Definitive Guide to Hiring in Ecuador

Hiring in Ecuador

Hiring employees compliantly in Ecuador means doing it yourself or using an Employer of Record like Global Expansion. You should be careful using independent contractor agreements in Ecuador so that you don’t run afoul of employment laws. To hire an employee compliantly and offer them mandatory benefits and compliant agreements, you can:

(a) Establish your own new legal entity, banking, accounting and payroll service in Ecuador; or

(b) use an Employer of Record like Global Expansion who can handle all of the details for you.

Labor Laws in Ecuador

Employment laws in Ecuador are uniquely suited to the country’s way of life, and crucial to understand if you want to employ local talent in this country. Get the details on Ecuador employment laws and Ecuador policies here.

Employee Probation Period

• A probationary period can be set up for 90 days

Annual Leave in Ecuador

• Annual leave (including rest days) is legally set at 15 days after one year of employment.
• After five years of employment, employees are entitled to one extra day per year up to an additional 15 days

Holidays in Ecuador

Workers are entitled to paid holidays during Festival (public and religious) holidays. These include memorial holidays and religious holidays (Christian origin).

Here is the full list of public holidays in Ecuador:

Maternity Leave Ecuador

• Employers must offer up to 12 weeks paid maternity leave.
• If an employee had multiple births (more than one child) or a C-section, then she is entitled to 10 additional days of leave.
• In case the newborn has a disability or serious congenital illness, mothers are entitled to 3 additional months of leave.
• Employers must pay 25% of the person's salary during this time.
• The other 75% is paid by social security.
• Mothers are also entitled to nine months of shortened work days (six hours as opposed to the full eight)

Paternity Leave Ecuador

• The employer must grant to the working father a paid leave of absence of ten days for the birth of his child, when it is a natural birth; and in multiple births or C-section, the leave is extended for five additional days.
• If the newborn has severe degenerative disease (more than 75%), fathers are entitled to a 25-day leave.

Sick Leave in Ecuador

• Employees are entitled to sick leave of up to two months at 50% of their salary.
• Employers must certify sick leave of less than three days with the social security medical center.

Working Hours in Ecuador

• The norm is 40 hours a week with 8 hours daily.
• The working day can start anywhere from 6 to 10 am and finish 8 to 10 hours later, depending on the type of work

Overtime in Ecuador

• Overtime is considered any hours additional to 8 in one day, or 40 in one week.
• It is paid at 150%, or 200% is overtime hours are after midnight.
• Overtime may not exceed four hours per day or twelve hours per week.
• Overtime occurring before midnight is considered “supplementary hours” and is paid with a surcharge of 50%.
• Overtime occurring from midnight to 6:00 a.m. is considered “extraordinary hours” and is paid with a surcharge of 100%.
• Work during Saturdays and Sundays must be paid with a 100% surcharge if these are obligatory rest days.

Termination of Employment in Ecuador

• Contracts can be terminated with just cause without severance (with approval from labor authority) for:

  • Lack of discipline
  • Dishonesty
  • Serious offense against the employer
  • Serious incompetence
  • Non-compliance with regulations
• For dismissal with just cause and without just cause (“despido intempestivo”): no statutory length of notice period.
• Art. 14 of the labor code establishes that no worker can be dismissed if he/she has less than one year of tenure. In practice, this implies a “notice period” of 3 months at 9 months of tenure
• In case of redundancy, article 193 establishes a 30 prior notice for the termination of all employment agreements due to final closure of the company
• Employees who are terminated before their contract, either due to a business closure or otherwise, normally collect severance pay as well as bonus called a desahucio.
• They are entitled to receive one paycheck for every ear employed by the company up to 25 months of payments.
• Desahucio is typically 25% of the employee's monthly salary multiplied by how many years an employee has served the company

Notice Period in Ecuador

• For dismissal with just cause and without just cause (“despido intempestivo”): no statutory length of notice period.
• Art. 14 of the labor code establishes that no worker can be dismissed if he/she has less than one year of tenure. In practice, this implies a “notice period” of 3 months at 9 months of tenure.
• In case of redundancy, article 193 establishes a 30 prior notice for the termination of all employment agreements due to final closure of the company

Severance in Ecuador

• Employees who are terminated before their contract, either due to a business closure or otherwise, normally collect severance pay as well as bonus called a desahucio.
• They are entitled to receive one paycheck for every ear employed by the company up to 25 months of payments.
• Desahucio is typically 25% of the employee's monthly salary multiplied by how many years an employee has served the company

Ecuador Salary and Wages

13/14th Month Salary in Ecuador

• Yes (Mandatory)
• There is a statutory requirement to pay the 13th and the 14th month salary.
• The 13th month must be paid by the 22nd of December and the 14th month (equal to the government minimum wage) on either March or August.

• The Social Security Institute of the government manages the social security system, which covers health benefits, pensions and certain social payments.
• All private, public and foreign employees and self-employed professionals are covered by social security legislation.
• Social security contributions must be paid to the Ecuadorian Social Security System. There are two different rates, according to the individuals' employment relationship.
• Private employees under an employment relationship will contribute at the rate of 9.45% of remuneration arising from employment (except certain statutory social benefits received). Special rates apply to employees working on special sectors of the economy. Voluntary contributors can contribute at a rate of 20.6% over their income.
• The employer contribution amounts to 12.15% of total remuneration.

Immigration Ecuador

• All foreign nationals must obtain temporary visas for labor activities to work legally in Ecuador.
• Temporary residence visas are valid for one or two years and are renewable for one or two years each time, at the discretion of the Ministry of Foreign Affairs.
• Temporary residence visa under labor contract:
  • This type of visa allows expatriates to work in an Ecuadorian company by being part of the local payroll and signing a labor contract.
  • The Ecuadorian branch must be duly incorporated with all documentation updated.
  • In addition, the share capital of the company must be at least USD12,500.
• Temporary residence visa under assignment letter:
  • This visa allows assignees to work in Ecuador and receive their compensation from a foreign company.
  • They maintain a labor relationship with the foreign company.
  • It must meet the same corporate requirements listed above, plus a training agreement between the companies and an assignment letter.
• Temporary residence visa for legal representation:
  • This type of visa allows expatriates to perform temporary legal representation activities in an Ecuadorian company (for example, general managers, presidents and attorneys).
  • The legal representative must be designated by an appointment or a power of attorney.
• Permanent residence visas are valid for an indefinite period of time.
  • This type of visa allows individuals to obtain an Ecuadorian identification, as well as to work or not work for an Ecuadorian company.
  • In this regard, they are not required to change their migratory category if they are employed by a local company.
  • Foreign nationals can obtain permanent residence visas if they have stayed in Ecuador as a temporary resident for 21 months.

Value Added Tax (VAT) in Ecuador

• Ecuador's general VAT rate is 12%, with other rates including 0% that can apply to certain transactions.
• The Value-added tax (VAT) is administered by the Ecuadorian Internal Revenue Service (IRS)

Mandatory Benefits in Ecuador

• These are mandatory benefits as postulated by law
• These include probationary period, annual leave, public holidays, sick leave, maternity leave, paternity leave, overtime pay, notice period, severance pay and 13th month pay
• Mandatory benefits also include social security benefits.

Payroll Accrual in Ecuador

Country Accruals Additional Information

Description

Following the second year of employment, however, employers are obliged to pay additional reserved funds into Social Security amounting to 8.33% of an employee’s gross salary each month.

Staff members have the choice to either receive this payment monthly or to have it accumulate it in their social security fund.

Employees who work extra hours will be paid at different rates based on an overtime schedule, which ranges from a premium payment of 25% to 100%.

Payroll Accruals Additional Information

Accrued Benefits in Ecuador

Why use Global Expansion to hire in Ecuador

Establishing a branch office or subsidiary in Ecuador can be time-consuming, expensive and complex. With such a robust labor market in place, one must pay great attention to detail when structuring employment because Ecuadorlabor laws are complex.

The company also has a responsibility to comply with specific employment practices dictated by Ecuador law to maintain its good standing as an equal opportunity employer.

Global Expansion makes it easy for you to expand into Ecuador. We'll help you hire your candidate of choice, handle HR matters and payroll, and ensure that you comply with local laws without the burden of setting up a foreign branch office or subsidiary. In addition, you'll have complete control and direction over your employees.

We enable you to stay in control of everything. Our Ecuador Global Professional Employer Organization (PEO) and Employer of Record (EOR) solution provides you with peace of mind to focus on running your company and the security to enter new markets.