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Hiring incentives and internships in Uruguay: the 2026 employment promotion law and formative internships

Last verified: 2026-10-27 · Status: Changing

Ley 20.506 of June 2026 replaced most of the former youth employment law with subsidies of one quarter to 80 percent of monthly pay for private employers who hire young people, people over 45, single mothers heading households, Afro descendants, people with disabilities and other groups facing barriers, under MTSS authorized contracts of 6 to 12 months. Hiring is capped by a quota of the permanent workforce (one person for firms without staff, 50 percent for 1 to 4 workers down to 20 percent for 50 or more), firms must be current with the BPS, DGI and MTSS and must not have dismissed workers in the same category in the prior 30 days, and subsidies last up to 12 months (18 months for firms with up to 19 workers). Formative internships for students aged 15 to 29 remain under Ley 19.973, with subsidies of up to 50 percent of the category wage; the Executive has 180 days from 17 July 2026 to regulate Ley 20.506.

USD figures use UYU 40.214 per US dollar, the BCU quotation for DLS. USA BILLETE on 26 October 2026, retrieved from the BCU quotations service on 27 October 2026; conversions are for orientation only.

Key facts

Duration of employment promotion contracts	6 to 12 monthsLey Nº 20.506 art. 10, as of 2026-10-27 · in force
Maximum monthly subsidy, share of pay (people with disabilities, trans people, people deprived of liberty or recently released)	80 %Ley Nº 20.506 art. 13 literals l), m) and n), as of 2026-10-27 · in force
Maximum subsidy duration for firms with up to 19 workers	18 monthsLey Nº 20.506 art. 14, as of 2026-10-27 · in force
Annual INEFOP funding cap for subsidies	407000000 UYULey Nº 20.506 art. 31, as of 2026-10-27 · in force
No dismissals in the same category before hiring	30 daysLey Nº 20.506 art. 5, as of 2026-10-27 · in force
Maximum length of an authorized unpaid internship	120 hoursLey Nº 19.973 art. 31, as of 2026-10-27 · in force
Subsidy for paid formative internships, share of category wage, up to	50 %Ley Nº 19.973 art. 35, as of 2026-10-27 · in force

The rule

1. The law covers people facing greater obstacles to employment: young people aged 15 to 29, women heading single parent households, people over 45, Afro descendants, parents or guardians of children under 15 with a disability, people with disabilities, trans people, and people deprived of liberty or released within three years.Ley Nº 20.506 (Promotion of decent work), Art. 2, 2026-06-26 official text · verified 2026-10-27 · changed: Ley Nº 20.506, promulgated 26 June 2026 and published 17 July 2026, repealed Ley Nº 19.973 art. 1 to 28 and 36 to 50 and Ley Nº 19.689 art. 11 and 13.

2. Hiring companies must be current with the BPS, the DGI and the MTSS and must not have dismissed or sent to unemployment insurance workers of the same category in the 30 days before or during the contract, except for notorious misconduct (fixed term and seasonal hiring excepted). The number of subsidized hires is capped by permanent staff: one person for firms with no staff, up to 50 percent for 1 to 4 workers, 40 percent for 5 to 19, 25 percent for 20 to 49 and 20 percent for 50 or more.
Example: A company with 10 permanent employees can hire up to 4 people under the regime.Ley Nº 20.506, Art. 5 and 6, 2026-06-26 official text · verified 2026-10-27

3. Contracts last 6 to 12 months, must be authorized by the MTSS, pay at least the applicable laws, Wage Council decisions and collective agreements, register the worker with social security, and include a trial period of 45 calendar days for contracts of up to 9 months or 60 days for 12 month contracts; dismissal after the trial period and before term triggers the statutory severance.Ley Nº 20.506, Art. 7, 8, 9, 10 and 12, 2026-06-26 official text · verified 2026-10-27

4. Private employers receive monthly subsidies: up to one third of pay for a woman and one quarter for a man when hiring young people aged 15 to 24 unemployed for more than three months, or 25 to 29 unemployed for more than six months; up to two thirds (woman) or one half (man) for young people in socioeconomic vulnerability; up to one third for women heading single parent households unemployed for more than six months (two thirds if vulnerable); one third (woman) or one quarter (man) for people over 45, Afro descendants and parents of children under 15 with a disability who have been unemployed for more than six months, rising to two thirds or one half if they are in socioeconomic vulnerability; and up to 80 percent of pay for unemployed people with disabilities, trans people and people deprived of liberty or released within three years.
Example: Hiring a 22 year old woman unemployed for four months at UYU 40,000 a month gives a subsidy of up to UYU 13,333 a month. / About US$332 a month.Ley Nº 20.506, Art. 13, literals a) to n), 2026-06-26 official text · verified 2026-10-27

5. Subsidies depend on keeping the job. For companies with more than 19 permanent workers they last as long as the contract, at most 12 months. For companies with up to 19 workers they can last up to 18 months: 100 percent for the first 12 months, 75 percent in the first quarter of the second year and 50 percent in the second quarter. The National Employment and Vocational Training Institute (INEFOP) funds the subsidies up to UYU 407,000,000 a year.
Example: For the hire above at a firm with 12 workers who keeps the job for 18 months, the maximum total subsidy is about UYU 210,000. / About US$5,222.Ley Nº 20.506, Art. 14 and 31, 2026-06-26 official text · verified 2026-10-27

6. Under the Yo Estudio y Trabajo program for the private sector, the MTSS calls companies and unemployed young people aged 15 to 24 who are studying and have not contributed for more than 90 days; participants are assigned by public lottery.Ley Nº 20.506, Art. 15, 2026-06-26 official text · verified 2026-10-27

7. The Executive must regulate Ley 20.506 within 180 days of its publication in the Official Gazette on 17 July 2026.Ley Nº 20.506, Art. 33, 2026-06-26 official text · verified 2026-10-27

8. Formative internships in companies for students aged 15 to 29, linked to courses of educational or training institutions, remain under Ley 19.973: conditions are agreed in writing between the institution and the company and approved by the MTSS, companies need a tutor, interns must be covered by BSE accident insurance and receive a certificate and evaluation, and companies may receive a subsidy of up to 50 percent of the category wage. Unpaid internships may be authorized exceptionally for at most 120 hours and no more than 50 percent of the course hours.Ley Nº 19.973, Art. 29, 30, 31, 32, 33, 34 and 35, 2021-08-13 official text · verified 2026-10-27

Permanent workers	Maximum subsidized hires
0	1 person
1 to 4	50%
5 to 19	40%
20 to 49	25%
50 to 99	20%
More than 99	20%

Hiring quota by permanent workforce (Ley 20.506 art. 6)

Period	Share of subsidy	UYU a month	USD a month
Months 1 to 12	100% (1/3 of pay)	13,333	332
Months 13 to 15	75%	10,000	249
Months 16 to 18	50%	6,667	166

Subsidy example: UYU 40,000 monthly pay, young woman unemployed over 3 months, firm with up to 19 workers

Worked example

A 12 person software firm in Montevideo hires a 22 year old junior tester who has been unemployed for four months on a 12 month MTSS authorized contract at UYU 40,000 (about US$995). The firm can receive up to one third of pay monthly, and if it keeps the tester on after the contract, the subsidy continues at 75 and then 50 percent for six more months, up to about UYU 210,000 in total.
The same firm cannot use the regime if it dismissed a junior tester in the 30 days before hiring, unless for notorious misconduct.

Step by step

1. Check eligibility: BPS, DGI and MTSS compliance and no dismissals in the category in the last 30 days.
2. Count permanent staff to find the quota.
3. Confirm the candidate's group and unemployment duration.
4. Sign a 6 to 12 month contract and obtain MTSS authorization.
5. Pay at least the Wage Council minimum and register the worker with the BPS.
6. Claim the subsidy under the procedure set by the regulatory decree and keep the job to keep the subsidy.

Common traps

The law needs a regulatory decree (due within 180 days of 17 July 2026); check that the authorization and payment procedure is in place before relying on the subsidy.
Dismissing someone in the same category during the contract can void eligibility.
Ending the contract early after the trial period triggers severance.
Subsidies are capped by an annual budget, so they are not an unlimited entitlement.

Sources

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