To expand your business and hire local talent in Ecuador, you may want to consider engaging with an Employer of Record (EOR) service. An EOR can help you navigate and ensure compliance with local labor laws, allowing you to focus on your core business activities.

Growing your team in Ecuador requires making strategic hires at the right time and placing them in appropriate positions. Expanding in the Ecuador comes with its own set of challenges, including compliance, payroll, tax, and benefits management. At Gloroots, our global Employer of Record (EoR) service can alleviate these complexities, ensuring compliance and enabling you to concentrate on what truly matters: your employees and business expansion. Partner with us to simplify the process and succeed in Ecuador's dynamic market.

Misclassification of employees occurs when businesses wrongly categorize workers as independent contractors or exempt employees, denying them essential protections and benefits. In Ecuador, using a PEO/EOR helps prevent such misclassification by ensuring workers are properly classified, payroll is managed accurately, and all labor laws are followed. This not only minimizes legal risks but also streamlines HR processes, allowing employers to focus on growth while maintaining full compliance in Ecuador’s complex employment landscape.

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Expanding your workforce in Ecuador is now a feasible choice for businesses, thanks to the many skilled professionals available. However, as with any international market, knowing essential government regulations and policies is crucial. This section provides an overview of the key compliance considerations when operating in this South American market. It covers regulations related to working hours, outlines employment contract requirements, explains statutory benefits, and delves into the employment tax obligations for both companies and their employees.

Employment contract

Employers in Ecuador must have a written employment contract, which should be registered online with the Ministry of Labour. While verbal agreements are accepted, they might require legal proof. The contract doesn't have to be in Spanish but should cover job details, how the work is done, payment terms, contract duration (linked to tasks, not set periods), work location, and possible performance penalties. Additionally, all required labor benefits and terms under the law and relevant collective agreements are part of the employment deal. Collective agreements with unions are binding on employers, and it's worth noting that there are no broad industry-wide agreements in Ecuador.

Working time

In Ecuador, a typical workweek includes 40 hours of work.

Overtime

For employers in Ecuador, any work that goes beyond the regular 40-hour workweek is considered overtime. The rules for overtime are outlined in the employment contract or collective agreements. If employees are asked to work extra hours or on holidays, there are limits – a maximum of four hours per day and 12 hours per week. Overtime pay is calculated at either 150.00% or 200.00% of the employee's usual salary, depending on the type of work and when it's done. Approval from the local labor inspector is needed for overtime hours.

Public Holidays

There are 14 public holidays in total. 

Minimum Wage

In Ecuador, the minimum wage is known as the Unified Basic Salary (SBU), and it amounts to $470 per month for workers in all economic sectors.

Annual Leave

In Ecuador, regular full-time employees are entitled to 15 days of paid leave each year. This increases to 16 days after five years of continuous employment. To qualify for the 15 days of paid leave, an employee must have completed one year of service.

Paid Sick Leaves

For employers in Ecuador, employees covered by the Ecuadorean Social Security Institute (IESS) qualify for sick leave if they've consistently contributed for either 180 days in the six months before their illness or 189 days in the eight months prior. During this sick leave, which can last up to two months, employees receive 50% of their regular salary. The employer handles payments for the first three days, and after that, the IESS takes over. It's important for employees to provide the employer with a certified medical document within 48 hours of the start of the sick leave.

Maternity leaves

Mothers in Ecuador receive a 12-week maternity leave, two weeks before giving birth and ten weeks afterward. This leave is financially supported by both Social Security and the employer, with Social Security covering 75% and the employer contributing 25%. Additionally, an extra ten days are added if it's not the mother's first child. New mothers also have the right to work six-hour days for nine months instead of the standard eight hours.

Paternity leaves

In Ecuador, fathers can take ten days of paid paternity leave, which extends to 15 days for multiple or complicated births. In cases of premature birth, fathers are eligible for an extended paid paternity leave of 18 days.

Tax and Social Security contribution:

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Employer Payroll Contribution 

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Employee Payroll Contribution

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Employee Income tax

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Termination 

The termination procedure depends on the employment contract, collective agreements, contract type, and the reason for ending the employment.

Severance Pay

Severance pay in Ecuador is calculated at one month's salary for each year of service, with proportional compensation for part-years worked. The minimum payout is equivalent to three monthly salaries, and the maximum can go up to 25 monthly salaries. Employers also have the option to provide a termination bonus, amounting to 25.00% of monthly wages for each year of service completed.

Notice Period

In Ecuador, the notice period is determined by the employee's employment contract or collective agreement, and it is not mandated by law.

Probation period

In Ecuador, the length of the probationary period varies based on the role and is defined in the employment contract. Typically, probation periods extend up to three months.