (Fri)
Día de la Raza	October 12 (Mon)
Day of the Deceased	November 2 (Mon)

Employee Benefits

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.

Employee Termination

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.