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Employment Norms in Ecuador
Ecuador's employment norms are governed by the country's labor laws and regulations, which aim to protect workers' rights and ensure fair treatment in the workplace.
General Information:
- The Ecuadorian currency is the US Dollar (USD).
- Quito is the capital of Equador.
- Spanish is the official language of Ecuador. Documentation is done in Spanish.
- As of 2021, the GDP of Ecuador was reported to be 5965.1 USD
Table of Contents
- Agreements
- Onboarding Process
- Visa
- Minimum Wage
- Payroll Cycle
- Annual Bonus
- Health Benefits
- Working Hours and Overtime
- Leaves
- Social Security
- Taxes for Employers
- Taxes for Employees
- Probation
- Termination
- Severance Pay
- Employees or Contractors
- Final Words
AgreementsOnboarding ProcessVisaMinimum WagePayroll CycleAnnual BonusHealth BenefitsWorking Hours and OvertimeLeavesSocial SecurityTaxes for EmployersTaxes for EmployeesProbationTerminationSeverance PayEmployees or ContractorsFinal Words
Agreements in Ecuador
According to Ecuadorian employment contract law, the employment contract must be written in Spanish, including all provisions, and has to be comprehensive. The agreements must include:
- Correct names of both the employer and the employee
- Place of employment
- Date of exact joining
- Working days (weekly)
- Duties of the employee
- Provisions for probation and termination
- Compensation in USD
- Payment Cycle
- Holiday and leave entitlement
Contracts should be presented to Ecuadorian Social Security for Employees together with any other provisions that were discussed and agreed upon.
Onboarding Process in Ecuador
- It takes 5 business days to complete the onboarding process. Documents must be submitted one day before the start date.
- After the employee submits all required information, the minimum onboarding time begins. The timeline for onboarding is also dependent on registration with local authorities.
- The Right to Work assessment (if applicable) will add three days to the total time to onboard all non-nationals of the country of employment.
- Extra time may be needed if there is a need to follow up on the right-to-work assessment.
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Visa in Ecuador
Ecuador offers 3 types of Visas:
- Tourist Visa: Ecuador tourist visas are valid for up to 90 or 180 days. This visa is intended for tourists visiting Ecuador.
- Temporary Resident Visa: A temporary resident visa in Ecuador is valid for two years. When they are about to expire, they can be renewed. This visa is required for all foreign nationals visiting Ecuador for reasons other than tourism, such as work or business.
- Work Visa: The type of work visa you need depends on the type of work you need to do and the amount of time you need to spend in Ecuador.
- 12-VI Visa: This work visa is for all foreign nationals who want to work in Ecuador.
- 10-IV Visa: This visa is granted to contracted technical experts working for Ecuadorian companies.
- 9-V visa: This is the most common work visa. It is granted when foreign nationals with professional degrees wish to relocate to Ecuador to pursue and practice their profession.
Minimum Wage in Ecuador
The Ecuadorian government raises the minimum wage every year. The current (as of 2023) monthly minimum wage is USD 450.
Payroll Cycle in Ecuador
The payroll cycle in Ecuador is either monthly or bimonthly. Clearance for monthly payments is made at the end of the month. Bi-monthly payments are made on the 15th and last day of the month. It is common to practice paying 40% of the salary by the middle of the month and the remaining 60% by the end of the month.
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Annual Bonus in Ecuador
In Ecuador, 13th and 14th-month pay is required. It can be paid monthly in proportion or collected and paid at the end of the year. Bonuses are typically paid twice a year, once in December and again in March or April. The following is the calculation for each:
- 13th Month Pay: The previous year's total remuneration (including benefits, commissions, supplemental pay, and overtime pay) divided by 12 months.
- 14th Month Pay: Pay for the 14th month is equal to one month's minimum wage.
A portion of the profits must also be distributed as a bonus to the employees.
Health Benefits in Ecuador
Ecuador has a well-developed publicly funded health care system as well as national health insurance. All residents, regardless of income or insurance status, have access to free medical care.
Working Hours and Overtime in Ecuador
- Work hours:Employee has to work 8 hours per day, 40 hours per week. Monday to Friday is the standard work week.
- Break: The workday of an employee is divided into two sections. The second of which, following the first four hours of work, includes a break lasting up to two hours. When working overtime, no segment of the day may last longer than five hours.
- Overtime: Maximum allowed overtime is 4 hours per day; 12 hours per week. Weekday overtime pay is 150% of regular pay. Weekend overtime is 200% of regular pay. There is no law requiring management, supervisors, or administration to work overtime.
Leaves in Ecuador
Sick Leaves
- Within the first three days of the illness, the employee who has a non-work-related illness must notify the employer and the relevant labor authority in writing. If not, they will be held responsible for upholding the expectation that there is no such disease.
- If an employee claims to have a non-work-related sickness, they must provide documentation in the form of a medical certificate, ideally from a doctor affiliated with the IESS's National Medical Social Directorate.
- A professional medical certificate must be given to the employer within 48 hours of the commencement of any sick period for all absences.
Parental leaves
Parental leave is not governed by legislation in Ecuador. Employees may, however, be eligible for maternity and paternity leaves.
Maternal Leaves
- 12 weeks - For normal birth (2 weeks before, 10 weeks after delivery)
- 15 days- For cesarean or multiple deliveries
- 18 days- For infants with exceptional difficulties, especially premature birth
- Extra 100 days- For newborns requiring extensive medical care
- The employee on maternity leave is paid 100% of their salary, out of which 75% is covered by social security and the remaining 25% by the employer.
Parental leaves
- 10 days- For normal birth (2 weeks before, 10 weeks after delivery)
- Additional 10 days- For cesarean or multiple deliveries
- Additional 90 days- For infants with exceptional difficulties, especially premature birth
- Additional 25 days- For newborns requiring extensive medical care
- The employer will be responsible for this pay.
Adoption Leaves
- 15 days after the adoption date
Annual leaves
- 15 days of annual leave after one year of work
- After five years have passed and each year after that, an extra day will be added. Capped at 30 days in total
- Annual leaves may be carried over for a maximum of three years.
Public Holidays (for the Calendar year 2024)
These dates may change as per official government announcements.
- 1 January - New Year's Day
- 12 February - Carnival Monday
- 13 February - Carnival Tuesday
- 29 March - Good Friday
- 1 May - Labour Day
- 24 May - Anniversary of the Battle of Pichincha
- 9 August - Independence Day
- 9 October - Independence of Guayaquil
- 1 November - All Souls' Day
- 3 November - Independence of Cuenca
- 25 December - Christmas Day
Public Holidays (for the Calendar year 2025)
These dates may change as per official government announcements.
- 1 January - New Year's Day
- 3 March - Carnival Monday
- 4 March - Carnival Tuesday
- 18 April - Good Friday
- 1 May - Labour Day
- 24 May - Anniversary of the Battle of Pichincha
- 9 August - Independence Day
- 9 October - Independence of Guayaquil
- 1 November - All Souls' Day
- 3 November - Independence of Cuenca
- 25 December - Christmas Day
Taxes for Employers in Ecuador
The 12.15% rate is the total contribution that the employer is responsible for paying on behalf of the employee. It includes the employee's portion (usually around 6.25%) and the employer's portion (usually around 5.9%).
The 8.33% Reserve Fund is a separate contribution that is not due until after the first year of employment. This contribution is used to fund certain social security programs, such as unemployment insurance and workers' compensation.
Taxes for Employees in Ecuador
Ecuador uses a Pay As You Earn system for income taxation. Due to the progressive nature of the system, your tax burden rises as your income does.
The following are the income tax rates for 2023:
Income - Tax on Income(%)
- US$ 0 to US$ 11,722 - 0%
- US$ 11,722 to US$ 14,935 - 5%
- US$ 14,935 to US$ 18,666 - 10%
- US$ 18,666 to US$ 22,418 - 12%
- US$ 22,418 to US$ 32,783 - 15%
- US$ 32,783 to US$ 43,147 - 20%
- US$ 43,147 to US$ 53,512 - 25%
- US$ 53,512 to US$ 63,876 - 30%
- US$ 63,876 to US$ 103,644 - 35%
- US$ 103,644 and over - 37%
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Probation in Ecuador
All employee contracts in Ecuador may include a 90-day probation period. The contract becomes effective upon completion of the probation period. During the probation period, either party may terminate the contract without cause.
Termination in Ecuador
- Employees are typically only terminated for breach of contract. Even in these cases, employers must obtain permission from the local labor inspector before taking action.
- Employers must give employees at least 20 days' notice before terminating fixed-term contracts. In almost all cases of job termination in Ecuador, the employer may be required to pay severance to the affected employees.
- Terminations that are compliant include:
- Voluntarily on the part of the employee
- By mutual consent
- Employer-based unilateral termination may include:
- On probation period
- Objective grounds
- Disciplinary dismissal
- Performance-based
- Job contract expiration
Severance Pay in Ecuador
The Ecuadorian Labor Code stipulates that an unjustified termination of a work connection must be compensated. Employees who are terminated without the proper notice are entitled to a severance payment. It is equal to one month's pay multiplied by the number of years the employee has worked for the company, up to a maximum of 25 years.
Employees or Contractors in Ecuador
- Employee/worker: The employment relationship between an employee and employer is a contractual one. It is defined as an agreement in which a person commits to providing another party with legal personal services in a dependent or subordinate relationship in exchange for compensation determined by a mutual agreement, by the law, by a collective agreement, or by a custom agreement.
- Independent contractor/self-employed: The connection with a self-employed or independent contractor is a contractual one. It is not governed by labor law and is not otherwise outlined by it.
Final Words
The use of an Employer of Record (EOR) solution can simplify the process of doing business in Ecuador by outsourcing HR and payroll responsibilities and ensuring compliance with local labor laws. EOR services can provide valuable support to companies operating in Ecuador, helping them to focus on their core business activities while ensuring compliance with all relevant employment regulations.
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Social Security in Ecuador