Table of Contents

Ecuador

Table of Contents

Currency

United States Dollar (USD)

Payroll Frequency

Monthly or Bi-monthly

Employer Taxes

12.15%

About Ecuador

Located in northwestern South America, Ecuador borders Peru and Colombia and includes the Galápagos Islands in the Pacific. Originally home to several Amerindian groups, it was colonized by Spain in the 16th century and gained independence in 1820 as a sovereign nation. Most of its population of 16.4 million citizens are considered mestizos, followed by people of European, native American and African descent. Spanish is the official language spoken by the majority of its people. Ecuador has a biodiversity that is reflected in its native plants and animals, including those that reside on the Galápagos Islands, a popular destination for both tourists and researchers alike. The Andes mountain range as well as the Amazon river, both play a critical role in Ecuador’s climate and ecology. As its name indicates, Ecuador’s location at the equator also means there is very little variation in daytime and nighttime hours during the year. Ecuador’s economy is primarily dependent on petroleum and agricultural products and is currently considered a developing, although upper-middle-income, economy.

Employment Relationship

• Permanent Employment

Employment contracts made for an indefinite term with stable and permanent work are considered permanent contracts in Ecuador. Such contracts can be concluded in writing or orally. All employees are entitled to statutory employment rights.

• Fixed-Term or Specific-Purpose Contracts

Employment contracts can be made for fixed-term with a minimum duration of one year. Contracts can also be made for specific tasks that are not habitual in the activity of the company or employer. Fixed-term contracts are renewable. Contracts that continue after their expiry are converted to indefinite term contracts. For contracts whose duration is less than two years, employers are required to give at least 30 days'. If a fixed-term contract is terminated before its expiry, the responsible party is liable to pay compensation to the other party. 

• Temporary Employment Contratcs

Temporary contracts in Ecuador can be made to satisfy circumstantial demands of the employer, such as replacement of personnel who are absent due to vacations, leave, illness, maternity and similar situations.  Occasional contracts may also be entered into in order to meet a greater demand for production or services in regular activities of the employer. The duration of such contracts cannot be more than 180 days in a period of 365 days. If the circumstance or requirement of the worker's services is repeated by more than 2 annual periods, the contract will become a seasonal contract.  Employees are paid 35% extra salary for temporary contracts as compared to permanent employees. 

Probationary Period

An employment contract can include a probationary period of a maximum duration of 90 days. This must be included in the written employment contract. During probation, either party can terminate the contract freely. No more than 15% of the total workforce can be on probation at a time. However, employers that start their operations in the country, or existing ones that expand or diversify their industry, activity or business, will not be subject to this restriction of 15% during the six months after the start of operations, expansion or diversification of the activity, industry or business. 

Working Hours

Standard working hours are eight hours per day or 40 hours per week. For underground works, maximum working hours are six hours a day. The working day for adolescents may not exceed six hours a day for a maximum period of five days a week. Two days' paid weekly rest is mandatory. Higher or lower working hours can be determined by collective agreements. If an employee stops working eight hours a day without justified reason, he/she loses proportional part of remuneration. When work is interrupted due to accidental or unforeseen causes, force majeure or other reason beyond the control of employers and employees, employers have the right to increase working hours by three hours a day to recover the lost time without liability for overtime pay.

Holidays / PTO

• Statutory Holidays

• Paid Annual Leave

Annual leave is an inalienable right for employees and cannot be compensated in lieu of. All employees have the right to annual leave of 15 days. Employees under 18 years of age have right to 18 days' annual leave. Employees who have worked for more than 5 years with the same employer are entitled to additional leave of 1 day per extra year of service. The choice between additional days due to seniority or payment in money will depend on the employer. Annual leave is paid in accordance with the average salary of the employee and is paid in advance. If an employee's contract is terminated without having enjoyed vacations, he/she will receive compensation for unused leave the proportional part to the time of services.  Employees can choose to not use vacations for up to three consecutive years, in order to accumulate them in the fourth year. In case of work technical work or trusts for which it is difficult to replace the worker for a short time, the employer may deny the vacation in one year to accumulate it to the following year. If the worker does not get to enjoy the vacation due to leaving the service, he/she will have the right to remuneration corresponding to those not enjoyed, with 100% premium over their usual wages. 

• Sick Leave

Employees are entitled to sick leave if they have paid six months of continuous contribution, prior to the onset of non-occupational disease. They must inform their employers and labor inspector in writing within first three days of their sickness, along with a medical certificate from a doctor from the Directorate of General Individual and Family Health Insurance of the Ecuadorian Institute of Social Security (IESS). The benefits are paid for a maximum of 185 days. First three days are covered by the employer and the remaining are paid by the IESS. The benefit is paid from the fourth day as 75% of the last remuneration.  Employers are required to pay sickness benefits at the rate of 50% of their wages to employees who are not entitled to IESS sickness benefits. Such benefits are paid for a maximum of two months.

• Maternity Leave

All female employees in Ecuador have the right to 12 weeks paid maternity leave – two weeks before delivery and ten weeks after, extended by ten days in case of multiple births. They must submit a medical certificate issued by a doctor from the Ecuadorian Institute of Social Security (IESS), stating the probable date of delivery. In case of any premature birth or delivery under conditions of special care, maternity leave is extended by at least eight days. If the child is born with a degenerative, terminal or irreversible disease or with a degree of severe disability, the parent may take a leave of absence with pay for 25 days. The benefits for maternity leave are paid by IESS at the rate of 75% of the wages of the employee for the duration of maternity leave. Remaining 25% is paid by the employers. Employees must have paid 12 consecutive monthly contributions, within the 12 months before prenatal rest. Employers are prohibited from dismissing pregnant employees and those who are on maternity leave, except for liquidation or disability that makes them unable to work.

• Paternity Leave

Ecuador grants ten days paid paternity leave to fathers. In cases of multiple births or delivery by cesarean section, it will be extended for five more days. In case of premature birth, the leave is increased by eight days and when the child is born with a disease – degenerative, terminal or irreversible, or with a degree of severe disability, the parent can take paid leave of up to 25 days. In the event of death of the mother during childbirth or while enjoying maternity leave, the father may make use of all, or where appropriate, of the remaining part of the maternity leave that would have corresponded to the mother if she had not died.  

Termination of Employment

• Notice Period

It is not mandatory to give notice to terminate a contract. Both employers and employees can terminate a contract without notice by paying a sudden dismissal bonus. Fixed-term contracts can be terminated by giving a notice of at least 30 days by the employer and 15 days by the employee. In case of termination without notice, employers must pay the employees compensation equal to 25% of their last monthly remuneration for each year of service with the employer. This compensation is in addition to any severance pay to which the employee is entitled.

• Severance Benefits

Severance benefits are paid to employees whose contract is terminated untimely, as follows: Up to three years of service – Three months of remuneration  More than three years of service – One month of remuneration for each year of service without in any case that value exceeding 25 months of remuneration  In case of sudden dismissal without notice, employees are entitled to a sudden dismissal bonus equal to 25% of their last monthly remuneration for each year of service with the employer.