Castellán

Salary is defined as the economic compensation, regardless of its denomination or calculation method, that the employer must pay to the worker for work performed or services rendered, whether under a written or verbal contract, and that can be evaluated in cash, in accordance with the legislation.

In certain industries or occupations, it is common for part of the salary to be integrated in part with benefits in kind (e.g. housing, food, clothing, transportation). In such cases, it must be ensured that these benefits are appropriate for the personal use of the worker and their family, and provide a fair and reasonable benefit.

Labor costs consist of three main elements:

• Minimum wages: Determined by category according to the sector of activity.
• Additional benefits such as: Christmas bonus (or "thirteenth salary"), Leave (paid vacations), Vacation pay (additional amount for better enjoyment of the vacation), Overtime, Severance pay; and eventual Marginal items (such as tips, commissions, bonuses).
• Tax contributions: Contributions to the pension or social security system.

There are various ways to negotiate salary:

• By time worked: whether monthly, daily or hourly.
• By production: through commissions, piecework or other incentives that ensure at least the achievement of a normal salary for 8 hours of work.
• By mixed system: combining a basic salary by time with an additional percentage based on production achieved after a minimum established.

Salaries can also be established as mentioned above by month (monthly workers) or by hour/day (daily workers), always respecting the minimums prescribed and their adjustments. Companies can only, unilaterally, offer conditions more beneficial than those stipulated in the Agreements.

Salary negotiation

In Uruguay, minimum wages are set by Collective Agreements negotiated in the Wage Councils, tripartite bodies that bring together representatives of workers (unions), employers and the government. Through collective bargaining, these councils establish not only minimum wages, but also job categories, salary adjustments and other benefits.

In the same way, salary adjustments are agreed upon, taking into account mainly the evolution of inflation (past or projected) as the main element, the loss of purchasing power of the salary and the general and particular economic context of each sector.

Decisions of the Wage Councils are made: unanimously, by voting of the parties or by simple majority. In case of no agreement, the Executive Branch has the power to submit a proposal for a vote or resolve by means of a Decree, which has a limited scope only on the salary issue.

Deadline for salary payment

The norm stipulates that salary payment must be made within the first five business days and in no case after the first ten consecutive days of the following month (or fortnight - as the case may be) that must be paid. If payment is weekly, it must be made at the end of the respective week. Salary payment is considered effectively made when it is available to the worker.

Salary in foreign currency

In Uruguay, it is legal to agree on salary payment in foreign currency, for example in dollars, with the process for the application of legal adjustments (conversion to national currency to apply the increases stipulated by the Wage Councils) even being provided.

The update is made when it experiences a depreciation in relation to the official increases established by the Wage Councils.

From a conceptual perspective, it is necessary to convert the salary established in foreign currency to the national currency and then apply the increases stipulated by the official regulations. If, when comparing month by month the amount obtained by converting the foreign currency with the original salary, a negative difference is observed, this should be compensated to the affected worker.

The procedure is as follows:

• The amount in national currency equivalent to the salary in foreign currency that the worker was receiving at the date of the last salary adjustment is determined using the average exchange rate of the month of the last adjustment applied for the conversion.
• To that amount (in national currency) the adjustment stipulated by the Wage Councils is applied. The resulting amount is then converted back to foreign currency using the average exchange rate of the month of the adjustment applied for these purposes.
• If the percentage variation, due to the evolution of the average exchange rate between the month of the last adjustment applied and the month of the adjustment, is equal to or greater than the adjustment stipulated by the Wage Councils, no adjustment is required.
• If the percentage variation of the salary, due to the evolution of the average exchange rate between the month of the last adjustment applied and the month of the adjustment, is less than the adjustment of the Wage Councils, a complementary percentage adjustment must be applied, until matching the percentage of the salary adjustments in pesos.

Employment contract and types of contracting in our legislation

In Uruguay, it is not mandatory for the employment contract to be in writing. However, it is mandatory to register the worker in the Work Control Sheet (Ministry of Labor and Social Security) and before BPS (Social Security Bank). It is considered, however, that the signing of a written contract is a highly recommended business practice, due to its usefulness in facilitating evidence in case of claims, especially regarding agreements between the parties (for example, the specification of a trial period).

With regard to its duration, Employment Contracts can be entered into for an indefinite period, for a fixed term, or subject to a resolutive condition (such as replacement contracts). Depending on the above, the payment of compensation will be required or not when the termination occurs, or the eventual consequences for early termination.

Most common types of contracts and aspects to consider:

• Probationary contract: Allows the employer to assess whether the worker meets the company's requirements for a maximum period of 90 days. If terminated within this period, there is no obligation to pay severance pay.
• Indefinite term contract: It is understood that the hiring is permanent or for an indefinite period. The termination of the relationship by the employer's will entails the obligation to pay severance pay (legally tariffed based on the worker's seniority and remuneration).
• Fixed-term, harvest or seasonal contracts: It is understood to be justified by specific needs, such as a temporary increase in workload or special qualities of the worker. When the contract ends, it is terminated without the need to pay compensation, unless the employer decides to terminate it early, in which case compensation must be paid. The continuous renewal of this type of contract can be interpreted as an indefinite contract.
• Replacement contract: It is used to cover the absence of a regular worker (for example, due to sick leave or maternity leave). It ends automatically when the regular worker returns, without the obligation to pay compensation.
• Internships: The Youth Employment Law promotes the labor insertion of young people, combining employment with education and professional training. This modality offers economic benefits to companies to encourage the hiring of young people under this regulation.
• Disability: Companies with 25 or more permanent workers are required to hire people with disabilities (registered in the National Registry of Persons with Disabilities). This obligation implies reaching at least 4% of the total workforce, promoting effective labor inclusion and establishing concrete measures to ensure accessibility conditions and make the necessary adaptations in the workplace.

What aspects can the parties negotiate in the employment contract?

• Probation period.
• Work schedules (taking into account the hourly limitation of each activity).
• Salary (complying with legal minimums).
• Confidentiality clause.
• Clause relating to the Intellectual Property of the worker's creations.
• Non-competition and/or exclusivity (depending on the position).
• Special benefits or other aspects not included in the regulations.

What issues are non-waivable by contract?

• Overtime (there is a legal limitation on the workday).
• Breaks and weekly rest.
• Paid holidays by law.
• Leave or "paid annual vacations".
• Vacation pay or "amount for better enjoyment of the vacation".
• Christmas bonus or "annual supplementary salary".
• Special leaves (study, mourning, marriage, paternity, etc.).
• Minimum wages (salaries and categories established by sector award).

Employment Promotion Policies

Uruguay promotes the hiring of young people, people over 45 years old, and people with disabilities, offering specific economic benefits to companies that employ personnel in these categories. The objective is to facilitate access and reintegration into the labor market for more vulnerable people, promoting their training and professional development. Companies that hire workers under these conditions can receive subsidies for the payment of special social security contributions. The amounts and percentages of the subsidies vary according to the contracting modalities established by the applicable law.