Learning Uruguay

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Domestic help additional costs

Posted by urufish on June 20, 2007


This is a very ‘taxing’ week.  Every time we turn around, I learn of another fee we’re supposed to be paying.   We better be careful or people will stop coming to the blog for fear of more bad news.  We’ll search for more optimistic material next week 🙂

For 25 years, (more or less) we had a cleaning lady for the 3 months of the summers.  2 years ago, the last time we got to use the summer house on a regular basis, we were paying her UYP300 per day.  Since we started living here, we have the same cleaning lady.  She takes the bus from Piriapolis 3 days a week.  /Recently we increased her daily pay to UYP400 plus bus fare.  

2 days ago, she told us she wanted us to pay her holiday pay, but she didn’t want to take holidays.  She just wanted the money.  She didn’t demand it.  She told us to check with our lawyer to make sure we were doing it the right way, paying her only what she is entitled to under the law.   We had no idea such a thing exists because she’s a casual employee, working freelance a few days a week.  Tonight we met with our lawyer and she explained our responsibilities.  

There are 2 issues.  The first, supposedly exists only in a few left leaning (or perhaps social conscience) countries like Mexico, Argentina and Uruguay.  It’s called the Aguinaldo (Christmas gift).  Find out all about it here:  http://es.wikipedia.org/wiki/Aguinaldo.   In North America, this roughtly translates into Christmas bonus, but here it is compulsory for wage earning employees and equal to one months wages.  You pay it twice a year, end of June and end of December.  At the end of June you pay the person a half month of earnings and you do this again at the end of December.  In total, it’s the equivalent of a month’s pay.   In our case, she averaged UYP4000 per month, so she is entitled to a bonus payment of UYP2000 on June 30th and again on December 30th.

The 2nd is  the equivalent of a northerner’s vacation pay with an interesting twist.  If you work 5 days a year, all year long, it would total 20 days, roughly 3 weeks holidays.  In our case, she works 60% of the workweek, so she would be entitled to 12 days paid vacation pay per year, but she doesn’t want the time off, she wants the money instead.  So for the month we pay her the holiday pay, she will make double for 12 days. 

Our lawyer created forms to use for this past year (see attached).  We’ll modify this for next year, etc. 

domestic-help-deductions.jpg domestic-help-deductions-summary.jpg

Since our lady started working full time in January 2006, I’d say we’re just over a year behind, so we need to pay her for the full year’s back pay up to Dec 31/06 and for her first Aguinaldo payment the end of this month.  In total, we should owe her UYP7,200 at the end of June.  

But she told my wife that she feels bad about this and she only wants it for 2007.  So we will pay her the UYP2000 on July 1st and again on December 31st, (increased by 33% because of the increase in base pay).  At some point in 2008, she will ask for her vacation pay and we will pay it at that time. 

Something you should keep in mind when budgeting for domestic help. 


16 Responses to “Domestic help additional costs”

  1. Brazzie said

    By the way, Brazil also has the Aguinaldo thing, with minor differences:

    1) It is called the 13th salary
    2) It is in the constitution – http://www.consumidorbrasil.com.br/consumidorbrasil/textos/domestico/decimoterceiro.htm
    3) It must be paid before Dec 20th and at the December pay rate.
    4) The employee can request that up to 50% be payed earlier, at the time of their vacation

    In Brazil the worker would only get double pay if she were to forgo taking vacation and worked instead (essentially the vacation pay + the regular pay), although the employer does not need to agree to this.

    This in general applies to all other types of employees as well. It is so completely ingrained into the culture that I think would be easier to change the country’s flag than this system. 🙂

  2. Brazzie said

    I reread my comment and noticed I forgot to say that the “13th pay” is separate and in addition to vacation pay.

  3. urufish said

    Thanks for your comments Brazzie.. I believe you addressed a question I had but couldn’t get a straight answer in the translation with my lawyer. Her English is as bad as my Spanish. How we ever get anything understood between us is a miracle. That part about the vacation being double pay, just didn’t make sense, until you pointed it out. Sometime, the obivous isn’t so obvious to me.

    Another interesting point you make is that it is to be paid at the December rate. We gave her the raise in April. She’s to be paid end of June so is it assumed the higher rate will be in effect this coming December and is it calculated at the coming December rate or on the previous december’s rate. I doubt she care, but I love puzzles like this.

    One thing that isn’t clear to me yet is whether Aguinaldo applies to employees who are ‘regular’ employees, working fulltime, receiving a monthly salary.

  4. roberto said

    Aguinaldo and Vacation Pay applies to all employees no matter if they are half time, part time, full time, one day a week, etc.

    Aguinaldo as was said is payed half before the 30th June and the other half usually before 20th December (so the employee has money to buy Christmas presents 😉 )

    The June half is the sum of 1/12 of the salaries from December of the previous year to May of the present year. The december half is the sum of 1/12 of the salaries from June to November.

  5. urufish said

    Roberto, do you mean it’s 1/12th or 1/6th.
    I ask because I thought the total represents an extra month, 1/12th of the year.
    Regardless, thanks for clearing up the mechanics of how it’s calculated. So it’s unrelated to the actual salary scale as of December. That seems fairer.
    Are you sure you’re Sponge Bob? You sure sound like you’re an accountant or you’re doing payroll or perhaps paying payroll.
    You’re dammed good at English too.

  6. urufish said

    Speaking of buying Christmas presents. Uruguayan children are luckier than their northern neighbours. They get two days of presents.. Christmas and Kings day.

  7. roberto said

    Yes, its the sum of 1/12 of the monthly salary, as it is calculated from the previous six months, you get 6/12 or 1/2 of a month salary in june and another half in december.

    The vacation salary is calculated using the salary you are earning the month you take your vacations. So here when the inflation was higher, it was a good thing to wait and take your vacations just after you got a raise.

  8. urufish said

    The lawyer sent us a set of forms we will use to clear up last year’s and this year’s 13th month and holiday obligations. You’re welcome to use these forms yourselves if you have casual help.

  9. Shirley said

    So, what is the actual annual cost to the employer for an employee making a nominal monthly salary of $4000? So far we have:

    $48,000 (annual salary)
    + $ 4,000 (13th month)
    + $ 4,800 (paid vacation)
    = $56,800

    (Assumptions: $400/day, $4000/month, 12 days vacation/year, which is not taken)

    What is required for BPS? health insurance? DGI? anything else? (Not necessarily for your cleaning lady in particular, but for any typical employee.)

  10. urufish said

    The only person I pay with any consistancy is our cleaning lady. She said she didn’t want to get involved with BPS/DGI because I believe she has to pay a portion our ot her wages. That’s common here.

    I’ll get you an official answer tomorrow.

  11. roberto said

    Vacations days are 20 per year.

    I dont have the exact calculations, but the vacations salary is a bit less than a monthly salary, so in Shirley’s example the vacations salary would be around $3800.

    This is assuming the employee actually takes the vacation. If the employee does not take the vacation you have to pay it. In spanish one would be “Salario Vacacional” which is the one I refered as “Vacation Salary”, and if you dont take the vacations days you get paid for “Licencia no gozada”, something like “Vacations not taken”

    Also if you are paying a monthly salary of $4000, you have some taxes to pay on it, which I think are around 14%. This taxes are to cover the future retirement benefits of the employee.

  12. urufish said

    the majority of domestic workers in Uruguay dont list with BPS. If the person lists with BPS, the 14% is deducted from the person’s pay.. –they get 14% less.

    I’m not saying it’s right to do this.. I’m saying this is what most of them do. None of the people I know with non full time help do this…. If the person was living here or worked full weeks, it would probably be different.

  13. roberto said

    We are talking about two different 14% (always if the salary is payed within the law).

    If an employee earns 100 pesos gross monthly, they get a deduction of around (15% bps + 3% disse + 1% IRP + 0.125% FRL) 19.125%. The IRP part is variable, there is a scale, as your salary goes up, the % goes up, to a maximun of 6%.

    Then the employer has to pay around 14% “Aporte Patronal” above the 100 pesos. So to the employer the employee cost 114 pesos per month. (plus aguinaldo and vacation salary)

  14. Brazzie said

    Thanks Roberto, your comments are always so full of helpful tidbits 🙂

  15. urufish said

    A couple of things.. firstly, I have a bad habit of ‘bottom lining’, I apologize. I often avoid detail if that’s not the point. In my response, where I said they get 14% less, I should have said they get less. It’s the less that is the point. It’s what drives it. That’s the reason lowly paid people like domestics dont want to be in the system. They are already below the poverty line. They dont want to go any further. The employer is happy too. He/she doesn’t have to pay the extra money either.
    A person can be ‘out of the system’ here.. which is where she is. Every person’s situation has to be analyzed, but clearly, some people are actually out of the system.

    Interesting observation on all of this. The new reform has rather little effect on people who are currently paying these taxes. That’s why you see these advertisements and articles in the paper saying ‘did you lose or did you win’ with the reform.

    To an outsider, it was always thought there was no income tax in Uruguay. Technically that’s true. But practically speaking, it’s not. Not when you look at what salaried employees deductions were, the total $ is pretty similar to what a northerner pays in income tax. A rose by any other name… dah dah dah. Maybe that’s why the government said they were uncomplicating things.
    Of course, for people outside this system before, that’s a whole different story. Now they have to pay whereas before they didn’t.

  16. Freddy said

    I agree “Aguinaldo” is a kind of “left oriented (leaning) country” invention. But it is not to be messed with 13.salary – it is far different. It is a suplement for holidays . 13.th salary is different, paid at the end of the year as part of company’s profit given to workers.
    A suplement fof holidays (Aguinaldo) is supposed helping summer holidays affordable ( in poor countries it is a huge expense for family budget).
    It does not mean a worker have to take holidays – the right for free days out of work (holidays) is not binded to this right for suplement (or bonus). You should consider this as kind of benefit workers have.

    In some countries workers have right to paid transportation cost to/from work (cheapest public transport)and daily supplement for lunch as well….

    Kind regards,

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