Why Every Employer in Uruguay Must Master the Aguinaldo, Vacation Bonus and Annual Leave

When you decide to set up a company in Uruguay, payroll is one of the most significant operating costs. And it is not just the monthly salary: Uruguayan labour law sets three additional items that every employer must budget for, calculate correctly and pay on time: the aguinaldo (13th-month bonus), the salario vacacional (vacation bonus) and annual leave.

These items are not optional. Omitting them or calculating them wrongly leads to penalties from the Ministry of Labour and Social Security (MTSS), labour contingencies and, in the worst cases, claims for constructive dismissal or inspections resulting in considerable fines. For foreign or non-resident business owners starting to operate in Uruguay, understanding these concepts is as critical as choosing between an SAS, an SRL or a corporation (SA).

In this article you will learn how the aguinaldo, vacation bonus and annual leave are calculated, the payment dates set by law, which pay items are included in each calculation and which mistakes to avoid to keep your payroll compliant from day one.

Aguinaldo: What It Is, How It Is Calculated and When It Is Paid

The aguinaldo, also known as the supplementary annual salary (SAC), is an additional payment equal to one twelfth of the gross pay earned by the worker in the twelve months before 1 December each year. In other words, the employer pays one extra month’s salary a year, split into two instalments.

The aguinaldo is calculated on total gross pay: base salary, overtime, commissions, productivity bonuses and any other remuneration item. Non-salary social benefits such as travel allowances, expense reimbursements or properly structured meal vouchers are not included.

The law sets two mandatory payment dates:

• First instalment: paid in June (by 30 June), equal to one twelfth of the pay earned between 1 December of the previous year and 31 May of the current year.
• Second instalment: paid by 20 December, equal to one twelfth of the pay earned between 1 June and 30 November of the current year.

If employment began during the year, the aguinaldo is calculated in proportion to the months worked. If the worker leaves before December, the proportional aguinaldo earned up to that date must be paid on termination. The aguinaldo is subject to BPS contributions like any gross salary and, for the worker, to IRPF where applicable.

Common mistakes when calculating the aguinaldo

The most common mistake is forgetting to include variable items such as overtime or commissions. Another is not prorating the aguinaldo correctly when the employee joins or leaves mid-semester. Finally, some employers do not include the aguinaldo in the total labour cost when budgeting payroll, which causes cash-flow gaps in June and December.

Salario Vacacional: The Vacation Bonus

The salario vacacional is a bonus paid to the worker for their annual leave. By law it is equal to 100% of the net amount corresponding to the leave days, and it must be paid before the worker starts their leave.

Its purpose is to let the worker enjoy their annual rest with additional income. It is not subject to BPS contributions, which makes it different from the aguinaldo.

Calculation is simple: take the pay corresponding to the leave days (for monthly employees, the daily rate is usually calculated from the monthly salary), deduct the personal contributions and withholdings that would apply, and the resulting net amount is the vacation bonus. If the worker takes 20 days’ leave, they receive their normal pay for those days plus the vacation bonus for the same days.

What if the worker does not take their leave?

The law requires leave to actually be taken: the employer cannot replace leave with money, except on termination of employment. If the contract ends before the worker has taken the leave they have earned, the employer must pay both the untaken leave days and the corresponding vacation bonus.

Annual Leave: How Many Days and How It Accrues

Annual leave is the paid rest period every worker is entitled to. In Uruguay, the minimum is 20 days of annual leave. From the fifth year of service, the worker is entitled to one additional day for every four years of seniority with the employer. Collective agreements may set more favourable conditions.

Leave accrues year by year, and the worker is entitled to take it during the year following the year worked. For example, if an employee joins on 1 March 2025, they will accrue a proportional leave entitlement for 2025 to be taken during 2026.

The employer can set leave dates according to the business’s operational needs, giving the worker reasonable notice and respecting the rules and collective agreements that apply (for example, those that require leave to be taken in a certain period or allow it to be split).

Leave cannot be replaced by money while the contract is in force. If the employee does not take their leave in the corresponding year, it accumulates, which creates a contingency for the employer. That is why well-run companies keep a strict record of leave accrued and taken.

Proportional leave on termination

When employment ends for any reason, the employer must pay the worker for leave earned but not taken, plus the corresponding vacation bonus. This item is called “untaken leave” and is calculated in proportion to the days accrued in the last year worked (around 1.67 days of leave for each month worked in the current year).

Employer Obligations and Penalties for Non-Compliance

An employer hiring staff in Uruguay must meet these labour obligations from day one. In addition to paying the aguinaldo and vacation bonus and granting leave, the employer must:

• Register the worker with BPS before or when employment starts
• Withhold the worker’s personal BPS contributions (around 15% pension plus health insurance) and IRPF where applicable
• Pay employer contributions to BPS (around 12.6% of gross salary for a typical private employer) and occupational accident insurance with the BSE
• Keep the work roster and payroll records
• Issue a monthly payslip signed by the worker

Failure to meet these obligations leads to MTSS fines, which can reach thousands of dollars depending on the number of workers affected and the seriousness of the breach. Moreover, if the employer does not pay the aguinaldo or vacation bonus, the worker may consider themselves constructively dismissed, obliging the employer to pay severance plus the amounts owed with surcharges.

For companies set up as a sole proprietorship or any of the other types of companies in Uruguay, the effective labour cost is significantly higher than the gross salary. A worker on a gross monthly salary of USD 1,000 costs the employer roughly USD 1,250–1,300 a month once the prorated aguinaldo (8.33% a month), the vacation bonus, BPS employer contributions (around 12.6%) and accident insurance are taken into account.

Before you open a company in Uruguay as a foreigner, it is essential to understand that the Uruguayan labour market is highly regulated and that the real labour cost is well above the gross salary. Poor planning of these items can lead to avoidable cash-flow problems and labour contingencies.

Frequently Asked Questions

Is the aguinaldo paid in one or two instalments?

The aguinaldo is paid in two instalments required by law: the first in June and the second by 20 December. Each instalment is one twelfth of the pay earned in the six months before each payment date.

Is the vacation bonus paid if the employee does not take leave?

The vacation bonus is paid for the leave the worker takes, before they start it. If employment ends with leave untaken, the untaken leave and the corresponding vacation bonus for those days must be paid on termination.

What happens if I don’t pay the aguinaldo on time?

If the employer does not pay the aguinaldo on the legal dates, it is in salary arrears. The worker can formally demand payment and, if the situation persists, consider themselves constructively dismissed, obliging the employer to pay severance plus the amounts owed with interest. The MTSS can also impose fines.

Conclusion: Start Right from Your First Employee

The aguinaldo, vacation bonus and annual leave are pillars of labour cost in Uruguay. They are not optional or negotiable: they are set by law and actively monitored by the MTSS. For entrepreneurs deciding which legal structure to choose or considering options such as buying a ready-made SAS, understanding the real cost of hiring staff from the outset is essential to budget correctly and avoid surprises.

Labour compliance is not just a legal obligation: it is part of a company’s reputation and operational stability. Running payroll correctly, paying these items on time and keeping BPS and MTSS records up to date avoids costly contingencies and lets you focus on growing the business.

At sociedadesanonimas.uy we support entrepreneurs and business owners throughout incorporation and company management in Uruguay, including advice on labour obligations, registering employees with BPS and structuring payroll correctly from day one. If you are about to hire your first employee or want to check that your company is compliant, book a consultation with our team and make sure you start right.