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No dismissal at will: the statutory dismissal indemnity

Last verified: 2026-10-28 · Status: Stable

There is no free dismissal in Uruguay: every dismissed private sector employee is owed a statutory indemnity of one month's total pay per year or fraction of service, capped at six months. Only proven 'notoria mala conducta' (serious misconduct) removes it, and the employer carries the burden of proof; late payment after a judgment adds 1 percent a month. Special tariffed indemnities stack on top in protected situations such as pregnancy (six extra months), sexual harassment (six months) and refusing to rehire after a work accident (triple).

USD figures use UYU 40.210 per US dollar, the BCU quotation for DLS. USA BILLETE on 27 October 2026; UI amounts use UYU 6.6803 per UI (BCU, 28 October 2026), except cash limits, which the law converts at the first day of the month: UYU 6.6516 per UI on 1 October 2026 (BCU). Retrieved from the BCU quotations service on 2026-10-28; conversions are for orientation only.

Key facts

Dismissal indemnity per year of service or fraction	1 months of payLey 10.489 art. 4, as of 2026-10-28 · in force
Dismissal indemnity cap (3 if entitled to retirement)	6 months of payLey 10.489 art. 4, as of 2026-10-28 · in force
Monthly surcharge on indemnities paid under a final judgment	1 % per monthLey 12.597 art. 8, as of 2026-10-28 · in force
Extra indemnity for dismissal of a pregnant worker	6 months of salaryLey 11.577 art. 17, as of 2026-10-28 · in force
Special indemnity for sexual harassment (minimum)	6 months of payLey 18.561 art. 11, as of 2026-10-28 · in force
Prescription of labor actions after employment ends	1 yearsLey 18.091 art. 1, as of 2026-10-28 · in force
Prescription of individual labor credits	5 yearsLey 18.091 art. 2, as of 2026-10-28 · in force

The rule

1. Dismissal costs one month per year or fraction, up to six months. Commerce and industry employees who are dismissed are entitled to an indemnity equal to their total monthly remuneration for each year or fraction of activity, with a cap of three months if they are entitled to retire and six months otherwise. Dismissal for 'notoria mala conducta' removes the right.
Cost to do it: One month of total pay per year or fraction, maximum six months; no government fee.
Example: An employee earning UYU 80,000 a month dismissed after three years and two months (four years or fractions) receives UYU 320,000; after nine years the cap of UYU 480,000 applies. / UYU 320,000 is about US$7,958; the six month cap of UYU 480,000 is about US$11,937.Ley Nº 10.489 (commerce working hours and dismissal indemnity), art. 4, 1944-06-06 official text · verified 2026-10-28

2. The employer must prove misconduct, and late indemnities carry a surcharge. A worker dismissed for notoria mala conducta has no right to the indemnity, but the employer must prove the facts that constitute it. Indemnities paid under a final judgment are increased by 1 percent a month. The reduced three month cap applies only when the worker has more than ten years of recognised service and is 40 or older, or has a retirement right under special laws.
Cost to do it: Exposure grows by 1 percent a month if the indemnity is only paid after a final judgment.
Example: If a UYU 400,000 indemnity is paid only under a judgment, each month of surcharge adds UYU 4,000. / About US$99 a month on an indemnity of about US$9,948.Ley Nº 12.597 (dismissal indemnities, day and piece workers, domestic service), art. 5, 8 and 10, 1958-12-30 official text · verified 2026-10-28

3. Day and piece workers and domestic staff are covered too. Day or piece workers with fewer than 240 but more than 100 paid days in a year get a partial indemnity of two days' wages per 25 days worked in that year; fractions of a year count at the same rate. Domestic workers are entitled to a dismissal indemnity after one continuous year of service.
Cost to do it: Two days' wages for every 25 days worked in short years.
Example: A day worker with 150 paid days in the last year earns 12 days' wages for that year (150 / 25 x 2). / At a daily wage of UYU 2,000 that is UYU 24,000, about US$597.Ley Nº 12.597, art. 1, 3 and 7, 1958-12-30 official text · verified 2026-10-28

4. Pregnancy dismissal triggers six extra months. A pregnant worker may not be dismissed during the absence the law protects; if she is, the employer must pay six months' salary plus the ordinary legal indemnity.
Cost to do it: Six months of salary on top of the ordinary indemnity.
Example: An employee earning UYU 120,000 with five years of service: UYU 720,000 special indemnity plus UYU 600,000 ordinary indemnity, UYU 1,320,000 in total. / About US$32,828 in total.Ley Nº 11.577 (industrial and commercial workers), art. 16 and 17, 1950-10-14 official text · verified 2026-10-28

5. Harassment victims can claim a tariffed six months. A worker who is a victim of sexual harassment may claim moral damages of at least six months of the last remuneration, or treat themselves as indirectly dismissed, in which case the dismissal is abusive and a special six month indemnity is added to the ordinary one.
Cost to do it: Minimum six months of pay, cumulative with the ordinary indemnity in the indirect dismissal route.
Example: On UYU 120,000 a month, the special indemnity is at least UYU 720,000. / About US$17,906.Ley Nº 18.561 (sexual harassment at work), art. 11, 2009-09-11 official text · verified 2026-10-28

6. Refusing to rehire after a work accident costs triple. A worker who recovers from a work accident or occupational disease must be readmitted to the same post on request, cannot be dismissed for 180 days after returning except for notoria mala conducta or serious supervening cause, and if the employer does not readmit within 15 days of the worker presenting, the dismissal indemnity is three times the ordinary amount.
Cost to do it: Three times the ordinary indemnity.
Example: An ordinary indemnity of UYU 400,000 becomes UYU 1,200,000. / About US$29,843.Ley Nº 16.074 (work accidents and occupational diseases), art. 69, 1989-10-10 official text · verified 2026-10-28

7. Claims expire one year after the job ends. Actions arising from employment prescribe one year from the day after the employment relationship ended, and individual labor credits prescribe five years from when they became payable. Filing a request for a conciliation hearing at the Ministry of Labour (MTSS) interrupts prescription.
Cost to do it: No fee; the cost is the open exposure window after exit.
Example: An employee who leaves on 31 March 2027 can sue until 1 April 2028 for unpaid items from the previous five years. / A five year look back on unpaid overtime of US$100 a month could total about US$6,000 plus surcharges.Ley Nº 18.091 (prescription of labor claims), art. 1, 2 and 3, 2007-01-07 official text · verified 2026-10-28

Situation	Indemnity	Rule
Ordinary dismissal	1 month per year or fraction, max 6 months	Ley 10.489 art. 4
Worker entitled to retire (10+ years of service and age 40+)	1 month per year or fraction, max 3 months	Ley 10.489 art. 4; Ley 12.597 art. 5
Proven serious misconduct	None (employer proves it)	Ley 12.597 art. 10
Pregnant worker	6 months of salary plus ordinary indemnity	Ley 11.577 art. 17
Sexual harassment, indirect dismissal	6 months plus ordinary indemnity	Ley 18.561 art. 11
No readmission after work accident	3 times the ordinary indemnity	Ley 16.074 art. 69
Paid under final judgment	Plus 1% a month	Ley 12.597 art. 8

Dismissal indemnity by situation

Worked example

A US subsidiary terminates an engineer earning UYU 120,000 a month (US$2,984) after four years and five months. Years or fractions: five. Indemnity UYU 600,000 (US$14,922), plus the proportional aguinaldo and unused leave pay owed on any exit.
If the same engineer were pregnant and protected, the bill would be UYU 600,000 plus UYU 720,000, that is UYU 1,320,000 (US$32,828).

Step by step

Before any termination, compute years or fractions of service from the start date and the total monthly remuneration (fixed plus variable).
If relying on misconduct, gather documentary evidence first; the burden of proof is on the employer.
Check protected situations (pregnancy, recent work accident, harassment complaint) before deciding.
Pay the indemnity together with the final settlement (aguinaldo, leave and vacation bonus) to avoid the 1 percent monthly surcharge if a court later orders it.
Keep payroll and settlement records for at least five years after exit, matching the look back period.

Common traps

Treating a 'fraction' as nothing: any fraction of a year counts as a full year for the indemnity (Ley 10.489 art. 4).
Assuming the three month cap applies to older workers by age alone: it requires more than ten years of recognised service and age 40, or a special retirement right (Ley 12.597 art. 5).
Calling a dismissal 'for cause' without evidence: the employer must prove notoria mala conducta (Ley 12.597 art. 10).
Forgetting that an MTSS conciliation request interrupts prescription, so the one year window can effectively run longer (Ley 18.091 art. 3).

Sources

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