Transition to Formality: Impact of the monotax scheme in Uruguay
New ILO Technical Report reviews the opinions, assessments and suggestions of monotax workers and analyses this scheme’s impact on the transition towards labour formalisation.
22 August 2023
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Santiago, Chile – Today, the ILO Office for the Southern Cone of Latin America released the report "Monotributo y monotributo social en Uruguay: Apreciaciones de los y las monotributistas", which examines the impact these simplified contribution schemes have had on the Uruguayan workers and the economy.
The report - produced with the Women in Informal Employment: Globalising and Organising (WIEGO) network - provides a detailed insight into the experiences, opinions and suggestions of monotax workers, shedding light on how the monotax contributes to the transition towards labour formality and increased social security coverage.
Since the beginning of this century, Uruguay has seen a significant reduction in the rate of informal workers, from 42.8% in 2001 to 21.0% in 2022. The Monotributo and its targeted version, the Monotributo Social, have contributed to this transformation. With the monotax, the self-employed can access retirement, maternity benefits with and health insurance and health services for an additional payment.
The study is based on interviews and focus groups with monotax workers, conducted between September 2022 and January 2023, providing an updated perspective on their motivations and experiences. One of the key findings is that enrolment in the monotax is mainly associated with the search for labour formality, the search for new clients and the avoidance penalties and inspections. In addition, the social security access provided by the monotax has also been a relevant incentive to join this regime, although some workers still do not take advantage of these benefits despite being eligible.
While the overall assessment of the monotax is positive, the report identifies areas for improvement based on the experience of monotax workers themselves. Criticisms include the limited the social protection offered by the scheme, which could lead to a possible consolidation of a "second-rate social security scheme". Workers also highlight the need to simplify procedures for the most vulnerable workers and to address the loss of certain benefits by being considered employers rather than workers.
As key recommendations for the scheme, the report calls for improving the quality of benefits, improving accessibility to health services, providing clearer information about the scheme, making contribution mechanisms more flexible to access better benefits, and reducing disparities with the Sole Proprietorship scheme.
This report, together with previous ILO analyses of this instrument, provides valuable inputs for the design and implementation of policies to promote labour formalisation and social protection in the region.
The report - produced with the Women in Informal Employment: Globalising and Organising (WIEGO) network - provides a detailed insight into the experiences, opinions and suggestions of monotax workers, shedding light on how the monotax contributes to the transition towards labour formality and increased social security coverage.
Since the beginning of this century, Uruguay has seen a significant reduction in the rate of informal workers, from 42.8% in 2001 to 21.0% in 2022. The Monotributo and its targeted version, the Monotributo Social, have contributed to this transformation. With the monotax, the self-employed can access retirement, maternity benefits with and health insurance and health services for an additional payment.
The study is based on interviews and focus groups with monotax workers, conducted between September 2022 and January 2023, providing an updated perspective on their motivations and experiences. One of the key findings is that enrolment in the monotax is mainly associated with the search for labour formality, the search for new clients and the avoidance penalties and inspections. In addition, the social security access provided by the monotax has also been a relevant incentive to join this regime, although some workers still do not take advantage of these benefits despite being eligible.
While the overall assessment of the monotax is positive, the report identifies areas for improvement based on the experience of monotax workers themselves. Criticisms include the limited the social protection offered by the scheme, which could lead to a possible consolidation of a "second-rate social security scheme". Workers also highlight the need to simplify procedures for the most vulnerable workers and to address the loss of certain benefits by being considered employers rather than workers.
As key recommendations for the scheme, the report calls for improving the quality of benefits, improving accessibility to health services, providing clearer information about the scheme, making contribution mechanisms more flexible to access better benefits, and reducing disparities with the Sole Proprietorship scheme.
This report, together with previous ILO analyses of this instrument, provides valuable inputs for the design and implementation of policies to promote labour formalisation and social protection in the region.