Castellán

Salary adjustment system

In our country, by Law, minimum wages are currently established by Collective Agreements negotiated in Wage Boards. Likewise, salary adjustments are determined, taking into account mainly the evolution of inflation. Salaries can be set per month (monthly worker regime) or per hour or day (daily worker regime), but those minimums and adjustments must always be respected.

Since 2005, the Government of Uruguay has called for the “Wage Boards” again. These are tripartite integration bodies (with representatives of workers -unions-, employers, and the government) created by Law 10,449, which, through collective bargaining, establish minimum wages, categories, and other benefits for workers, by branch or “Group”.

These minimums are mandatory and must be complied with without exceptions (except for those companies that request an “exception” which we will expand on below). Companies unilaterally can only then decide to establish more beneficial conditions than those determined there (that is, “above” what is provided for in the Agreements of each sector). These increases cannot be omitted. The consequence otherwise is the contingency of a claim by the workers, in which the company would be condemned to pay the salary differences for the increases not granted, plus interest, legal fine (article 29 of Law No. 18,572) of 10% of the amount owed, and damages (usually established between 10 or 20% according to judicial criteria and family burdens of the worker).

Salaries in dollars. Application of increases.

Regarding the issue of the depreciation of the salary of workers who are paid in foreign currency (which is legal in our country), it should be noted that according to current jurisprudence, the adjustment must be made in accordance with the provisions of the Wage Boards, following the procedure established by the Ministry of Labor and Social Security (MTSS). By Resolution dated March 9, 2009, the MTSS established that first, the amount in Uruguayan pesos of the salary in foreign currency that the worker was receiving on the date of the last adjustment of the Wage Boards must be determined (according to the exchange rate of that date). The corresponding adjustment must then be applied to the resulting sum of that calculation. And finally, that amount must be converted back to the foreign currency (e.g. dollars) according to the exchange rate of the new adjustment date. That is, if that amount is higher than the salary the worker receives, the adjustment is appropriate (of course, there cannot be a decrease in salary, so if that amount is lower, no increase is due).

Exceptions.

As we mentioned, the only scenario in which a company could deviate from the obligation to respect the mandatory Collective Wage Agreements is through the “exception” procedure. This is a process by which certain cases in which certain realities of a sector of activity (or of a particular company) warrant a departure from those general mandatory conditions are sought to be considered. This procedure is quite complex nowadays, although the Executive Branch has announced its willingness to promote a negotiation framework among social actors in order to make it more flexible. The truth is that it is reserved exclusively for “extreme” cases, for example: companies that cannot bear the salary burden, that need to save jobs, and in which their survival is truly at stake. For this, objective data and solid technical arguments should be provided. For the exception to take effect, the approval of the Wage Board of the sector is required (either unanimously or by majority) and the company's situation is thoroughly examined.

Final Considerations.

Regardless of the company's activity and number of employees, we believe it is necessary to have proper advice to ensure compliance with the aforementioned salary obligations. Our firm, composed of professionals specialized in the labor and accounting area, provides advice tailored to the requirements of both national and foreign companies. We offer various services in personnel management, such as salary and other remuneration calculations; labor cost calculations; advice on social security contributions; and audits, seeking to add value to our clients.

Montevideo, November 23, 2020.