How to use an Employer of Record in Uruguay

Uruguay consistently ranks highly on many factors, including political stability, economic equality, and human development indicators in South America — all of which make Uruguay a great base for remote workers. Tapping into Uruguay’s vibrant labor market is a viable option for employers who are looking to expand operations in Latin America.

But, it can be challenging to hire employees in Uruguay. You’ll have to create a local entity in the country, file for employment permits, and build a system to manage payroll and stay compliant with local regulations. International hiring is a time-consuming and expensive process. Unless… you partner with an employer of record who can do the hard work for you.

An employer of record (EOR) legally hires employees on your behalf and handles every aspect of the process — employment contracts, onboarding, benefits, taxes, payroll, data security, compliance, and more.

This article will teach you how to use an EOR in Uruguay by explaining how they work, how to choose the right partner, and how to manage employees in Uruguay after you’re set up to hire with an EOR.

Six steps to hiring employees in Uruguay using an employer of record

There are hundreds of EORs you can partner with. How do you figure out if an EOR has the infrastructure to support you as you hire international employees? Follow these six steps to find the right EOR for your business.

Step 1: Weigh up the pros and cons of each potential partner

Make a shortlist of the features you want in a potential employer of record, and use that as a checklist for vetting potential partners. Some features you could look for include:

• A local entity authorized to hire in Uruguay

• Payroll services for paying employees and contractors

• Assistance with issuing contracts to employees

• Legal support with navigating Uruguayan labor laws

• Onboarding support for new employees, etc.

Step 2: Take the time to select the most appropriate EOR service provider 

EOR providers often use entities owned by third parties because it's convenient. But you may end up paying more because those third-party companies can end up changing prices at will. There’s also no guarantee that your data will stay safe.

EOR partners that own their local entities can guarantee reasonable fees and better security for your data. Learn more about the difference between owned-entity and third-party providers and what it means for your business. 

Step 3: Check the reviews, testimonials, and coverage of your shortlist of providers

Nothing can give you a better overview of an EOR’s service quality than the reviews and testimonials by their existing customers, especially from those in your niche. Make sure you check out the company website for client testimonials, third-party review sites, and online press coverage to get an understanding of how the EOR operates and whether the company is the right fit for you.

Step 4: Make sure that the EOR solution for Uruguay will provide a best-in-class employee experience

An EOR should be able to pay your employees’ salaries on time, respond to their questions, provide explanations for any taxes withheld, and generally provide a seamless experience to your employees. The EOR acts as the face of your company, so they must treat your employees well.

Step 5: Work with your partner to make sure you always provide a fair and equitable compensation package 

According to Payscale, a staff software engineer in Uruguay earns $40,000 annually while the same role in San Francisco would cost roughly nearly five times more at $190,000!

Salaries for remote roles factor in the local cost of living, market rates, and your desired skill and experience level. An employer of record can help you figure out competitive rates for the roles you’re hiring for without breaking the bank. Additionally, you should be able to work with your partner to offer a modern and locally compliant benefits package that can attract top talent. 

Step 6: Make sure your partner will guard your intellectual property and maintain data security for your business

Check out the EOR's security certifications (SOC 2, GDPR, etc.) to see if they have strong protections in place for your data. Likewise, EOR contracts should transfer any intellectual property your employees produce to your company to prevent litigation over invention rights, etc.

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What are the benefits of using an employer of record in Uruguay?

Can you set up a local entity and hire employees without using an employer of record? Of course, you can! But it’s likely to be a costly affair and can take you months. Not to mention the headache of dealing with compliance risks and managing HR processes involved in hiring, paying, and managing your remote team.

At the end of the day, there’s always the possibility that you’ll overlook some tiny detail that can attract hefty fines for your business.

An employer of record does the hard work needed to hire employees in Uruguay, such as:

• Maintaining a local entity authorized to hire in Uruguay

• Providing a system for paying employees and contractors

• Assistance with understanding and complying with Uruguayan employment laws

• Onboarding your new employees quickly

• Managing terminations compliantly

• Issuing contracts to employees

• Protecting your intellectual property and internal data, etc.

An employer of record hires your employees on paper and does all the paperwork needed so that your new employees can start working for you in days.

How much does it cost to use an EOR in Uruguay?

EOR costs vary depending on the kind of services offered, the number of workers you want to hire, and where they are based. Generally, costs range from $599 to $2,000 per employee per month.

The older, well-established EORs tend to charge enterprise rates. While these companies may support several countries, they may add on hidden costs that can as a surprise to you. Newer EORs may charge less. However, they may not have the same service quality or robust data security measures in place. Besides, they may be reliant on third parties to offer their EOR services, which can expose your company to legal and regulatory risks.

In contrast, Remote offers everything you need to build a team of international employees: payroll, localized benefits, compliance, reliable support, and high-level security that’s SOC 2 and GDPR-compliant. All, for an affordable, flat rate, with no hidden fees or surprise costs.

Don’t take our word for it: here’s a detailed comparison between Remote and other EOR providers on the market.

Hiring in Uruguay

Employment in Uruguay is regulated by the Constitution and International Labor Organization statutes, to which Uruguay is a signatory.

Getting acquainted with how these labor laws work in practice will help you treat your employees as the law provides so that your company can avoid crises with the authorities. 

Remote’s guide to hiring in Uruguay explains the Uruguayan labor landscape in detail and explains taxes, minimum wages, remuneration, benefits, etc.

Employment contracts and agreements in Uruguay

Employment agreements can either be verbal or written (although it’s best to have contracts in writing in case litigation arises in the future) and should include:

• working hours

• job role and description

• employee benefits

• salary

• terms of termination and notice period

Labor compliance in Uruguay

Uruguay was the first nation to adopt an eight-hour working day. That employee-first culture continues today, and employment courts will generally side with an employee’s assertions unless you have sufficient evidence to the contrary.

It’s best to proactively comply with labor standards, treat employees respectfully, and avoid getting entangled with the authorities. Some of these labor standards demand that:

• Working hours be limited to eight hours daily and 44 to 48 hours per week.

• Overtime work must be paid for accordingly.

• Private employers with at least 25 employees must hire workers with disabilities whenever they meet all the conditions for employment.

• Employees must be paid vacation benefits equivalent to their normal wages.

• Workers must be paid a supplementary 13th-month salary split half-and-half in June and December.

• Employers are to provide a safe, conducive working environment with adequate protection from injuries.

Payroll and payroll taxes in Uruguay

Employee income and payroll taxes are capped at 36% and 23.1% respectively.

Employer payroll contributions cover health insurance (5%), Uruguay’s Labor Re-conversion Fund (0.1%), pensions (7.5%), and the Labor Credit Guarantee Fund (0.025%) for a total of 12.625%.

Employment benefits and compensation in Uruguay

Uruguayan law demands that you provide basic benefits to your employees. Remote can help you go above and beyond to offer perks that will promote better work-life balance and help retain your employees for longer.

Maternity and paternity leave

Expectant mothers are entitled to 14 weeks of paid maternity leave, with benefits paid by social security.

Parental leave lasts for 13 days, with 10 of those paid for by the government and the rest by the employer.

Vacations and public holidays

Employees are entitled to 20 days of paid leave per year, which increases to 21 days in the fifth year of employment. An additional day of vacation is added every four years until it maxes out at 25 days off per year.

Healthcare and sick leave

Employers are required to pay an employee’s full wages for the first three days of an illness, following which sickness benefits will be paid by social security. Workers are entitled to an entire year of sick leave if the need arises.

Other benefits Remote can help you roll out

Remote’s founding philosophy is built around helping visionary businesses hire anyone across the world. Part of that is paying employees and international contractors well and offering them world-class benefits, no matter where in the world they’re located.

Beyond the basics required by Uruguayan law, Remote can help you create an employee-first culture with benefits like:

• Localized health insurance

• Dental and vision insurance

• 401k retirement accounts

• Life insurance

Download our global benefits guide for insights on how to develop an equitable benefits plan for your distributed team.

Severance pay and employee terminations in Uruguay

Employers can dismiss employees at will as long as notice is given and severance payments are made. There is no requirement to make severance payments if an employee is dismissed for a just cause.

Fixed-term workers who’re fired before their contract is due to expire must be paid any salaries due for the rest of the contract period. Full-time employees are entitled to a month’s pay for every year worked, capped at six months’ pay.

What are the risks of employee misclassification in Uruguay?

Uruguay takes workers’ rights seriously and maintains a network of employment courts designed to resolve labor disputes quickly and at no cost to an employee. Under the Uruguayan regime, the burden of proof lies with the employer and if you’re found to have misclassified an employee, you may be fined or prosecuted.

Remote’s global employment experts can help you classify your workers correctly so that you won’t have to worry about the risks of misclassification.

Get started with an employer of record in Uruguay

If you want to expand globally and recruit team members across the world, you'll have to open an entity in the country you want to hire in. You'll have to comply with labor laws and establish HR processes for onboarding, paying, and managing your employees.

But there's no need to be overwhelmed. The right employer of record can make it easy and safe to hire employees in Uruguay and beyond.

Remote’s global HR platform has all the infrastructure needed to build a remote team: payroll, benefits, compliance, and reliable security that keeps your company’s internal operations and intellectual property safe.

Essentially, Remote offers access to a team of global employment experts that can provide case-by-case guidance on scaling your remote team, hiring and paying your employees, granting benefits, and dismissing employees without breaking the law.

Remote makes international hiring quick, easy, and safe. Ready to start onboarding new team members in Uruguay? Get started with Remote and make your global expansion dreams come true.

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