Ecuador Employment Law: A Guide

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If you are interested in starting a business in Ecuador or already operating in the market, understanding and guiding your path through Ecuadorian employment law will be crucial to establishing and maintaining a strong reputation with local authorities and ensuring the success of your business.

Map of Ecuador and some of its capitals accompanying an article on Ecuadorian employment law
Map of Ecuador and some of its capitals

The employment law in Ecuador is overseen by the Ministry of Labor, and although it has similarities with many other countries in the region, you will also come across a number of peculiarities in the regulations.

For this reason, you will need to find a reliable corporate lawyer in Ecuador with experience in working with foreign investors and overseeing market entry.

This brief guide to Ecuador’s employment law provides an overview of the regulations you must comply with when working in this South American market, including working time rules, an overview of some of the most common types of employment contracts, statutory leave allowance and employment taxes. companies as well as their employees.

If you are interested in learning more about how we can help your company understand and comply with Ecuadorian employment law, or want to know more about the wide range of support services we offer, contact us today.

Working hours under Ecuadorian employment law

The Employment Act of Ecuador stipulates that an employee may not work more than 40 hours as part of a standard working week, with each working day not lasting more than eight hours.

Allowed hours are allowed, but must be additionally compensated in proportion to the time spent.

Note that in Ecuador there are generally between 11 and 12 public holidays that fall on weekdays in a calendar year.

Employment law in Ecuador: the most common types of contracts

Although there are at least 16 different types of contracts that can be used in different circumstances under Ecuadorian labor law, there are three main contracts that companies and foreign investors tend to use when operating in the market.

Stock image of someone signing a contract with an article on the employment law in Ecuador
There are three main types of contracts in Ecuador
  1. Contracts for an indefinite period are the most commonly used type of contract in Ecuador, lasting until both parties mutually agree on termination. In order to unilaterally terminate such a contract, the employer must show a justifiable reason to the competent authorities or pay compensation to the employee. Indefinite contracts must be in writing, and in 2021 they must pay a salary of at least $ 400 a month, while any scheduled probationary period cannot last longer than 90 days.
  1. Interim contracts they may be provided in circumstances that justify it, such as maternity leave or extended sick leave. An interim contract may last for a maximum of 180 days within 365 days, and if the employee continues to work thereafter, the contract is automatically converted into an indefinite contract. The employer must be able to provide documentation proving the need to hire someone on a temporary basis. Termination occurs after the expiration of the period of employment specified in the contract. Interim contracts must be in writing and in 2021 must include a salary of at least $ 400 per month.
  1. Occasional contracts they can be provided to cover emerging or extraordinary needs that are not related to the company’s core business activities. An occasional contract may last for a maximum of 30 days with a period of 365 days, and if the employee continues to work after that, the contract is automatically converted into an indefinite contract. The employer must be able to provide evidence that shows the need to hire someone from time to time. Termination occurs after the expiration of the period of employment specified in the contract. Occasional contracts must be in writing and in 2021 must include a salary of at least $ 400 per month.

Vacations, absences and other absences

Under Ecuador’s employment law, workers who have completed one year of work with the same employer are entitled to 15 consecutive calendar days off. After five years of service, employees have an additional day off and continue with an additional day for each subsequent year they work.

If the employee leaves the company before the age of one year, he will be entitled to payment of a proportional number of days of annual leave collected during working hours.

For example, an employee who has completed eight months of service will be entitled to the payment of two-thirds of the annual leave allowance, which means 10 days of salary.

A photo of a pregnant woman following an article on the employment law in Ecuador
Maternity leave lasts at least 12 weeks in Ecuador

Sick leave
The employer must grant the employee any leave necessary to recover from the illness, as long as it has been approved by the doctor.

Maternity and paternity
Under Ecuador’s employment law, women are entitled to 12 weeks of paid maternity leave when they have a child. In case of multiple births, the period is extended by an additional 10 working days, which means a total of 14 weeks of paid leave.

Fathers are granted 10 days of paid paternity leave, which is extended by an additional five days in the case of multiple births or cesarean births.

Procrastination
Employees are entitled to three days of paid leave in the event of the death of any of the first or second degree relatives. This includes spouses and extramarital partners, parents, siblings, children, grandparents, grandchildren, aunts, uncles, nieces, nephews and half-siblings.

Legal contributions under Ecuadorian employment law

Employee deductions
Under Ecuador’s employment law, a total of 9.45% of an employee’s salary is deducted for social security contributions. Income tax is applied gradually, with salaries of up to $ 14,400 per year excluding income tax. The highest income tax is 35% and applies to salaries in excess of $ 115,000 per year.

Employer contributions
Employers must pay social security in the amount of 11.5% of the employee’s salary.

Profit sharing
Under Ecuadorian employment law, companies must share 15% of net annual profits with their employees. This cost is deductible from tax when calculating the taxable amount of the enterprise.

Biz Latin Hub can help you do business in Ecuador

At Biz Latin Hub, our multilingual team of corporate support experts has the experience and expertise to help you navigate Ecuador’s employment law. Our portfolio of services includes company formation, accounting, legal services and tax consulting, among others, and we provide our clients with customized packages of integrated back-office solutions, acting as a single point of contact for business in Ecuador or any of the other 17 markets across Latin America and the Caribbean where we can offer our services.

Contact us now to talk about how we can support your business.

Or learn more about our team and professional authors.

Key services offered by BLH, including legal services, accounting and taxation, employment and PEO, due diligence, tax consulting and visa processing
Key services offered by Biz Latin Hub



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