UTC -5 to UTC -6
up to 20.48%
United States Dollar (USD)
weekly or monthly
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This country guide is for general informational purposes only and should not be construed as legal advice, nor as binding based on your relationship with Lano. When using Lano's solutions, the specifics may depend on your EOR and Payroll setup with our partners. Although we update this guide regularly, it may not reflect current legal developments. Lano Software GmbH disclaims any liability for any actions you take or refrain from taking based on the content contained in this country guide.
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.
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)
Job description, duties and responsibilities
Basic salary as well as other compensation or benefits
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.
Probationary periods in Ecuador usually last for 90 days.
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As a general rule, employees in Ecuador work 40 hours per week, i.e. eight hours per day and five days per week.
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.
Most employers pay their workers once a month.
The current national minimum wage is USD 450 per month (valid since January 2023).
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.
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. There further is a legal requirement for businesses to share their profits.
Employers and employees in Ecuador are subject to the following tax and social security contribution rates (last review February 2023):
25% corporate tax rate
12% VAT (standard rate)
up to 37%
Individual income tax rates range from 0% to 37% *
up to 20.48%
12.15% of employee’s salary to Ecuadorian Social Security System
After the employee’s first year, employers are also obligated to make an additional reserve fund payment of 8.33%.
9.45% of employee’s salary to Ecuadorian Social Security System
* Read more
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 11,722 - 0%
USD 11,722 to USD 14,935 - 5%
USD 14,935 to USD 18,666 - 10%
USD 18,666 to USD 22,418 - 12%
USD 22,418 to USD 32,783 - 15%
USD 32,783 to USD 43,147 - 20%
USD 43,147 to USD 53,512 - 25%
USD 53,512 to USD 63,876 - 30%
USD 63,876 to USD 103,644 - 35%
Over USD 103,644 - 37%
Please note that the social security contributions indicated above do not necessarily reflect the actual employment costs. These may differ depending on the employment contract and due to other factors (e.g. 13th and 14th salary, health insurance allowances, accrual for severance pay, etc.).
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 for every additional year of service. 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.
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.
There are no legal provisions for further parental leave.
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.
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”.
This country guide is for informational purposes only and should not be construed as legal advice. The content of this guide contains general information, and although we update this guide regularly, it may not reflect current legal developments. Lano Software GmbH disclaims any liability for any actions you take or refrain from taking based on the content contained in this country guide.
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