To expand your business and hire local talent in Ecuador, you may want to consider engaging with an Employer of Record (EOR) service. An EOR can help you navigate and ensure compliance with local labor laws, allowing you to focus on your core business activities.

Businesses partner with an Ecuador EOR mainly for two reasons:

1) To hire local talent without setting up an entity: Setting up your business in Ecuador will cost you up to $1500. Costs like notary fees and consultation fees will further exacerbate costs. 

2) To comply with changing labor laws: Labor laws in Ecuador have some distinct elements which can be quite daunting for foreign employers to keep up with. For instance, employees in Ecuador are entitled to a thirteenth salary, paid in December, and a fourteenth salary, paid in the middle of the year. These are equivalent to an extra month's salary each, with the fourteenth salary being calculated based on the minimum wage. 

Keeping up with all this needs you to divert attention from core business activities. Particularly, when hiring foreign talent, much attention needs to be spent on hiring the right candidate and adhering to budgetary constraints. With an Ecuador EOR, like Gloroots, you can use our entity to onboard talent and hire for your business. And by offloading compliance, payroll onto us, you can focus on your business’ growth.

The cost of Ecuador EOR/PEO services in Ecuador may differ based on various factors, such as the number of employees, the extent of services needed, and the intricacy of the project. The pricing structure for Ecuador EOR/PEO services usually involves a monthly fee per employee or a percentage of the employee's salary. Extra charges may apply for additional services or customization.

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Key Metrics For Foreign Employers 

Ecuador ranks 84th in INSEAD’s The Global Talent Competitiveness Index(2023). Ecuador’s time-zone advantage can help you set up teams that can work in near-to-similar time zones as the USA, Canada and other significant economies of the west. 

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The table below depicts key indicators from the Global Talent Competitiveness Report for employers wishing to hire from Ecuador.

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Source: The Global Talent Competitiveness Index 2023

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Through the Gloroots’ Recrew platform, you can discover amazing talent in Ecuador.

"Challenges of Incorrect Worker Classification" pertains to the incorrect labelling of workers, such as designating them as independent contractors or exempting them from specific regulations when they should legally be employees with rights. In Ecuador, engaging a PEO/EOR effectively mitigates these risks. It guarantees adherence to labor laws, precise worker classification, streamlined payroll management, and employee benefit provisions, enabling employers to focus on their core business activities. Delegating these tasks to seasoned experts ensures a smooth and compliant journey through the Ecuador labor landscape, promoting confidence and operational efficiency.

Expanding your workforce in Ecuador is now a feasible choice for businesses, thanks to the many skilled professionals available. However, as with any international market, knowing essential government regulations and policies is crucial. This section provides an overview of the key compliance considerations when operating in this South American market. It covers regulations related to working hours, outlines employment contract requirements, explains statutory benefits, and delves into the employment tax obligations for both companies and their employees.

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Employment contract

Employers in Ecuador must have a written employment contract, which should be registered online with the Ministry of Labour. While verbal agreements are accepted, they might require legal proof. The contract doesn't have to be in Spanish but should cover job details, how the work is done, payment terms, contract duration (linked to tasks, not set periods), work location, and possible performance penalties. Additionally, all required labor benefits and terms under the law and relevant collective agreements are part of the employment deal. Collective agreements with unions are binding on employers, and it's worth noting that there are no broad industry-wide agreements in Ecuador.

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Working time

In Ecuador, a typical workweek includes 40 hours of work.

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Overtime

For employers in Ecuador, any work that goes beyond the regular 40-hour workweek is considered overtime. The rules for overtime are outlined in the employment contract or collective agreements. If employees are asked to work extra hours or on holidays, there are limits – a maximum of four hours per day and 12 hours per week. Overtime pay is calculated at either 150.00% or 200.00% of the employee's usual salary, depending on the type of work and when it's done. Approval from the local labor inspector is needed for overtime hours.

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Public Holidays

There are 13 public holidays in total. 

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Minimum Wage

In Ecuador, the minimum wage is known as the Unified Basic Salary (SBU), and it amounts to $450 per month for workers in all economic sectors.

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Annual Leave

In Ecuador, regular full-time employees are entitled to 15 days of paid leave each year. This increases to 16 days after five years of continuous employment. To qualify for the 15 days of paid leave, an employee must have completed one year of service.

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Paid Sick Leaves

For employers in Ecuador, employees covered by the Ecuadorean Social Security Institute (IESS) qualify for sick leave if they've consistently contributed for either 180 days in the six months before their illness or 189 days in the eight months prior. During this sick leave, which can last up to two months, employees receive 50% of their regular salary. The employer handles payments for the first three days, and after that, the IESS takes over. It's important for employees to provide the employer with a certified medical document within 48 hours of the start of the sick leave.

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Maternity leaves

Mothers in Ecuador receive a 12-week maternity leave, two weeks before giving birth and ten weeks afterward. This leave is financially supported by both Social Security and the employer, with Social Security covering 75% and the employer contributing 25%. Additionally, an extra ten days are added if it's not the mother's first child. New mothers also have the right to work six-hour days for nine months instead of the standard eight hours.

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Paternity leaves

In Ecuador, fathers can take ten days of paid paternity leave, which extends to 15 days for multiple or complicated births. In cases of premature birth, fathers are eligible for an extended paid paternity leave of 18 days.

Tax and Social Security contribution:

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Employer Payroll Contribution 

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Employee Payroll Contribution

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Employee Income tax

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Termination 

The termination procedure depends on the employment contract, collective agreements, contract type, and the reason for ending the employment.

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Severance Pay

Severance pay in Ecuador is calculated at one month's salary for each year of service, with proportional compensation for part-years worked. The minimum payout is equivalent to three monthly salaries, and the maximum can go up to 25 monthly salaries. Employers also have the option to provide a termination bonus, amounting to 25.00% of monthly wages for each year of service completed.

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Notice Period

In Ecuador, the notice period is determined by the employee's employment contract or collective agreement, and it is not mandated by law.

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Probation period

In Ecuador, the length of the probationary period varies based on the role and is defined in the employment contract. Typically, probation periods extend up to three months.

When expanding your global workforce, maintaining compliance can be a complex challenge. Employers must ensure that all aspects of hiring and onboarding align with employment laws, payroll procedures, diversity, equity, and inclusion (DE&I) requirements, as well as data protection regulations like GDPR. If establishing local entities and commencing hiring is already a daunting task, staying in sync with a constantly evolving compliance landscape can be even more demanding.

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At Gloroots, we simplify this process by offering a unified platform to manage all these responsibilities. Our in-house experts provide comprehensive protection against the complexities of cross-border employment and payroll compliance. We assist in creating employment contracts, ensuring timely payments, and delivering compliant benefits, allowing you to focus solely on talent acquisition.

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Our commitment is to deliver a stress-free global employment experience for both you and your employees.

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Get in touch with our experts today to kickstart your global hiring campaign.

Growing your team in Ecuador requires making strategic hires at the right time and placing them in appropriate positions. Expanding in the Ecuador comes with its own set of challenges, including compliance, payroll, tax, and benefits management. At Gloroots, our global Employer of Record (EoR) service can alleviate these complexities, ensuring compliance and enabling you to concentrate on what truly matters: your employees and business expansion. Partner with us to simplify the process and succeed in Ecuador's dynamic market.