Hiring at a Glance

Uruguay is a highly formal, compliance-predictable hiring market in Latin America, with employment protections that are clear on paper and actively enforced in practice. Working time is capped at 8 hours per day, and the weekly limit depends on sector: 44 hours/week for commerce and services and 48 hours/week for industry.  Overtime is generally treated as time beyond the legal or agreed limit and is commonly paid with a 100% surcharge (and higher on rest days in many regimes), which makes time tracking and approvals an immediate payroll control point.

Employees are entitled to at least 20 days of paid annual leave, with a seniority increment that adds days over time (commonly one additional day every four years, and additional seniority rules after longer service).  Uruguay also operates “extra salary” mechanics that materially affect total cost: private-sector employees are entitled to a mandatory 13th salary (aguinaldo / sueldo anual complementario) and a vacation salary payment tied to annual leave.

From a payroll standpoint, employers must withhold IRPF (employment income tax) and remit social security contributions to the system, with standard employer contributions totaling 12.625% and employee contributions typically 18.1% to 23.1% depending on health coverage profile.  An Employer of Record (EOR) in Uruguay becomes the legal employer and runs the full statutory stack—contracting, BPS/FONASA registration and remittance operations, IRPF withholding, vacation/aguinaldo/vacation-salary administration, and termination settlement execution—so foreign companies can hire without setting up and running a local entity.

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Key characteristics of talent market

Uruguay’s talent market is concentrated in Montevideo, with a strong supply of professionals across software development, business services, finance operations, and regulated corporate functions. The market is known for relatively high formality and strong worker protections for the region, which improves predictability but also increases the operational burden: compliance success is driven by disciplined payroll operations, accurate classification of remunerations (what is contributory/taxable), and audit-ready recordkeeping. Employers typically find that Uruguay is straightforward to hire in commercially, but unforgiving if overtime, leave, and termination math are handled informally rather than through documented processes.

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Most In-Demand Skills in 2026

Demand in Uruguay remains strongest in technology and high-trust operational roles. Software engineering, data analytics, cloud and cybersecurity capabilities are consistently sought, particularly for companies serving international markets from Montevideo. In parallel, employers show sustained demand for finance and compliance-linked roles—controllers, payroll and HR operations, and shared-services leaders—because the payroll system requires precise handling of statutory deductions and “extra salary” benefits (aguinaldo and vacation salary) that create cost and timing obligations beyond a standard monthly wage.

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Top Universities Supplying Talent

Uruguay’s primary professional pipeline is led by the Universidad de la República (Udelar), the country’s oldest and largest public university, based in Montevideo and structured across multiple faculties including Engineering, Economics/Business, and sciences.  Employers hiring in Uruguay frequently recruit from Udelar for engineering, IT, and business roles, and complement this pipeline with graduates from private universities in Montevideo for business and technology disciplines, depending on role requirements and English proficiency.

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Salary Benchmarks for Roles

Uruguayan salaries are typically paid in UYU, with a meaningful Montevideo premium. Levels.fyi’s current Montevideo dataset (last updated 15 February 2026) reports median total compensation for software engineers at approximately UYU 1,665,939/year, with the 25th–75th percentile range roughly UYU 1.18M to UYU 2.4M.  Entry-level software engineer median total compensation is reported around UYU 589,065/year, while senior software engineer median total compensation is reported around UYU 2,355,120/year.

For budgeting, employers should model total employment cost beyond base salary because Uruguay’s statutory employer contributions (12.625%) and the annualized impact of aguinaldo and vacation-salary mechanics can materially shift the “all-in” cost compared to a simple monthly salary comparison.

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Employer of Record vs Legal Entity Setup in Uruguay

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To legally hire employees, a company must

A company hiring directly in Uruguay must be able to operate as a registered employer and execute the full compliance workflow: (1) issue a compliant employment agreement and enforce legal working time limits (8 hours/day; 44/48 hours/week depending on sector), (2) administer annual leave entitlements and ensure leave is granted and paid according to Uruguay’s rules, and (3) run compliant payroll with statutory withholding and contributions.

On payroll, employers must withhold employee contributions and remit employer contributions to the social security system. As a general framework, employer contributions total 12.625% (including retirement, FONASA health insurance, labour reconversion, and the labour credit guarantee fund), while employee contributions range from 18.1% to 23.1% depending on health insurance factors.  Employers must also withhold IRPF on employment income, which is progressive, with rates described as ranging from 10% to 36% for residents.

Uruguay also requires employers to hold mandatory work accident and occupational disease insurance with the State Insurance Bank (BSE) under the relevant framework described in employer guidance.  Hiring through an EOR shifts these registrations and recurring filings to the EOR as the legal employer.

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Cost of Entity Setup

Entity setup in Uruguay is often not the hardest part; the ongoing compliance footprint is. A locally operating entity must sustain local accounting and tax administration, maintain payroll operations capable of handling social security remittances and IRPF withholding, and administer mandatory employee benefits including the 13th salary and vacation salary.  In addition, corporate formation and annual corporate maintenance can include specific taxes such as ICOSA (a control tax on corporations) payable on setup and annually, which adds a predictable cost layer beyond payroll administration.  For many foreign companies, an EOR is used until headcount and long-term commitment justify building the internal payroll/legal capability and absorbing the recurring entity overhead.

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What Hiring Through an EOR Means in Uruguay

An Employer of Record (EOR) in Uruguay becomes the legal employer registered before the Dirección General Impositiva (DGI) and the Banco de Previsión Social (BPS), while the employee works exclusively for your company. You control the employee’s daily responsibilities and performance, but the EOR assumes all statutory employer obligations under Uruguayan law.

Employment in Uruguay is governed primarily by:

• Uruguayan Labour Code and complementary labour laws
• Social Security Law (BPS regulations)
• Income Tax Law (IRPF – Impuesto a la Renta de las Personas Físicas)
• Collective Bargaining Agreements (Consejos de Salarios)
• Occupational Health and Safety regulations

Foreign companies cannot legally employ workers in Uruguay without:

• Establishing a local legal entity or branch
• Registering with DGI for tax purposes
• Enrolling with BPS for social security
• Managing payroll and statutory contributions
• Complying with sector-specific collective bargaining agreements

An EOR provides this complete employer infrastructure without requiring you to incorporate a Uruguayan company.

An EOR in Uruguay handles:

• Labour-compliant employment contracts (Spanish required)
• Payroll processing in UYU
• IRPF income tax withholding
• Social security contributions (BPS)
• Mandatory 13th salary (Aguinaldo) accrual and payment
• Paid leave and public holiday compliance
• Overtime tracking
• Severance and termination handling
• Labour authority coordination
• Work permit and immigration support (if applicable)

This model is ideal for companies seeking to hire in Uruguay while minimizing exposure to local labour courts and statutory benefit obligations.

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Risk Involved in Both Models

Uruguay has strong employee protections and active labour enforcement through the Ministerio de Trabajo y Seguridad Social (MTSS).

Key characteristics:

• Mandatory written employment terms
• Sector-based collective bargaining agreements
• Mandatory 13th salary (Aguinaldo)
• Strict severance entitlements
• Strong union presence in certain industries
• Formal termination documentation requirements

Compliance failures can result in:

• Labour fines from MTSS
• Retroactive social security payments to BPS
• Tax penalties from DGI
• Court-ordered severance compensation
• Reinstatement claims in unfair dismissal cases

Uruguay is generally regarded as a pro-employee jurisdiction, particularly in termination disputes.

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EOR Vs. Entity: When to use What?

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Why an EOR Is the Most Efficient Way to Hire in Uruguay

Uruguay is a stable South American economy with strong sectors in technology services, agribusiness, financial services, and shared service centers. However, hiring is governed by mandatory benefits, collective bargaining obligations, and strict severance rules.

An EOR is not simply a payroll processor. It is the legal employer recognized by Uruguayan authorities, responsible for:

• Labour law compliance
• Collective agreement adherence
• Social security reporting
• Payroll tax filings
• Aguinaldo administration
• Termination execution

This allows foreign companies to operate in Uruguay without assuming direct employer liability.

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#1. EOR Manages Social Security Contributions (BPS)

Employers in Uruguay must register employees with BPS and make statutory contributions.

Contributions fund:

• Pension insurance
• Healthcare coverage (FONASA system)
• Unemployment insurance
• Maternity benefits
• Disability protection

Employer contribution rates are significant and vary by sector, while employees contribute a portion of their salary.

Errors can trigger:

• BPS audits
• Retroactive contribution demands
• Interest penalties
• Administrative fines

An EOR ensures accurate calculation and reporting.

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#2. EOR Handles Income Tax (IRPF) Withholding

Uruguay applies progressive personal income tax (IRPF) rates.

The EOR ensures:

• Correct tax bracket application
• Family allowance considerations
• Monthly withholding compliance
• Annual reporting submissions

Incorrect withholding may result in:

• Tax audits by DGI
• Employer liability for unpaid tax
• Financial penalties

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#3. EOR Controls Mandatory Benefits and Leave Compliance

Uruguayan law mandates:

• 13th salary (Aguinaldo) paid in two installments (June and December)
• Minimum 20 days of annual paid leave (increasing with tenure)
• Public holiday observance
• Overtime premium compensation
• Holiday bonus payments (Salario Vacacional)

Failure to comply can lead to:

• Wage claims
• Labour inspection penalties
• Employee disputes

An EOR ensures:

• Proper Aguinaldo accrual
• Leave and vacation bonus calculation
• Overtime documentation
• Payroll adjustments

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#4. EOR Minimizes Termination Risk

Termination in Uruguay requires:

• Valid legal grounds or severance payment
• Notice period compliance (if applicable)
• Seniority-based severance calculation
• Payment of accrued Aguinaldo and leave

Improper dismissal can result in:

• Court-ordered compensation
• Additional penalty payments
• Litigation exposure

An EOR manages termination documentation and statutory settlement to reduce risk.

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EOR vs. PEO in Uruguay: How to Decide the Right Hiring Model?

A PEO in Uruguay does not replace the legal employer.

Under a PEO model:

• The client remains the legal employer
• The client must register with DGI and BPS
• The client bears collective bargaining compliance risk
• The client assumes termination liability

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Payroll, Taxes, and Monthly Compliance

Monthly payroll in Uruguay is built around three pillars: (1) gross-to-net calculation, (2) statutory contributions remittance, and (3) income tax withholding. Employers remit social security contributions calculated on gross remunerations: employer contributions total 12.625% and employee contributions generally fall between 18.1% and 23.1%, with the components outlined (retirement, FONASA health insurance, labour reconversion, and the labour credit guarantee fund).

Employment income tax (IRPF) is withheld by the employer and applies on employment income under progressive rates described as 10%–36% for resident employees.  Employers also need to operationalize Uruguay’s “extra salary” mechanics—aguinaldo (13th salary) and vacation salary—because they introduce additional payment events and calculation rules beyond normal monthly payroll.

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Salary Structure: Where Most Compliance Issues Begin

In Uruguay, compliance issues usually begin when employers treat compensation as only “monthly base salary” and fail to control (a) overtime, (b) special payments, and (c) termination settlements. Overtime is triggered by exceeding legal or agreed limits and is generally paid with a 100% surcharge (with higher rules on rest days in many regimes), which makes timekeeping evidence and manager approval workflows essential.

Another frequent risk area is underestimating the statutory significance of “extra salary” items. The mandatory 13th salary (aguinaldo) is calculated from remunerative earnings over the applicable period, and vacation salary is an additional payment tied to annual leave enjoyment—both must be handled cleanly in payroll records and settlement calculations.

Termination is the third major hotspot: employer guidance commonly frames dismissal compensation as linked to seniority, with severance described as up to six monthly salaries (a monthly salary per year worked capped at six “units”), and settlements also typically include unused leave, vacation salary, and annual bonus amounts.

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What Monthly Payroll Operations Actually Involve

Monthly payroll operations in Uruguay follow a repeatable compliance workflow. Employers begin by confirming monthly payable elements for each employee (base salary, variable pay, overtime, allowances) and validating working time compliance against the daily and weekly caps applicable to the sector.  They then calculate employee deductions and employer contributions using the statutory rates and components and prepare remittances to the system (retirement and FONASA health insurance included), while withholding IRPF according to the employee’s taxable income and the current progressive framework.

Finally, employers produce compliant payslips, transfer net wages, and retain audit-ready records (time tracking evidence, payroll registers, remittance proofs). Throughout the year, payroll must also schedule and correctly calculate “extra salary” payments—aguinaldo and vacation salary—which means the payroll function must operate not only monthly compliance, but also benefit-event compliance.

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Step-by-Step Onboarding Process With an EOR in Uruguay

Hiring in Uruguay requires tax registration, social security enrollment, and statutory benefit tracking.

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1. Verify EOR Registration with DGI

Confirm valid tax registration and corporate standing.

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2. Confirm BPS Enrollment

Ensure the EOR is registered with social security authorities.

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3. Determine Applicable Collective Agreement

Identify sector-specific salary and benefit requirements.

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4. Validate Salary and Minimum Standards

EOR ensures compliance with:

• Sector wage scales
• National minimum wage
• Collective bargaining rules

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5. Calculate Total Cost-to-Company

Includes:

• Employer BPS contributions
• Aguinaldo accrual
• Vacation bonus (Salario Vacacional)
• Severance exposure
• Payroll taxes

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6. Draft Labour-Compliant Contract

Contract must include:

• Job role and duties
• Salary structure
• Work schedule
• Leave entitlements
• Termination provisions

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7. Register Employee with BPS

Registration must occur upon commencement of employment.

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8. Establish Payroll and Benefit Tracking

EOR sets up:

• Monthly payroll
• Aguinaldo accrual
• Leave and vacation bonus tracking
• Overtime monitoring

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9. Immigration Compliance (If Applicable)

For foreign nationals:

• Work authorization support
• Residency processing assistance

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10. Execute First Payroll

Includes:

• Salary payment
• Social security contributions
• IRPF tax reporting

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11. Ongoing Compliance Management

EOR oversees:

• Monthly tax filings
• BPS reporting
• Labour inspection responses
• Collective agreement updates

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12. Termination and Final Settlement Handling

EOR manages:

• Legal grounds validation
• Severance calculation
• Final payment processing
• Labour authority coordination

Termination and severance disputes are a primary source of employer litigation in Uruguay.

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Build Your Uruguay Team with Bolto EOR

Hiring in Uruguay requires careful management of collective agreements, statutory bonuses, and social security contributions.

Bolto’s Employer of Record model absorbs:

• Labour law complexity
• Collective bargaining compliance risk
• Social security reporting obligations
• Aguinaldo and vacation bonus administration
• Termination and litigation exposure

This allows you to expand into Uruguay without establishing a local entity or inheriting direct employer liability.

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Full Legal Employer Coverage in Uruguay

Bolto becomes the legal employer before:

• Dirección General Impositiva (DGI)
• Banco de Previsión Social (BPS)
• Ministerio de Trabajo y Seguridad Social (MTSS)
• Labour courts

Bolto manages:

• Employment contracts
• Payroll and statutory filings
• Social security reporting
• Collective agreement compliance
• Termination execution

You manage employee performance. Bolto manages legal risk.

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Built for Fast Market Entry and Flexible Exit

With Bolto EOR:

• Hire within weeks
• Avoid entity registration
• Skip BPS and DGI setup complexities
• Exit without liquidation procedures

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Transparent Cost Structure

Bolto provides:

• Clear statutory cost breakdowns
• Visibility into Aguinaldo and severance accrual
• Predictable EOR service fees
• No hidden compliance liabilities

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End-to-End Employee Lifecycle Management

Bolto manages:

• Contract drafting
• Payroll processing
• Social security and tax compliance
• Leave and bonus administration
• Termination handling

You never interact directly with Uruguayan labour authorities.

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Designed for Risk-Controlled Expansion in Uruguay

Uruguay enforces penalties for:

• Social security underpayment
• Failure to comply with collective agreements
• Improper termination
• Tax non-compliance

Bolto enables compliant hiring in Uruguay while shielding your company from direct employer liability exposure.