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Employer of Record and Payroll Services in Uruguay Uruguay flag

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Global Payroll Team
Written by Global Payroll Team
Last updated May 1, 2026
Expert Reviewed
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Mercans offers complete payroll, PEO and HR services in Uruguay

Mercans offers comprehensive payroll, PEO, and HR services in Uruguay to help businesses manage their human resource needs. With expertise in local compliance, Mercans ensures that businesses can focus on their core operations while staying compliant with local regulations.

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Doing Business in Uruguay

Uruguay is known for being a safe and stable country with a resilient economy and a strategic location for business in South America. The government has implemented various incentives to attract foreign investment, and key industries in Uruguay include agriculture, technology, services, logistics, and tourism.

Entity Registration and Incorporation Requirements

Entity registration and incorporation requirements in Uruguay include obtaining a tax ID number and registering with the National Register of Commerce.

Banking

Banking Hours: branch hours vary by institution, with many banks operating Monday to Friday during standard business hours.

Working Week

The standard working week in Uruguay is generally 44 hours, although some sectors operate on shorter weekly schedules.

Labor Law

Uruguay has a highly regulated labor market, with strong labor protections and a range of benefits required by law, such as paid vacation, mandatory annual bonus payments, and severance pay. The labor laws also establish limits on working hours and overtime, as well as protections against discrimination, harassment, and unfair dismissal.

Main Industries

Food processing, agriculture, logistics, technology services, electrical machinery, transportation equipment, textiles

GDP Growth

3.1%

Dates & Numbers

dd/mm/yyyy

Official State Name

Oriental Republic of Uruguay

Population

3.50 million

Capital

Montevideo

Major Languages

Spanish

Currency

Uruguayan Peso

Internet Domain

.uy

International Dialing Code

+598

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Uruguay
Montevideo, UY
10:15 am, May 2, 2026
14°C
scattered clouds
61 %
Wind Gust: 35 mph
Clouds: 40%
Sunrise: 7:21 am
Sunset: 6:01 pm

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Payroll

In Uruguay, payroll calculations are complex and involve several components, including social security contributions, taxes, and other mandatory withholdings. Employers must ensure compliance with labor and tax laws and maintain accurate records to avoid penalties and fines. Outsourcing payroll services to a local provider like Mercans can help businesses navigate the complex payroll landscape in Uruguay.

It is acceptable to provide employees with online payslips

Payslip

Payroll reports must be kept in line with applicable labor, tax, and social security recordkeeping requirements

Reports

Employees receive paid annual leave of 20 working days

Annual Leave

Sick leave benefits are generally subject to social security coverage, medical certification, and BPS eligibility rules

Sick Leave

14 weeks of paid maternity leave and 20 continuous days of paternity leave for births from 1 January 2026

Maternity & Paternity Leave

Notice requirements depend on the contract and circumstances. There is no single universal statutory notice period for all terminations

Employee Termination

Aguinaldo, the annual bonus salary, is mandatory by law

13thmonth salary

24,572 UYU per month

Minimum Wage

Overtime must be paid with the statutory surcharge, with higher rates commonly applying for rest days and holidays

Overtime

Employees paid monthly are generally entitled to one month’s salary per year of service, subject to statutory limits and the circumstances of dismissal

Severance Pay

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Tax and Social Security

In Uruguay, both employers and employees are subject to social security contributions, which fund the country’s social security system. The tax system is progressive, meaning that higher-income earners pay a greater percentage of their income in taxes, with the maximum individual income tax rate set at 36%.

Tax

Uruguay operates on a progressive tax system, which means that higher-income individuals are subject to higher tax rates. The tax system consists of several types of taxes, including personal income tax, corporate income tax, value-added tax (VAT), social security contributions, and property tax. Tax residents in Uruguay are subject to taxation on their worldwide income, while non-residents are taxed only on their income sourced within Uruguay.

25%

Corporate Income Tax

36%

Personal Income Tax

22%

Sales Tax

22%

VAT

Social Security

Social security in Uruguay is managed by the Banco de Previsión Social (BPS), which provides coverage for retirement, disability, health, and other social benefits for workers and their families. Contribution rates vary depending on pension, health, labor reconversion, and other applicable payroll items.

Varies

Social Security Rate

12.6%+

Social Security Rate for Employers

15%+

Social Security Rate for Employees

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Employment Law

Uruguay’s employment law is highly protective of workers, with regulations on issues such as minimum wage, working hours, overtime pay, annual leave, aguinaldo, and severance pay. Employers are required to provide their employees with a safe working environment and adhere to strict rules and regulations in the case of dismissals.

Employment Agreement

In Uruguay, employment agreements can be either verbal or written, although written agreements are recommended to avoid any potential disputes. The agreement should include details such as job duties, salary, benefits, and working hours.

Working Condition

The standard workweek in Uruguay is generally 44 hours, and employees are entitled to a minimum of 20 paid vacation days per year, as well as additional paid public holidays. Maternity leave is also available for female employees.

Leaves

In Uruguay, employees are entitled to 20 working days of paid vacation per year, as well as paid national and public holidays. They can also take sick leave and maternity or paternity leave. Employers must comply with salary and social security rules during leave periods as applicable.

Employment termination

In Uruguay, an employment contract can be terminated by mutual agreement, by the employer for just cause, or by dismissal with the corresponding legal consequences. Employers should assess termination risk carefully because unjustified dismissal commonly triggers severance liability.

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No notice rule

Minimum notice period for terminating an employee

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varies

Total number of public holidays

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44 hours

Working hours per week

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As provided

Total number of days for Compassionate & Bereavement Leave

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Immigration

Foreign nationals who intend to live and work in Uruguay generally need the appropriate residence status and supporting employment documentation. Uruguay offers temporary and Mercosur residence routes, and residence procedures are handled through the competent migration authorities.

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Residency permits

Foreigners seeking residency in Uruguay can apply for temporary or permanent residence depending on their nationality and circumstances. Temporary residence for labor and other purposes is commonly granted for a minimum of 6 months and a maximum of 2 years, and Mercosur temporary residence can be granted for up to 2 years, renewable for the same term.

Work Permit Validity

Up to 2 years depending on the residence route

Required Documents

A completed visa or residence application form

A recent passport photograph

A passport with a minimum of six months of validity

A copy of the main page of the applicant’s passport

An offer of employment from a company registered in Uruguay, where applicable

Identity or reference documentation in Uruguay, where required

Proof of payment of the applicable fee

Compliant, reliable, error-free and touchless payroll in Uruguay

Build the best team and hire top talent compliantly in Uruguay. Get in touch with Uruguay payroll outsourcing & PEO specialists for a free consultation!

This document was prepared for informational purposes only. As local laws & regulations keeps on changing. Please consult your tax & legal advisors as well.
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    FAQs

    What is an Employer of Record (EOR) in Uruguay and how does it work for foreign companies?

    An Employer of Record in Uruguay allows international companies to hire local employees without setting up a legal entity in Uruguay. The EOR acts as the formal employer, managing employment contracts, payroll, social security contributions, tax filings and compliance with Uruguayan labour and employment laws while your company retains operational control.

    Why should businesses use an EOR instead of establishing a legal entity in Uruguay?

    Using an EOR enables faster, lower-cost entry into the Uruguayan market. Companies avoid entity registration, legal setup, local administration and ongoing HR overhead while securing full compliance with Uruguay’s labour, tax and social security regulations.

    How does payroll outsourcing in Uruguay ensure compliance with tax and labor regulations?

    Payroll outsourcing in Uruguay covers accurate salary calculations, tax withholdings, employer and employee social security contributions, payslip issuance and statutory reporting. The service ensures all payroll operations align with the Uruguayan labour code and tax authority requirements, reducing risk of penalties.

    Can an Employer of Record in Uruguay hire employees and manage work permits for international companies?

    Yes. An EOR in Uruguay can hire both Uruguayan nationals and foreign employees, manage work permit or visa application processes, oversee resident registration and ensure compliance with immigration and employment regulations in Uruguay.

    What are the main benefits of using EOR and payroll services in Uruguay for global expansion?

    Key benefits include rapid market access without establishing a local entity, reduced administrative and setup costs, full compliance with Uruguayan labour and tax laws, expert local HR and payroll support, and flexibility to scale your workforce efficiently across Uruguay.

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