Uruguay: Employment Law – The Basics

Last Updated: 20 June 2017
Article by Matilde Campiotti and Mark Teuten

The Uruguayan labour force is the best educated in Latin America, with many English speakers and well-qualified professionals in many fields.

While Uruguay's labour market is characterized by strong protections, it is still an attractive place in which to open business, particularly for regional operations.

The applicable legal norms for hiring workers in Uruguay are set out in the Constitution, specific Laws and Decrees, and regulations from the Ministry of Labour.

Much of Uruguay's labour legislation is based on international norms adopted by the International Labour Organisation (ILO). These norms establish a set of guarantees to protect employees, which at the same time act as a limit to the rights of the employer.

Our country is an active member of the ILO, which itself seeks to defend employees' rights. Most of, Many of the regulations and court judgments handed down are in accordance with conventions adopted within the framework of the ILO, which are designed to establish minimum rights for employees.

1. FORMAL REQUIREMENTS TO HIRE AN EMPLOYEE.

There are no formal requirements to establish an employment relationship. As a matter of good practice a written contract should be signed, in order to be clear about the rights and obligations of each party, which can be essential for the employer in the event of a dispute arising.

In principle employment contracts are for an indefinite period of time. However, the parties can agree on a specific period. It is common practice to have a probation period of up to 3 months to see if an employee is suitable to the job.

It is obligatory to register the employee for social security purposes (BPS) and in the list of employees, which is open to inspection by the Ministry of Labour (MTSS) at any time. Employees must also be insured at the State Insurance Bank (Banco de Seguros del Estado -BSE) in order to cover any illness or workplace accident.

2. BENEFITS TO WHICH ALL EMPLOYEES ARE ENTITLED.

Employees are entitled to:

Payment of salary. Under a new law which has just come into force all payments must be made by means of a financial instrument, such as a cheque or bank transfer. Except for minor exceptions, cash payments are no longer allowed.

The Ministry of Labour fixes a minimum national salary. Additionally, each area of business activity has its own minimum salary for workers in that field.

These minimum salaries are set out in collective agreements negotiated in Wage Panels ("Consejos de Salarios"), made up of employers, employees, and government representatives.

Salaries can be paid monthly, weekly or daily.

Working hours. The normal working day is fixed at 8 hours and 48 hours per week and 44 hours for retail workers.

The parties can agree to work less, but not more.

Overtime. This must be paid at double the normal rate when it is on a working day. When it is a non-working day the rate is two and a half times.

Aguinaldo. This is a legally required bonus payment equal to one month's salary, known as a 13th salary. It is payable in two instalments, part in June and part in December.

Paid holidays. Every employee is entitled to 20 days of paid holiday every year. For every 5 years of work with the same employer they are entitled to 1 additional day per year.

During the first year of employment the employee is not entitled to any holiday – during that first year they accumulate the right to take holiday in the following year.

Other special situations. Employees are entitled to additional leave (paid) as follows:

  • Maternity leave (12 weeks)
  • Paternity leave (3 days)
  • Marriage Leave (3 days)
  • Study leave for university students ( 6, 9 or 12 days per year depending on the number of hours worked)
  • Leave for family death (3 days)
  • Leave for union activities – depends on the collective agreement).

Payment of holidays. All employees are entitled to paid holidays i.e. in addition to their right to 20 days of paid holiday leave, they must be given an additional payment, equivalent to 100% of their take home pay for those 20 days.

The idea being that they need their normal salary to pay their basic needs and this additional money is to enable them to actually take a holiday.

3. FORMS OF TERMINATING EMPLOYMENT.

Apart from fixed term contracts, when the relationship is terminated by the employer the employee is entitled to an indemnization equivalent to one month's salary for every year worked, up to a maximum of 6 months' salary. (The calculation includes holiday pay, other benefits, commissions and aguinaldo).

The exceptions to this are in cases of serious misconduct (but this can be very difficult to prove), seasonal workers and those on probation.

Special additional payments on termination. Additional payments are due in some cases e.g. firing of a pregnant woman, firing for illness or after a work accident or for union related activity.

4. UNIONS AND THE RIGHT TO STRIKE.

Uruguay has a culture of collective negotiation. Article 57 of the Constitution contains the right for employees to participate in collective action, the right to strike and the right to organize unions.

Employees have the right to take part in union activities and become union leaders. Employers cannot take any action to prevent an employee from joining or leaving a union.

As mentioned above, there are Wage Panels which set minimum salary levels. Additionally, unions are entitled to negotiate working conditions with employers.

One aspect of workers rights which has been a source of continued discussion is whether employees are entitled to take control of a work place away from the employer and occupy it, as an extension of the right to strike.

According to the Trade Union head office, they are prepared to negotiate a protocol governing conflicts so that a definite period of time must go by before a strike is declared. But they do not seem prepared to give up the possibility of occupying the work place.

5. LEGAL PROCEEDINGS IN EMPLOYMENT MATTERS.

Uruguay has special employment courts with special procedures for employees, which are much quicker than other court cases, and is free for employees.

In general, the burden of proof is on the employer to refute a claim, rather than for an employee to prove a claim.

Prior to filing any claim there is an obligatory mediation stage at the Labour Ministry (MTSS).

CONCLUSION.

Uruguay's legal regime is very protective of employee legal rights in general. For employers, these rights can represent a significant burden.

This means that employers are careful about hiring and will often look at alternatives to an additional employee, such as contracting out non-essential functions, using short fixed term contracts, and/or hiring people as independent contractors.

Some view Uruguay's labour regime as a barrier to employment, and hence a cause of unemployment by themselves. Against this, the rate of unemployment in Uruguay is now quite low (around 8.1%) on a historical basis.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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