Ecuador

Currency CurrencyUnited States Dollar (USD) Working Time Work Week40 hours Employer Taxes Employer Taxes 20.48%

Hire in Ecuador

Get the best talent in Ecuador. Let Lano do the heavy lifting. We’ll help you hire the best full-time employees or contractors, saving you from the pain of establishing a legal entity. No need to worry about complex local laws or tax requirements. From compliant contracts to global payroll, we’ve got you covered. 

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Companies who are planning to recruit in Ecuador are usually attracted by the country’s low employment costs. Wages are way below Western standards and social security contributions are also just a fraction of what you could expect to pay in other countries. 

That being said, cheap labour is not the only aspect rendering hiring in Ecuador attractive. As the country’s official language is Spanish – which is spoken by the vast majority of the local population – recruiting an Ecuadorian employee means adding valuable language skills to your remote team.

Basic Facts about Ecuador

  1. official state name Republic of Ecuador (República del Ecuador)
  2. capital Quito
  3. population 17.8 million
  4. language Spanish
  5. currency United States Dollar (USD)
  6. time zone UTC -5 to UTC -6
  1. Show public holidays
    01 Jan New Year
    15 Feb Carnival
    16 Feb Carnival
    02 Apr Good Friday
    01 May Labour Day*
    24 May Simon Bolivar Day
    10 Aug National Day*
    09 Oct Independence of Guayaquil*
    01 Nov Independence of Cuenca
    02 Nov All Saints’ Day
    25 Dec Christmas Day*

    *Observed on the day before, i.e. 30 Apr, 09 Apr, 08 Oct and 24 Dec (as in 2021).

Employment Contract

Although verbal contracts are also valid under Ecuadorian labour law, it is best practice to establish a written employment contract when hiring an employee from Ecuador. The contract should be drafted in Spanish and contain at least the following basic terms of employment:

  • Identification of both parties 
  • Date of commencement (and employment duration for temporary contracts) 
  • Workplace
  • Job description, duties and responsibilities
  • Basic salary as well as other compensation or benefits
  • Working hours 
  • Total number of holidays
  • Notice periods for employment termination
  • Probation period, if any

Most employment agreements in Ecuador are permanent but fixed-term contracts are also possible under certain circumstances.

Probation Period

Probationary periods in Ecuador usually last for 90 days

Working time

Working Hours

As a general rule, employees in Ecuador work 40 hours per week, i.e. eight hours per day and five days per week.

Overtime

Any work performed beyond standard working hours is considered overtime and should be paid at a rate of 150% of the employee’s usual salary – 200% on public holidays.

Payroll

Most employers pay their workers once a month

Minimum Wage

The current national minimum wage is USD 400 per month (as of 2021). 

Sick Pay

Employees who are unable to work because of sickness or injury are entitled to sick pay. The employer generally provides sick pay equal to 50% of the employee’s usual wages for the first three days of sick leave. Any following sick days are normally covered by the Ecuadorian Social Security Institute (IESS) – given that the employee fulfills the necessary requirements.

Bonuses

All employees are legally entitled to a 13th and 14th salary which should be paid no later than the 24th of December – the 14th instalment is due before the 15th of August. While the 13th salary equals one full salary, the 14th month’s bonus corresponds to the national minimum wage.

Taxes and Social Security Contribution

Employers and employees in Ecuador are subject to the following tax and social security contribution rates (as of 2021):

taxes
employers

25% corporate tax rate

12% VAT (standard rate)

employees

individual income tax rates range from 0% to 35% *

additional 0.15% municipal tax

social security
employers

12.15% of employee’s salary to Ecuadorian Social Security System

After the employee’s first year, employers are also obligated to contribute an additional 8.33%.

employees

9.45% of employee’s salary to  Ecuadorian Social Security System

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Individual income is taxed progressively based on the following tax brackets (percentage rates given only apply to income exceeding the respective tax bracket threshold):

– up to USD 11,315: 0%

– USD 11,315 to USD 14,416: 5%

– USD 14,416 to USD 18,018: USD 155 + 10%

– USD 18,018 to USD 21,639: USD 515 + 12%

– USD 21,639 to USD 43,268: USD 950 + 15%

– USD 43.268 to USD 64,887: USD 7,194 + 20%

– USD 64,887 to USD 86,516: USD 8,518 + 25%

– USD 86,516 to USD 115,338: USD 13,925 + 30%

– above USD 115,33: USD 22,572 + 35%

Employee Benefits

Annual Leave

During the first five years of service, employees are entitled to 15 days of paid annual leave. Thereafter, annual leave entitlements increase by one day every four years. The maximum is 30 days. 

Ecuador observes eleven public holidays – including two days over the annual Carnival celebrations – on which employees usually don’t have to work.

Maternity Leave and Paternity Leave

Female employees can take up to twelve weeks of fully paid maternity leave – ten more days in case of multiple births – starting two weeks before the expected due date. Payment is provided by both the employer and the IESS in shares of 25% (employer) and 75% (social security). Paternity leave is currently limited to ten days.

Parental Leave

There are no legal provisions for further parental leave.

Additional Leave and Benefits

Other leave includes 25 days in case the employee’s child needs to go to hospital and one day of bereavement leave for the death of a close family member.

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Employment termination

Termination procedures in Ecuador can be quite complicated. When planning to dismiss an employee for any reason linked to the employee’s behaviour, employers generally have to notify an independent labour inspector who will then make judgement on whether the dismissal is lawful or not. 

Recognised causes for employment termination generally include:

  • redundancy – 30 days’ notice
  • employee’s misconduct including dishonesty and lack of discipline – no notice as such but possible suspension of employment contract until final judgement of labour inspector 
  • other personal grounds such as underperformance or incapability – no statutory notice period but no employee can be dismissed before having completed his or her first year of service (once probation is over)

If employees are dismissed for reasons other than their behaviour, they are entitled to severance pay equal to:

  • three months’ pay during the first three years of service
  • one month’s pay for each year of service if the employee’s length of service exceeds three years

When terminating employees with a fixed-term contract, employers must pay a bonus equal to 25% of the employee’s usual monthly salary for each year of service. Employees who are made redundant also receive this bonus as well as severance pay as mentioned above. The same applies in cases classified as “sudden dismissal”.

Hiring in Ecuador?

Not sure if you should start with a contractor or go ahead and hire a full-time teammate in Ecuador? The Lano platform makes it easy to go from freelance to full-time employee. Get expert guidance from the Lano team to compare your options and keep growing.