How do you terminate an employee in Uruguay in 2026?
Pay the tariff and you can let a monthly-paid employee go without giving a reason: 1 month of total pay for every year or part-year worked, with the bill capped at 6 months. Uruguay sets no statutory notice period, so the severance cheque is the whole obligation.
· Uruguay guide
Illustration · Montevideo, Uruguay
You can dismiss a monthly-paid employee in Uruguay without giving a reason. There is no just-cause test to pass. (Ley 10.489)
You pay tariffed severance instead. The rate is 1 month of total pay for each year or part-year worked. The total is capped at 6 months.
Uruguay sets no statutory notice period. You do not have to warn the employee in advance. A bill before the Senate would change that, but it is not law yet.
Day-workers paid by the shift follow a separate tariff. They earn 25 days of pay per year worked, capped at 150 days.
How is severance pay calculated in Uruguay?
Monthly-paid employees earn 1 month of total pay for each year worked. A part-year counts as a full year. The total is capped at 6 months.
Severance is based on total pay, not base salary alone. It is due on the last working day. (Ley 10.489)
Severance pay (indemnización por despido) for monthly-paid staff is set by Ley 10.489 and the MTSS common dismissal rules. The headline figure is one month of total remuneration for each year or fraction of a year of service. Because a fraction counts as a whole year, an employee with two years and one month of service is owed three months of pay.
The severance tariff for monthly staff
| Completed service | Severance owed |
|---|---|
| Up to 1 year (any fraction) | 1 month total pay |
| 3 years | 1 month total pay times 3 |
| 6 years | 6 months total pay (the cap) |
| 10 years and over | 6 months total pay (the cap) |
The maximum a monthly-paid worker can claim is 6 months of pay, no matter how long they served. Once an employee passes six years, extra service adds nothing to the severance figure. The calculation runs on total remuneration, which includes the prorated thirteenth-month salary (aguinaldo) and accrued holiday pay.
What sits on top of severance
Severance is not the only line on a final settlement. The thirteenth-month salary (aguinaldo) is mandatory in Uruguay and is paid out for the part of the year already worked. Unused annual leave is paid in cash. The vacation bonus (salario vacacional) is also settled. These are separate amounts, owed whether or not the employee receives severance.
Do you need a reason to dismiss someone in Uruguay?
No. Uruguay runs a free-dismissal system. You can end a monthly contract without stating a cause, as long as you pay the tariffed severance.
There is also no statutory notice period to serve first. The severance payment replaces the warning other countries require. (Parlamento)
Uruguay does not require an employer to justify a dismissal. The employer may end the contract and pay the set severance figure, and that closes the matter. There is no unfair-dismissal claim to defend in the way the UK or Germany would recognise, because the law does not test the reason behind the decision.
There is no statutory advance-notice period either. You are not required to warn the employee a set number of days or weeks before the last day. In practice many employers still give a short heads-up, but the law does not set a figure.
A change is being discussed
A bill before the Senate would introduce a duty to justify dismissals and a short advance-notice requirement, drawing on the unratified ILO Convention 158. As of June 2026 it remains a proposal, not law, so the free-dismissal rule still stands. Watch the Parlamento record for movement before relying on the current position long term.
Where free dismissal does not apply
Free dismissal does not cover everyone. A dismissal that is really a reprisal, for example against a pregnant worker, a union representative, or someone who reported wrongdoing, can be challenged as an abusive dismissal (despido abusivo) and can carry damages above the standard tariff. The protection comes from the courts and special statutes, not from a general just-cause test.
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Confirm the worker category
Check whether the employee is monthly-paid or a shift-paid day-worker. The two follow different severance tariffs, so this decides which calculation applies.
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Check for protected status
Make sure the dismissal is not really a reprisal against a pregnant worker, a union role, or a whistleblower. Those cases can become an abusive dismissal with damages above the standard tariff.
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Calculate the severance tariff
Work out the months or shifts owed for the years served, apply the cap, and run the figure on total pay rather than base salary alone.
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Add the other terminal sums
Settle the prorated thirteenth-month salary, unused annual leave, and the vacation bonus. These are owed on top of severance.
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Pay on the last working day
Clear the full settlement at termination and issue the paperwork. Getting the figures signed off before the last day avoids disputes over timing.
How does severance work for day-workers in Uruguay?
Day-workers paid by the shift (jornaleros) follow their own tariff. They earn 25 days of pay for each year worked, capped at 150 days.
No severance right arises until the worker has clocked 100 days. Below that, nothing is owed on dismissal. (Ley 10.570)
Uruguay splits its severance rules by how the worker is paid. Monthly staff follow the one-month-per-year rule. Day-workers paid by the shift (jornaleros) fall under Ley 10.570 and a tariff counted in shifts (jornales).
The day-worker tariff
| Question | Answer |
|---|---|
| Rate per year worked | 25 days of pay (where 240 shifts are completed in the year) |
| Maximum payout | 150 days of pay |
| Minimum to qualify | 100 days worked before any right exists |
The eligibility floor matters. A jornalero who has worked fewer than 100 days has no severance right at all. Once past that threshold, the worker earns the per-year tariff up to the 150 days ceiling. As with monthly staff, the aguinaldo and any unused leave are settled on top.
Getting the worker category right is the first job on any Uruguay dismissal. The same headcount can hold both monthly staff and shift-paid workers, and the two tariffs produce very different bills.
What else must you pay on a Uruguay exit?
The thirteenth-month salary (aguinaldo) is mandatory. You pay the prorated share for the part of the year already worked.
Unused annual leave is paid in cash. Uruguay grants at least 20 days of paid leave a year, with one extra day from the fifth year of service.
A monthly-paid employee is owed 1 month of total pay for each year or fraction worked, up to a ceiling of 6 months. The thirteenth-month salary and unused leave are settled on top, on the last working day.
The mandatory thirteenth-month salary
Uruguay requires a thirteenth-month salary, the aguinaldo, under Ley N.º 12.840. It equals one-twelfth of the cash wages paid over the year. During normal employment it is paid in two parts, one by the end of June and one in the days before 24 December. On termination, you pay the share earned up to the last working day.
Annual leave and the vacation bonus
Workers earn a minimum of 20 days of paid annual leave a year under Ley 12.590. Leave rises by one day from the fifth year of service, and by a further day every four years after that. Any unused leave is paid out in cash on exit. A vacation bonus (salario vacacional) is also owed; the exact statutory value is not settled across official sources, so we calculate it case by case rather than quote a single figure here.
Protected categories
Some dismissals carry extra exposure even under free dismissal. Letting someone go because they are pregnant, a union representative, or a whistleblower can be treated as an abusive dismissal and can attract damages above the standard tariff. These protections come from special statutes and the courts. Teamed flags any dismissal that touches a protected category before it goes ahead.
Can you agree a mutual exit in Uruguay?
Yes. An employer and an employee can agree to end the contract by consent. A written agreement records the terms and reduces the risk of a later claim.
Mutual exits still settle the aguinaldo and unused leave. The parties can also agree an amount above the legal minimum.
A mutual exit (egreso por mutuo acuerdo) is a recognised way to end employment in Uruguay. Both sides agree the last day and the money owed, and sign. It is useful where you want certainty rather than relying on the standard tariff alone.
Typical components of a Uruguay mutual exit:
- The agreed final figure, which usually starts from the statutory severance the employee would otherwise receive
- Prorated thirteenth-month salary, the aguinaldo earned up to the last day
- Unused annual leave, paid in cash at the daily rate
- The vacation bonus, settled alongside the leave
- Any agreed top-up, where the parties want to add to the legal minimum to close cleanly
- A clear release, recording that the agreement settles the open items
Uruguay does not require the employee to take independent legal advice before signing. Offering it is still good practice and makes the agreement harder to unpick later. Get the document signed on or before the last working day so there is no dispute about timing.
On final-pay timing, Uruguay does not fix a single statutory deadline for paying every terminal sum after the last day. Severance and the settled amounts are due at termination. In practice Teamed clears the final payroll on the payroll run for the month of exit.
How Teamed runs Uruguay terminations
Teamed is your legal employer of record in Uruguay. The cost is from $599 per employee per month, with zero FX mark-up in any currency. Every Uruguay dismissal runs through our local operations team.
We work out the worker category, the severance tariff, the aguinaldo share, and the leave payout. It all runs on one platform. The decision on who to let go is always yours.
Real HR and legal experts handle your Uruguay hires, from the first offer letter through every monthly payroll run and BPS contribution. An actual person, not a chatbot or a pooled queue. There is no setup fee and no exit fee, and employer cost passes through at cost, itemised on every invoice.
The split of responsibilities under EOR for Uruguay terminations:
| What Teamed handles | What the client decides |
|---|---|
| Confirming worker category and the right severance tariff | Whether to end the contract, and on what timeline |
| Monthly-staff severance at 1 month per year, capped at 6 months | Whether to offer terms above the legal minimum |
| Day-worker severance at 25 days per year, capped at 150 days | Communication with the wider team |
| Prorated aguinaldo and the leave and vacation-bonus payout | The shape of any mutual-exit offer |
| Flagging any dismissal that touches a protected category | Reference wording and confidentiality terms |
| Final payroll: severance, aguinaldo, leave, IRPF and BPS lines | Commercial terms of any settlement |
Uruguay has no statutory notice period and no just-cause test, so the severance figure is the live number on every exit. Get the worker category and the cap right and the bill is predictable. Teamed runs that calculation on every dismissal.
EOR, contractors, and entity employees all live on one platform. An employee hired through Teamed's Uruguay network can graduate to your own Uruguayan entity when headcount makes that the right call, until it isn't. Run the Crossover Calculator to see when the model flips. Start from the Uruguay hiring overview.
Key sources: MTSS Despido régimen común, Banco de Previsión Social (BPS), and the Ministerio de Trabajo y Seguridad Social.
Frequently asked questions
Do you need a reason to dismiss an employee in Uruguay in 2026?
No. Uruguay runs a free-dismissal system. An employer can end a monthly contract without stating a cause, as long as the tariffed severance is paid. There is no general just-cause test and no unfair-dismissal claim of the kind the UK or Germany recognise. A bill before the Senate would introduce a duty to justify dismissals, but as of June 2026 it is not law.
How much severance is owed in Uruguay?
Monthly-paid employees are owed 1 month of total pay for each year or part-year worked, capped at 6 months. The calculation runs on total remuneration, not base salary alone, and is due on the last working day under Ley 10.489. Once an employee passes six years of service, extra time adds nothing to the severance figure.
Is there a notice period for termination in Uruguay?
No. Uruguay sets no statutory notice period for dismissal. You are not required to warn the employee a fixed number of days in advance; the severance payment stands in for the warning. Many employers still give an informal heads-up, but the law does not set a figure. A pending Senate bill would add a short advance-notice requirement, but it has not passed.
How is severance different for day-workers in Uruguay?
Day-workers paid by the shift (jornaleros) follow Ley 10.570. They earn 25 days of pay for each year worked, where 240 shifts are completed, capped at 150 days. No severance right arises at all until the worker has clocked 100 days. Below that threshold, nothing is owed on dismissal.
Do you still pay the thirteenth-month salary on termination?
Yes. The thirteenth-month salary (aguinaldo) is mandatory in Uruguay under Ley N.º 12.840 and equals one-twelfth of cash wages paid over the year. On termination you pay the share earned up to the last working day. Unused annual leave, of at least 20 days a year, and the vacation bonus are settled in cash on top of severance.
The Uruguay mistake we see most is treating free dismissal as free. It is not. There is no reason to prove and no notice to serve, but the tariffed severance is owed in full, and the cap only helps once someone has served more than six years. Get the worker category wrong and the bill swings hard.
Uruguay lets you part ways without a reason. The catch is the cheque, not the paperwork.
You owe 1 month of pay per year for monthly staff, capped at 6 months.
No statutory notice. No just-cause test. Just a severance figure that has to be exactly right.
Know the number before you start the conversation.
