Employ Candidates Compliantly in Ecuador

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  1. Overview: Ecuador
  2. Global HR Compliance
  3. Global PEO and payroll
  4. Expand without a company set up
  5. Contractor vs. employee: which is better?
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Global HR Compliance in Ecuador

If you hire international workforce, or plan to hire, then Hiring and Firing Workforce in Ecuador Guide below will help you understand the nuances of labor legislation in the country.

There are two main reasons for companies hiring foreign workforce:

  • Expanding into foreign markets to sell company product or products there. In this case, companies hire sales representatives who would exclusively represent their product in the target market and sell it to their local client base.
  • Hiring the right foreign talent with a unique expertise, often related to IT sphere that cannot be found in the home country or that costs less compared to local specialist with similar skills.

After you have found the right candidate, the question is how to hire and provide compensation to this person so you as a business remain 100% compliant when working with global workforce. Another thing to consider is whether you want to keep the talent long-term and how you can do that.

If you need to hire foreign workforce in Ecuador so you can expand there, then our Global Employer of Record solution may be of help. We help you legally hire and reward your foreign workforce by making them employees via a global employment outsourcing service. This is simple as employ your in-house workforce with the only difference that workers can live anywhere in the world and Acumen International would be their legal employer on your behalf. This means we would bear all employment risks, not you. Also, we manage bonuses, vacations, sick leave and can rent the office and a car for your foreign sales representatives if that is what you need.

With our solution, you can test new foreign markets before deciding whether you are going to get established there. You gain flexibility and expand with reduced costs, and easily withdraw from the unattractive countries.

We are experts in global workforce employment in Ecuador, and our goal is to become your single provider. Instead of working with numerous local staffing agencies and legal advisors, Acumen International can solve your global business challenges and save you time, costs, and resources.

Our team of English-speaking professionals frees you from working through language nuances. Acumen International works 24/7 and can assist you whenever you need, regardless of time zones. Our goal is to create tailored labor solutions for you that are managed legally and in full compliance with the local employment laws.

With our knowledge and deep understanding of local nuances, you easily satisfy your need for skilled professionals in your global industry. With our qualified local partners, you can trust that your global workforce satisfies all local tax, social security, and immigration requirements in Ecuador.

See the guide below for a general overview of labor rules and regulations in Ecuador. Or contact us if you need to employ workers in Ecuador or would like to get more details.

Hiring and Firing Workforce in Ecuador Guide

# Employment Agreements

Indefinite Contract: This is the common employment contract under Ecuadorian legislation.

Casual contract:  It is held to meet circumstantial requirements, such as replacement of personnel absent for vacation, leave, sickness, maternity and to meet a greater demand for production or services in usual activities, its duration may not be greater than one hundred and eighty days continuous or discontinuous, within a period of three hundred and sixty-five days.

Occasional contract: They are held for the attention of emergent or extraordinary needs, not linked with the habitual activity of the employer, its duration will not exceed thirty days in a year.

Season contract: They are celebrated by reason of custom or collective bargaining, so that cyclical or periodic work is carried out, due to the discontinuous nature of their work, enjoying these stability contracts, understood as the right for workers be called to provide their services in each season that are required. In the event that the worker is not called to provide his services, it is considered an untimely dismissal.

Contract for certain work: It’is celebrated with the worker to take charge of the execution of a specific task, for a remuneration that includes the whole of it, without taking into consideration the time that is invested in executing it.

Contract by task: It is celebrated with the worker so that he commits to execute a certain amount of work or work in the day or in a period of time previously established. It is understood concluded the day or period of time, by the fact of completing the task.

Contract for a certain work or service determined within the business line: It is celebrated with the worker for the execution of works or services, and the employment relationship will end once the work or activity for which he was hired is finished

# Employment Termination and Severance Pay (Dismissal)

Termination of employment:

An employment contract for an indefinite period can be terminated based on the following concepts: 

  • Dismissal with reason (Visto Bueno) 
  • Dismissal without reason (Despido Intempestivo) 

Reasons for termination

The employer may dismiss an employee with reason on the following grounds: 

  • Repeated lack of punctuality or attendance at the workplace. Abandonment of the workplace without due cause for more than three consecutive days in a one-month period. 
  • Serious disobedience with respect to the internal regulations of the company or business, or indiscipline. 
  • Lack of honesty or immoral conduct.
  • Serious offenses conducted against the employer, employer’s wife, family or employer’s legal representative.
  • If the employee is incapable of performing the agreed service. 
  • If the employee submits an unjustified complaint against the employer to the social security office. 
  • If the employee fails to comply with security and hygiene measures required under the law; or by opposing to medical prescriptions and/or orders. 
  • When the employee discloses secrets or makes disclosures occasioning harm to the employer;
  • When the employee has induced the employer to sign a contract, by means of false certificates

The employer may dismiss an employee without reason (terminacién por despido intempestivo) without a notice period and the obligation to inform the employee of the specific reasons for his/her dismissal.

On Employee will

The employer will reward the worker with twenty-five percent of the equivalent to the last monthly remuneration for each of the   service rendered to the same company or employer. The same bonus will be paid in cases where the employment relationship ends by agreement between the parties.

On Employer will

The employer who untimely dismisses the worker will be condemned to compensate him, in accordance with the time of service and according to the Up to three years of service, with the value corresponding to three months of remuneration; and of more than three years, with the value equivalent to one month of remuneration for each year of service, without in any case that value exceeding twenty-five months of remuneration.

# It is prohibited to dismiss

Some employees enjoy special protection by the law against dismissal, as follows: 

  • Pregnant women and women in lactation period: prohibition on termination of an employment contract if woman is pregnant or in lactation period
  • In such case the termination is considered invalid and the employee may choose to be reinstated (despid inefcaz) in her job position or to receive a severance equivalent to a one-year salary
  • Union leaders: prohibition on dismissal of a union leader without reason.
  • In such case the termination is considered invalid and the employee may choose to be reinstated to his/her job position or to receive a severance equivalent to a one-year salary. 
  • The following categories of employees enjoy special statutory protection and are entitled to additional compensation if dismissed:
    • Handicapped employees 
    • Temporary incapacity due to non-professional illness, as long as such does not exceed one year 
    • Employees obligated to attend military service or to serve in a public office 
    • Employees dismissed due to discriminative circumstances. 

# Notice period

No notice period is required in case of dismissal without reason. The employer may dismiss the employee with immediate effect.  In case of dismissal with reason, an administrative procedure has to be followed, during which the employer must deposit one month’s salary to suspend the labor relationship. 

# Severance payments

If the administrative petition for the dismissal with reason (Visto Bueno) is authorized by the Ministry of Labor, the employer is bound to pay the employee only the pending amount of the employee’s salary. 

If the employer decides to dismiss an employee without reason, he/she has to indemnify for unlawful dismissal (indemnizacién por cdespedio intempestivo), in accordance with the employee’s seniority and the following range: 

SeniorityCorresponding amount 
0-3 yearsThree month’s salary
3 years or moreOne month’s salary for each year of service, but not exceeding 25 months’ salary

# Employee Benefits and Contributions

To the mandatory benefits can be referred the following:  

  • Annual leave 
  • sick leave  
  • maternity leave
  • 13th and 14th salary 

# Probationary period

A probationary period can be set up for 90 days. 

# Overtime

Overtime working hours shall not exceed 4 hours per day and 12 hours per week. 

# Work hours

Ecuador labor law recognizes a fairly traditional work schedule, to include an eight (8) hour work day, a forty (40) hour work week. 

The workweek shall not exceed 5 days in any week. 

Exceptions:

  • Work performed underground may be performed up to a maximum of 6 hours per day. 
  • Sectoral commissions can determine industries in which a limit of less than 8 hours will apply. 

# Annual Leave

Employees are entitled to 15 days of paid holiday per year. After five years, employees are entitled to one extra day per year worked with a maximum of 15 extra days.
The annual leave shall be remunerated with the normal rate of payment. The worker shall receive in advance the amount due to for annual leave. 

# Sick Leave

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. 

# Parental Leave

Maternity rights and leaves

In addition to job security, the woman is entitled to a 12-week paid leave because of the birth of her firstborn, these twelve weeks can be taken even days or weeks before the birth occurs, however at 12 weeks will have to re-join their normal work. Only in the case of multiple births this license will be extended for ten more days

Paternity rights and leaves 

This paid leave is 10 days in the case of normal delivery; an additional 5 days will be granted in case of c-section or multiple births; if the child is born premature or in special care, the parent will be given an additional 8 days of paid leave; and when the daughter or son has been born with an illness, degenerative, terminal or irreversible, or with a severe degree of disability, the father may have a license with remuneration for twenty-five days. 

Acumen International can help you fast-track your possibilities of entering and expanding your business in Ecuador by providing you with an Employer of Record services. Our unique mix of PEO/EOR solutions will enable you to jumpstart your global operations almost immediately, cost-effectively and compliantly without any requirement to set up a legal entity first or thereafter.

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