Ecuador PEO & Employer of Record

WeHG provides an International PEO and global Employer of Record service in Ecuador to companies willing to enter the Ecuadorian market or hire local/expat employees in this country.

Traditional approach requires establishing a subsidiary in Ecuador.  However our solution allows you to start the operations in Ecuador within days hence save time and money.  WeHG would hire candidates on your behalf while you maintain full operational control of their work. So legally they would be our employees, on our local payroll, 100% compliant but will work on your behalf. .

Ecuador fast facts

Population, million: 17,08
Land area: 285,561 km² 
Capital: Quito
Local currency: USD

Hiring, Negotiating and Doing Business in Ecuador

Necessity of written employment contract

Labor contracts in Ecuador must include at least:

• Employer and worker data.
• The start date of the employment relationship.
• The position and description of functions to perform.
• The working day and the schedule, if applicable.
• The determination of the type of contract.
• The determination of the existence of a trial period.
• The remuneration and the form of payment.
• Any other condition that does not violate the rights of the worker.
• Contracts must be registered with the Ministry of Labor through the online system SUT (Unified Worker System).
• Employers must keep written records of signed contracts in their offices. The Ministry of Labor can review contracts and their registration at any time.

Different forms of engagement: employment, contracting, work with private entrepreneur

Depending on the needs of the company, there are different types of employment in Ecuador, among them are:

• Occasional workers
• Seasonal workers
• Certain/specific work contractors
• Task contractors

Ecuador Employment Contract

Types of employment agreements

• Indefinite term contract: This is the most common contract, it does not have a fixed or definite term for its termination. These contracts can have a 90-day trial period. Fixed term contracts were eliminated in 2015.
• Eventual contract: They are used to meet extraordinary circumstances that may occur in the ordinary course of business such as replacement of workers for maternity, illness, vacation. The reason or circumstance and the term must be included in the contract. These contracts can not exceed 180 continuous or discontinuous days within a period of 365 days. Remuneration includes a surcharge of 35%.
• Occasional contract: They are used to solve emergent or extraordinary circumstances not related to the principal or habitual activity of the employer. It term can not exceed 30 days. Remuneration includes a surcharge of 35%.
• Seasonal contracts: Those that are made to meet cyclical or periodic needs, due to the discontinuous nature of the activities. Workers should be called every season.
• Certain/specific work contract: They are signed when the need is for a specific job and the remuneration includes the whole of it.
• Task contracts: It is one in which the worker agrees to execute a certain amount of work or work in the day. It is understood concluded the day or period of time, by the fact of completing the task.
• Contract by piece: It is one in which the work is done by pieces or in general, by units of work, and the remuneration is agreed for each of them, without taking into account the time invested in the work.

Ecuador working hours

Ecuador’s working week is 40 hours over the five weekdays. Overtime rates apply for those working over 40 hours per week. Overtime rates are dictated by employee’s after-hours schedules. The rates range from a 25-100% increase in wage based on these schedules and depending on particular cases.

Vacation 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. Ecuador also observes 12 national holidays.

Ecuador Maternity Leave

Employers must offer up to 12 weeks paid maternity 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). On the other hand, paternity leave has a cap of 10 days.

If a company terminates an employee’s contract while they are pregnant, the employee is entitled to a settlement of 12 salaries additional any other terms of the settlement.

Ecuador Severance Laws

Termination of employment:

Including entitlement and termination terms in an employment contract can help make sure both parties are on the same page. You need to give workers notice 30 days before termination if they have a fixed-term contract. Employees, in any case, are usually entitled to severance.

The financial compensation for employment termination relationship without a cause is determined in the Ecuadorian Labor Code and it is equivalent to a monthly remuneration for each worked year or fraction of worked year. The minimum financial compensation is 3 monthly remunerations and the maximum is 25 monthly remunerations.

There is and additional bonus equivalent to 25% of the last monthly remuneration for each year of work.

This bonus has to be paid in every case of termination of the employment relationship including employee resignation and in case of termination with a fair cause.

Ecuador Tax

The personal income tax (PIT) table applicable for year 2020 is as follows:

Social Security contributions

Both employees and employers contribute to Social Security every month. Employees put in 9.45% of their gross salary, while employers must give 12.15%. However, after an employee’s second year of employment, employers have to give additional reserved funds to Social Security at 8.33%.

Health Insurance Benefits 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 centre. Sick leave beyond the first two months is usually paid by social security, as long as the employee is registered with the social security office.

Additional Benefits in Ecuador

The 13th-month bonus is a 12th of the employee’s annual salary and should be paid by December 24 each year. 

The 14th salary is a bonus equal to the current amount of the legal minimum wage. Depending on the location of the employee’s workplace, the 14th salary should be paid in either March or August of each year.

If employees are not union members, companies are not legally bound to consider particular annual raises or bonuses.

Ecuador Holidays

• New Year’s Day
• Carnival
• Good Friday
• Labor Day / May Day
• The Battle of Pichincha
• Independence Day
• Independence of Guayaquil
• All Soul´s Day
• Independence of Cuenca
• Christmas Day

Why Choose WeHireGlobally

WeHG takes care of all the onboarding hurdles, payroll, compensation and benefits, tax filing, and termination of employment. Our Employer of Record solution allows you to manage your overseas teams efficiently while minimizing cost and risk.