Introduction to Payroll in Uruguay

So, you are looking to hire an employee or contractor in Uruguay. It makes sense. With stable economic equality, the Uruguayan workforce is growing — both in quantity and quality.

However, the real struggle is ensuring that your payroll is compliant with the labor laws that regulate these workers. It can be tricky, especially with top talent located all over the world. That is where we come in.

We are here to simplify the payroll process in Uruguay. Keep the process as smooth as possible with a payroll company like Skuad.

Payroll Process in Uruguay

The best way to streamline your payroll process is by creating standard practices. Some factors are ever-changing, like a country’s tax rates or statutory policies. Yet, there are still ways to organize your company. This will help your staff manage the payroll. It can be broken up into three stages:

Pre-Payroll Phase

This first phase is crucial. There are several facets to your business that you can consider standardizing to simplify the payroll process later on.

Setting up the Organization

The first step to easily paying your team members in Uruguay is by setting up your organization. What is it that you want your business to be known for? Design your company's policies with your core message in mind. This will set the tone for your team.

• Business Profile – You will need to properly register your business in Uruguay. This will include listing on the National Trade Register and getting reviewed by the Inspector General of Employment and Social Security.
• Work Location – Establish a work location within Uruguay. If there are multiple locations, you will need to check the laws regarding each region.
• Leave Policy – Whether due to sickness, a holiday, or another reason, your employees will be entitled to certain leave periods. It will be important to set this policy up ahead of time, because it will be necessary when establishing payroll.
• Attendance Policy – Another important policy to define is attendance. Will your employees have set schedules or flexible hours? Consider if they will be paid hourly or with a set salary. Also, decide how they should log their working hours and leave. One option is to use Biometric devices to ensure accurate attendance data.
• Statutory Components – Review the statutory components for employing under Uruguayan law. These laws will clarify worker classification, elaborate payroll deductions, and establish minimum employee benefits.
• Salary Components – With team members all over the world, establish salary components that keep everyone in mind. Some of the components to decide are deductions, benefits, wages, and allowances.
• Pay Schedule – Specify how often and when you will pay your employees. Consider this: In Uruguay, employees are usually paid on a bi-weekly or monthly basis. You should set a standard schedule with set dates each month.
• Employee Information – You will need to gather essential information from your employees, such as documents for government records.

Payroll Calculation Phase

After you have gathered all the necessary information, it is time to calculate payroll. The process will change depending on what protocol you use. It’s best to work with a payroll system that will collect all the important data and calculate your team’s paychecks by considering the relevant taxes, deductions, and withholdings.

At last, all your hard work has paid off. The calculations are complete. And you are still compliant.

Post-Payroll Phase

Just because the calculations are complete doesn’t mean that you are done with payroll. There are some post-payroll steps to take:

• Salary Payments – Foremost, your employees need to receive their salary payment. You will send your calculation reports to your bank so they can disburse the payments. Another option is to use payroll software that has direct deposit built in.
• Payroll Accounting – Remember to record your team’s salaries as you go through each pay cycle. Payroll is a major expense, and this record can be consulted if any issues arise.
• Payroll Reporting and Compliance – Your organization will send all deductions to the proper agencies. Be aware of the due dates, so you remain compliant.

See how Skuad can help your company manage the payroll process.

Payroll Processing in Uruguay

Ensuring your Uruguayan team members get paid properly can be overwhelming. But do not fear. It can be simplified.

Payroll Processing Company in Uruguay

A payroll processing company like Skuad can get your payroll in Uruguay up and running in no time. Contact us to see how we can help your business grow.

Payroll Management in Uruguay

A payroll management service will retain records for each of your employees, as well as comply with the labor laws in Uruguay. These records include employees’ gross and net salaries, incentives, and a log of payslips.

Payroll Compliance in Uruguay

To be compliant means that your company must meet the mandatory requirements that Uruguay has placed in the labor laws. These include but are not limited to employee salary and benefits, taxes, and social security.

Payroll Components in Uruguay

The largest part of staying compliant is to ensure that your payroll components meet or exceed the minimum requirements in Uruguay:

Compensation

Employees in Uruguay shall be compensated in Uruguayan pesos (UYU). There is a minimum wage of at least UYU 19,364.00 per month, which converts to about US$465.

Working hours

A standard workday in Uruguay should not exceed eight hours, unless under specific provisions. A workweek is typically 44 hours per week.

Overtime laws

If an employee works more than the standard workweek, they can work up to eight more hours as overtime. Overtime pay should be calculated at twice the employee’s normal salary. If there is overtime on a holiday, it will be two-and-a-half times the rate of normal pay.

Social Security

In Uruguay, there are four social security programs to pay into:

• Health Insurance Contribution
  ‍Employers: 5%
  Employees: 3–8%

• Pension Fund Contribution
  ‍Employers: 7.5%
  Employees: 15%

• Labor Re-Conversion Fund
  ‍Employers: 0.1%
  Employees: 0.1%

• Labor Credit Guarantee Fund
  ‍Employers: 0.025%

Employees do not pay into the Labor Credit Guarantee Fund.

Sick Leave

All employers should give sick leave to their employees. The minimum required is for the first three days of sickness to be paid in full. After that, the days of sickness will only be paid at 70% of the employee's regular wage.

Parental Leave

When a woman is pregnant, she is entitled to 14 weeks of maternity leave. This can start six weeks before the delivery date. The entirety of maternity leaves is paid through the Ministry of Labor and Social Welfare.

In contrast, parental leave is only 13 days. Of these days, 10 days will be paid through the social welfare office, and the employer pays for the other three days.

Public Holidays

There are several observed holidays in Uruguay, but the government only requires five as mandatory paid time off:

• New Year’s Day (January 1)
• Labor Day (May 1)
• Constitution Day (July 18)
• Independence Day (August 25)
• Christmas Day (December 25)

If an employee works on these days, they must be paid overtime.

Here is a list of additional holidays that are unpaid public holidays:

• Carnival (the Monday and Tuesday before Ash Wednesday; in February or March)
• Maundy Thursday (Thursday before Easter Sunday)
• Landing of the 33 Patriots Day (April 18)
• Never Again Day (June 19)
• Day of the Races (October 12)
• All Souls Day (November 2)

These are not considered mandatory, but your employees would appreciate you considering them.

Payroll Taxes

You will be in charge of taking out your employees’ income tax from their regular paychecks. The Uruguayan resident rates are below:

• Up to UYU 409,080: 0%
• UYU 409,080–584,400: 10%
• UYU 584,400–876,600: 15%
• UYU 876,600–1,753,200: 24%
• UYU 1,753,200–2,922,000: 25%
• UYU 2,922,000–4,383,000: 27%
• UYU 4,383,000–6,720,300: 31%
• Over UYU 6,720,600 – 36%

There are differences depending on how the employee files and if they are a non-resident.

Other Laws

On top of these standard payroll components, Uruguay has a few more:

• Employees must receive at least 20 days of paid vacation annually. After five years, the employee will receive an additional day. This will continue each subsequent year until the employee has 25 days of annual paid vacation.
• Uruguayan law entitles employees to other types of leave, like education leave, marriage leave, bereavement leave, adoption leave, and studies leave.
• Employers are to pay 13th salary, or Aguinaldo, to all employees. This is paid half in June and half in December.

We know—this is a lot to take in. However, we are here to help you. Skuad can clarify any payroll components for your Uruguayan employees.

Conclusion

Payroll in Uruguay has its challenges, just as it does in any other country, but it is not impossible. Besides using a payroll processing company, you have other options. One, Uruguay internal payroll, entails creating your own subsidiary in Uruguay. However, it can be difficult to establish.

Instead, check out how Skuad can help you. We will ensure that your organization remains compliant and that your team is paid in a timely manner.