How to Run Payroll in Uruguay: Employment Taxes & Setup

Milani Notshe

Research Specialist

Last Updated

February 13, 2026

In This Guide

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Running payroll in Uruguay involves many moving parts before your team sees money land in their accounts. Each month you need to calculate gross-to-net correctly, apply statutory withholdings and employer contributions, issue compliant payslips, plus file and remit on schedule. If anything slips through the cracks, you could face penalties, back-pay exposure, and unnecessary friction with your people.

If you’re hiring in Uruguay, whether you’re building a local presence or expanding your global footprint, this guide is for you. We’ll walk through the choices and compliance requirements that have the biggest impact on your speed and risk, from entity vs. no-entity hiring to worker classification and the statutory bodies you’ll interact with along the way. By the end, you’ll know exactly what to expect and how to keep payroll running smoothly, wherever you’re hiring.

Key Takeaways

Payroll cycle: Employers in Uruguay typically process payroll on a monthly basis.

Tax filing: Monthly filings and remittances for personal income tax (IRPF) withholdings and social security contributions are submitted to the BPS and DGI.

Employer taxes: Employers contribute to mandatory social security programs through the BPS, including pension, health, and other statutory funds.

Tax year: Uruguay follows the calendar year for income tax and payroll-related reporting.

Payroll processing methods: Payroll is usually managed through electronic payroll systems integrated with BPS/DGI platforms or outsourced to local payroll providers.

How to Choose Your Payroll Structure in Uruguay

Expanding into Uruguay? Building a compliant payroll setup involves much more than simply paying salaries. You’ll be responsible for employment compliance, monthly tax and social declarations, and mandatory benefits. Even small delays in filings or payments can lead to real penalties.

You have several operating models to choose from to make this easier. The right one depends on your legal footprint, your appetite for risk, and how quickly you need to start hiring. Let’s break down the main options and when to use each.

1. No Local Entity in Uruguay: Use an Employer of Record (EOR)

If you don’t yet have a legal entity in Uruguay, an Employer of Record is usually the fastest and lowest-risk way to hire. An EOR becomes the legal employer on paper, provides locally compliant employment contracts, and manages payroll under local regulations, while you continue to direct the work and manage performance.

This model is ideal for:

Testing a new market
Hiring your first team members
Scaling a distributed workforce without building local infrastructure,

Why it’s the fastest and least risky option:

You skip the lengthy process (and cost) of setting up an entity.
All local registrations, monthly declarations, and statutory payments are handled by a provider already set up in-country, dramatically reducing your compliance risk.

2. You Have a Uruguay Entity: Run In-Country Payroll

If you already operate a local entity, or you’re planning to establish one, running payroll directly gives you maximum flexibility and control. You can set your own policies, design benefits, and align payroll closely with your finance and internal approval processes. But this also comes with greater operational responsibility.

What you’re responsible for:

Registering with relevant authorities and maintaining compliance with statutory bodies (often involving CSS/IPRES or similar local institutions).
Accurately calculating and remitting payroll taxes and contributions every month – plus handling year-end requirements.
Issuing compliant payslips and maintaining audit-ready payroll documentation.

When this option makes sense:

You’re hiring at scale and want payroll fully “in-house,” even if you partner with a local provider for execution.
You need deeper integration with finance systems or custom benefit structures.

If you want to keep the entity but offload the admin, many employers choose global payroll services to handle calculations, filings, and payments while they remain the legal employer.

3. Contractors Only: Use Contractor Management

Paying independent contractors is often simpler than setting up full payroll, especially for short-term or highly specialized work.

However, you need to watch out for misclassification risk. In Uruguay, as in many jurisdictions, someone may legally qualify as an employee based on how they work – not what their contract says. If they’re under your direction, working like an employee, you may be responsible for full employer obligations.

When contractor payments work well:

You need specialised expertise for a defined scope or timeframe
The contractor operates independently, not under your control or supervision

You can also use contractor management services to streamline compliant contracts, invoicing, and payments.

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What To Know About Payroll Processing In Uruguay

In Uruguay, payroll processing brings together several obligations: income tax withholding under the Impuesto a la Renta de las Personas Físicas (IRPF), social security contributions to the Banco de Previsión Social (BPS), health insurance and pension funding, and periodic payroll reporting to tax and social security authorities. You must calculate gross-to-net pay, apply progressive income tax brackets, withhold employee contributions, and add employer charges that typically total around 22%–27% of gross salary. Requirements can vary by income thresholds, sector, and company size, so your payroll engine needs to handle different rates and caps correctly.

Non-compliance can trigger BPS and Dirección General Impositiva (DGI) audits, late-payment surcharges, fines, and even restrictions on obtaining tax clearance certificates needed for public tenders or financing. Errors that delay salaries or misstate deductions quickly undermine employee trust and can lead to disputes or claims before the Ministry of Labour and Social Security (MTSS). This guide helps you and your team structure calculations, track deadlines, file and pay correctly, and choose the right setup whether you operate through your own entity or an Employer of Record.

Types Of Payroll Taxes In Uruguay

Uruguayan payroll taxes center on IRPF income tax withholding, mandatory social security contributions to BPS, and health insurance funding through the National Health Fund (FONASA), each with distinct rates, caps, and filing rules. You must withhold employee portions, add employer contributions, and remit everything on a monthly schedule aligned with BPS and DGI calendars.

IRPF Employment Income Tax Withholding

IRPF is a progressive personal income tax on Uruguayan-source employment income, with marginal rates typically ranging from 0% up to around 36% depending on annual taxable income. Employers act as withholding agents, calculating monthly withholding based on projected annual income, family deductions, and credits, and remitting the tax to DGI alongside monthly payroll declarations.

Employees bear the economic burden of IRPF, but you are legally responsible for correct calculation, withholding, and timely payment. Under-withholding can result in penalties, interest, and corrective assessments from DGI, while over-withholding may require year-end adjustments and can create employee dissatisfaction if not reconciled transparently.

Social Security Contributions To BPS

Social security contributions finance pensions, disability, unemployment, and other benefits administered by BPS, and they are shared between employer and employee. Employer contributions usually fall in the range of about 12%–15% of gross payroll, while employees contribute roughly 15% of their covered earnings, subject to statutory caps and specific rates by category.

These contributions are reported and paid monthly through BPS systems, using employer and employee identification numbers and detailed payroll data. Late or incorrect payments can trigger surcharges, fines, and restrictions on accessing BPS certificates that many clients and public bodies require before signing contracts or releasing payments.

Health Insurance And FONASA Contributions

Health coverage in Uruguay is funded through contributions to the National Health Fund (FONASA), which channels money to approved health providers (IAMCs and private insurers). Employers typically contribute around 5%–8% of gross salary to FONASA, while employees contribute about 3%–8%, with exact percentages varying by family dependents and income level.

FONASA contributions are collected together with other social security charges via BPS, using the same monthly payment cycle and reference numbers. Misclassifying dependents or applying the wrong FONASA rate can lead to arrears, retroactive adjustments, and employee complaints if their health coverage or entitlements are affected.

How To Pay Employees In Uruguay

Employees in Uruguay are typically paid in Uruguayan pesos (UYU) via bank transfer to a local account, although some sectors still use payroll cards or checks under specific agreements. Most companies pay monthly, with salaries due at the end of the month or within the first few days of the following month, and must respect collective bargaining agreements that may set stricter timing.

If you do not have a local entity, you can use an Employer of Record to hire and pay staff compliantly, or you can register a local company and set up your own payroll with a local partner. Payslips must clearly show gross salary, overtime, bonuses, IRPF withholding, social security and FONASA contributions, other deductions, and net pay, and they should also reference the pay period, employee ID, and employer registration numbers.

Payment Method: Use electronic bank transfers in UYU to employee accounts opened with local financial institutions.
Pay Frequency: Set a consistent monthly pay date aligned with employment contracts and any applicable collective bargaining agreements.
Payslip Content: Include gross earnings, itemized deductions for IRPF, BPS, FONASA, other withholdings, and final net pay.
Record Keeping: Store payroll records, contracts, and payslips for the statutory retention period to support inspections by BPS, DGI, and MTSS.
No-Entity Hiring: Engage an Employer of Record if you need to hire quickly without incorporating and registering directly with BPS and DGI.
Banking Setup: Open a local corporate bank account to fund payroll and statutory payments if you operate through your own entity.
Cut-Off Dates: Define internal cut-off dates for timesheets and variable pay so you can meet statutory paydays and filing deadlines.

Payroll Set Up Checklist (Entity Vs No-Entity)

Getting payroll set up correctly in Uruguay is essential because BPS and DGI link your tax, social security, and employment compliance to your registrations and monthly filings. Running payroll through your own entity gives you full control but requires more registrations and local administration, while using an Employer of Record lets you operate without a legal entity and shifts most compliance tasks to a local expert.

Your choice affects how you onboard employees, fund payroll, sign contracts, and interact with authorities, so you should map your headcount plans, risk appetite, and timeline before deciding. Once you choose a route, standardize your processes for data collection, approvals, and payments so that monthly payroll runs are predictable and auditable.

Incorporation Decision: Decide whether to establish a Uruguayan entity or use an Employer of Record based on headcount, timeline, and long-term plans.
Tax And Social Security Registration: Obtain a RUT tax ID with DGI and register as an employer with BPS before hiring staff directly.
Bank Account Setup: Open a local corporate bank account in UYU to pay salaries and remit BPS and DGI contributions.
Local Payroll Provider: Select a local payroll bureau or software that supports Uruguayan IRPF brackets, BPS codes, and FONASA rules.
Employment Contracts: Draft compliant Spanish-language contracts reflecting MTSS standards, working hours, benefits, and collective agreements.
Data Collection: Collect employee identification, BPS numbers, family dependents, and health provider choices to apply correct contribution rates.
Internal Controls: Define approval workflows for new hires, salary changes, bonuses, and terminations to avoid unapproved payroll changes.
Document Retention: Implement secure storage for contracts, timesheets, and payroll reports to support audits and employee queries.

Example Of Salary Tax Calculation

Assume an employee earns a monthly gross salary of UYU 60,000 with standard dependents and is enrolled in FONASA. Your payroll system must calculate employee social security and FONASA contributions, estimate IRPF based on annualized income, and then add employer contributions of roughly 22%–27% on top of gross pay.

The result is a net salary paid to the employee and a higher total employer cost that includes BPS, FONASA, and other statutory charges. You then remit all withholdings and employer contributions to BPS and DGI according to their monthly calendars.

Step 1 – Determine Gross Pay: Confirm fixed salary, overtime, and bonuses to arrive at total monthly gross earnings of UYU 60,000.
Step 2 – Calculate Employee Contributions: Apply employee social security and FONASA rates to gross pay to determine mandatory withholdings.
Step 3 – Estimate IRPF: Annualize income, apply the progressive IRPF brackets, and compute the monthly withholding amount.
Step 4 – Compute Employer Contributions: Apply employer social security and FONASA rates to gross pay to calculate the additional 22%–27% employer cost.
Step 5 – Derive Net Pay And Fund Payroll: Subtract all employee deductions from gross to get net pay, then fund the total of net salaries plus employer contributions before payment and filing.

Submitting Employee Tax In Uruguay

In Uruguay, you submit payroll taxes and contributions mainly through BPS and DGI online portals, using your employer credentials and electronic payment references. You need your RUT, BPS employer number, payroll period, detailed employee data, and the amounts for IRPF, social security, and FONASA before initiating payments.

BPS Online Portal: Upload or confirm monthly payroll data and generate payment slips for social security and FONASA contributions.
DGI Online Services: File IRPF withholding summaries and pay the corresponding amounts using your RUT and electronic forms.
Bank Transfer Or Online Banking: Pay BPS and DGI obligations via authorized banks using the reference numbers generated by each portal.
Payroll Software Integration: Use payroll systems that export BPS and DGI-compatible files to reduce manual data entry and errors.
Third-Party Provider: Engage a local payroll provider or Employer of Record to handle filings and payments on your behalf while you review reports and approve funding.

Payroll Tax Due Dates In Uruguay

Tax Type	Due Dates
BPS Social Security And FONASA Contributions	Monthly, typically due between the 15th and 20th of the following month, according to the official BPS employer calendar and employer ID.
IRPF Employment Withholding To DGI	Monthly, generally due in the first half of the following month, on staggered dates set annually by DGI based on the employer RUT.
Monthly Payroll Information Return To BPS	Submitted monthly together with contribution payments, following the same BPS calendar dates for each employer.
Annual IRPF Employee Summary (Form 3100 Or Equivalent)	Annually, usually due in the first quarter of the following year, on dates published by DGI for the corresponding fiscal year.
Annual BPS Employer Reconciliation	Annually, by the deadline set in the BPS calendar, often aligned with the close of the fiscal or calendar year.
Withholding Certificates To Employees	Annually, typically provided to employees in the first months of the following year so they can confirm their IRPF situation.

Running Payroll Processing in Uruguay

So, what does it actually take to run payroll in Uruguay? It involves calculating monthly salaries, applying the right statutory deductions, and making sure your team gets paid accurately and on time, while staying fully compliant with local tax and labour laws.

Let’s walk through what that looks like in practice:

Monthly Payroll Workflow

Gather all the essentials: hours worked, leave taken, new joiners, leavers, and any salary or benefit changes.
Double-check timesheets, leave balances, overtime, and any variable pay to make sure everything is accurate.
Work out gross earnings, including base salary, bonuses, commissions, and allowances.
Apply mandatory and voluntary deductions, like income tax, pension contributions, benefits, and any company-specific deductions. Then, calculate net pay after all deductions.
Run internal reviews, compare with previous payroll cycles, and get the necessary approvals.
Pay employees via bank transfer and share payslips through email or your payroll system.
Send statutory payments and required reports to tax authorities.
Update your records and ensure payroll entries flow correctly into your accounting system.
Share payroll summaries with finance and address any open questions or discrepancies.

How Playroll Streamlines Processing

Keeping track of all these steps, especially in a new market, is no easy task. Regulations change, requirements shift, and it’s easy for things to fall through the cracks. Playroll makes this effortless by managing the entire payroll process for you: onboarding employees, handling calculations and deductions, issuing payslips, transferring funds in Uruguayan Peso, and taking care of statutory filings and compliance.

Income Tax And Social Security In Uruguay

Understanding the tax obligations for both employers and employees is crucial when operating in Uruguay's business landscape. This section explains how taxes and statutory fees affect payroll and individual earnings in Uruguay.

Employer Tax Contributions

Employer payroll contributions are generally estimated at an additional 22%–27% on top of the employee salary in Uruguay. These contributions cover social security, health insurance via FONASA, and other smaller statutory funds managed primarily by BPS.

Tax Type	Tax Rate
Social Security Pension Contribution (Employer)	Approximately 7.5%–12% of gross salary, depending on sector and classification.
FONASA Health Insurance Contribution (Employer)	Approximately 5%–8% of gross salary, varying with employee family dependents and income.
Labour Reconversion Fund (FRL) Contribution (Employer)	Around 0.1%–0.2% of gross salary.
Work Accident Insurance / Occupational Risk (Employer)	Typically 1%–4% of payroll, depending on industry risk level.
Unemployment Insurance Contribution (Employer)	Approximately 0.1%–0.2% of gross salary.
Total Typical Employer Payroll Load	Overall 22%–27% of gross salary in most standard employment scenarios.

Employee Payroll Tax Contributions

In Uruguay, the typical estimation for employee payroll contributions cost is around 18%–20%. Employees fund part of their pension, health coverage, and other social benefits through mandatory withholdings from their salaries.

Tax Type	Tax Rate
Social Security Pension Contribution (Employee)	Approximately 15% of covered earnings, subject to statutory caps.
FONASA Health Insurance Contribution (Employee)	Approximately 3%–8% of gross salary, depending on income and number of dependents.
Labour Reconversion Fund (FRL) Contribution (Employee)	Around 0.1% of gross salary.
Unemployment Insurance Contribution (Employee, Where Applicable)	Small percentage, typically below 1% of gross salary when required.
Mandatory Pension Savings To AFAP (If Enrolled)	Portion of the social security rate is redirected to the individual pension fund according to BPS rules.
Total Typical Employee Payroll Load	Overall 18%–20% of gross salary in a standard employment relationship.

Individual Income Tax Contributions

Individual income tax on employment income in Uruguay is collected through IRPF, which applies progressive rates to annual taxable income in Uruguayan pesos. Employers withhold IRPF monthly, and employees may have year-end adjustments depending on their total income and deductions.

Income Bracket	Tax Rate
0 – 439,200 UYU (approx.)	0%
439,201 – 627,600 UYU (approx.)	10%
627,601 – 939,600 UYU (approx.)	15%
939,601 – 1,879,200 UYU (approx.)	24%
1,879,201 – 2,818,800 UYU (approx.)	25%
2,818,801 – 4,698,000 UYU (approx.)	27%
4,698,001 – 7,517,000 UYU (approx.)	31%
Over 7,517,000 UYU (approx.)	36%

Pension in Uruguay

Pension contributions in Uruguay are managed through a mixed system that combines public social security administered by BPS with mandatory or voluntary individual savings in private pension funds (AFAPs) for many workers. Both employers and employees contribute, and part of the employee contribution may be redirected to an AFAP account, building individual retirement savings alongside the state pension entitlement.

Managing Common Payroll Challenges in Uruguay

Global employers operating in Uruguay often encounter unique payroll challenges that can affect compliance and efficiency, like navigating evolving tax laws and managing employee data. With a need for real-time accuracy, modern organizations must develop strategies to overcome these challenges effectively. Below, we explore some of the most common payroll hurdles and provide actionable solutions to streamline payroll processes in Uruguay.

Maintaining Accurate And Detailed Payroll Reports

Maintaining accurate global payroll reports is often challenging due to currency exchange complexities, data integration issues, and the need to keep employee information up-to-date –including tax information, hours worked, leave balances, and any changes in salary or job status. Generating accurate reports is easy with a comprehensive payroll automation tool that consolidates fragmented data sources, and can keep track of employee payments and deductions.

Keeping up with ever-changing tax laws & Compliance Laws

In Uruguay, tax laws and compliance regulations can change frequently, presenting a significant challenge for global employers. Monitoring updates to federal, state, and local tax codes is crucial to avoid non-compliance and costly penalties, but requires significant time and resources. Partnering with local experts or a reputable global HR platform is an effective way to maintain compliance. These services can help employers stay compliant with evolving regulations while freeing up time for more strategic work.

Consolidating Multi-Vendor Payroll Analytics

Managing payroll across multiple vendors often leads to fragmented data and inefficiencies, making it difficult to consolidate analytics. These challenges can hinder decision-making, especially when trying to gain a clear view of workforce costs and trends. To address this, organizations can invest in a centralized payroll management system that unifies data from multiple vendors. A consolidated platform simplifies payroll tracking, ensures data accuracy, and provides actionable insights into payroll expenditures.

Integrating Multiple HR & Payroll Systems

Global companies are prone to using multiple HR or payroll systems across regions, which can easily lead to fragmented payroll data, increasing the risk of delays and errors in employee compensation. To combat this, seamless integration between payroll and other systems is critical.

Payroll management systems that connect with existing HR and financial platforms can help streamline workflows by reducing manual inputs and ensuring that all departments operate with up-to-date, accurate information. In turn, this helps guarantee on-time, accurate payroll, boosting employee satisfaction.

How Playroll Can Streamline Payroll & Taxes In Uruguay

Expanding globally is an exciting milestone for any company, but it comes coupled with complex payroll challenges. It doesn’t have to be complicated. At Playroll, our easy-to-implement global payroll management software combines automation with hands-on support to make global payroll truly simple. Here's how Playroll helps:

Multi-Vendor Integration: Our platform syncs seamlessly with your providers and in-house systems to unify global payroll services in one platform.
Standardize Payroll Processes: Unify your operations in one dashboard to ensure payroll is running smoothly globally, with advanced approval flows and reports.
Improve Governance & Compliance: Improve compliance by centralizing all your compliance tasks and processes. Easily track your payment obligations, with digitized audit trails.
Advanced Reporting: Access and configure your data, your way, with a comprehensive suite of payroll analytics and reporting tools.

Disclaimer

THIS CONTENT IS FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSTITUTE LEGAL OR TAX ADVICE. You should always consult with and rely on your own legal and/or tax advisor(s). Playroll does not provide legal or tax advice. The information is general and not tailored to a specific company or workforce and does not reflect Playroll’s product delivery in any given jurisdiction. Playroll makes no representations or warranties concerning the accuracy, completeness, or timeliness of this information and shall have no liability arising out of or in connection with it, including any loss caused by use of, or reliance on, the information.

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