Engage In Ecuador

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About Ecuador

Capital City

Quito

Population

As of March 2024, the estimated population of Ecuador is 18.1 million.

Currency

The currency in Ecuador is the United States Dollar (USD). The currency symbol is $.

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Overview

Ecuador, officially known as the Republic of Ecuador, is located in South America. It is bordered by Colombia to the north, Peru to the east and south, and the Pacific Ocean to the west. The country’s unique geography is defined by the presence of the equator, which runs through its territory, giving Ecuador its name. With a diverse landscape encompassing the Andes Mountains, the Amazon Rainforest, and the Galapagos Islands, Ecuador is known for its breathtaking natural beauty and rich biodiversity. Its capital and largest city, Quito, is situated in a valley on the eastern slopes of the Pichincha volcano. Ecuador is a unitary presidential republic, with a government that is focused on promoting economic growth, preserving its cultural heritage, and protecting its natural resources. The nation is home to a culturally diverse population, with a mixture of indigenous, mestizo, and Afro-Ecuadorian communities. Considered a jewel of South America, Ecuador offers visitors a wealth of experiences, from exploring ancient Inca ruins to marveling at diverse wildlife in the Galapagos Islands.

Employment Relationship

Permanent Employment

Employment contracts made for an indefinite term with stable and permanent work are considered permanent contracts in Ecuador. Such contracts can be concluded in writing or orally. All employees are entitled to statutory employment rights.

Fixed-Term or Specific-Purpose Contracts

Employment contracts can be made for fixed-term with a minimum duration of one year. Contracts can also be made for specific tasks that are not habitual in the activity of the company or employer. Fixed-term contracts are renewable. Contracts that continue after their expiry are converted to indefinite term contracts. For contracts whose duration is less than two years, employers are required to give at least 30 days'. If a fixed-term contract is terminated before its expiry, the responsible party is liable to pay compensation to the other party. 

Temporary Employment Contratcs

Temporary contracts in Ecuador can be made to satisfy circumstantial demands of the employer, such as replacement of personnel who are absent due to vacations, leave, illness, maternity and similar situations.  Occasional contracts may also be entered into in order to meet a greater demand for production or services in regular activities of the employer. The duration of such contracts cannot be more than 180 days in a period of 365 days. If the circumstance or requirement of the worker's services is repeated by more than 2 annual periods, the contract will become a seasonal contract.  Employees are paid 35% extra salary for temporary contracts as compared to permanent employees. 

Probationary Period

An employment contract can include a probationary period of a maximum duration of 90 days. This must be included in the written employment contract. During probation, either party can terminate the contract freely. No more than 15% of the total workforce can be on probation at a time. However, employers that start their operations in the country, or existing ones that expand or diversify their industry, activity or business, will not be subject to this restriction of 15% during the six months after the start of operations, expansion or diversification of the activity, industry or business. 

Working Hours

Standard working hours are eight hours per day or 40 hours per week. For underground works, maximum working hours are six hours a day. The working day for adolescents may not exceed six hours a day for a maximum period of five days a week. Two days' paid weekly rest is mandatory. Higher or lower working hours can be determined by collective agreements. If an employee stops working eight hours a day without justified reason, he/she loses proportional part of remuneration. When work is interrupted due to accidental or unforeseen causes, force majeure or other reason beyond the control of employers and employees, employers have the right to increase working hours by three hours a day to recover the lost time without liability for overtime pay.

Holidays / PTO

Statutory Holidays

Paid Annual Leave

Annual leave is an inalienable right for employees and cannot be compensated in lieu of. All employees have the right to annual leave of 15 days. Employees under 18 years of age have right to 18 days' annual leave. Employees who have worked for more than 5 years with the same employer are entitled to additional leave of 1 day per extra year of service. The choice between additional days due to seniority or payment in money will depend on the employer. Annual leave is paid in accordance with the average salary of the employee and is paid in advance. If an employee's contract is terminated without having enjoyed vacations, he/she will receive compensation for unused leave the proportional part to the time of services.  Employees can choose to not use vacations for up to three consecutive years, in order to accumulate them in the fourth year. In case of work technical work or trusts for which it is difficult to replace the worker for a short time, the employer may deny the vacation in one year to accumulate it to the following year. If the worker does not get to enjoy the vacation due to leaving the service, he/she will have the right to remuneration corresponding to those not enjoyed, with 100% premium over their usual wages. 

Sick Leave

Employees are entitled to sick leave if they have paid six months of continuous contribution, prior to the onset of non-occupational disease. They must inform their employers and labor inspector in writing within first three days of their sickness, along with a medical certificate from a doctor from the Directorate of General Individual and Family Health Insurance of the Ecuadorian Institute of Social Security (IESS). The benefits are paid for a maximum of 185 days. First three days are covered by the employer and the remaining are paid by the IESS. The benefit is paid from the fourth day as 75% of the last remuneration.  Employers are required to pay sickness benefits at the rate of 50% of their wages to employees who are not entitled to IESS sickness benefits. Such benefits are paid for a maximum of two months.

Maternity Leave

All female employees in Ecuador have the right to 12 weeks paid maternity leave – two weeks before delivery and ten weeks after, extended by ten days in case of multiple births. They must submit a medical certificate issued by a doctor from the Ecuadorian Institute of Social Security (IESS), stating the probable date of delivery. In case of any premature birth or delivery under conditions of special care, maternity leave is extended by at least eight days. If the child is born with a degenerative, terminal or irreversible disease or with a degree of severe disability, the parent may take a leave of absence with pay for 25 days. The benefits for maternity leave are paid by IESS at the rate of 75% of the wages of the employee for the duration of maternity leave. Remaining 25% is paid by the employers. Employees must have paid 12 consecutive monthly contributions, within the 12 months before prenatal rest. Employers are prohibited from dismissing pregnant employees and those who are on maternity leave, except for liquidation or disability that makes them unable to work.

Paternity Leave

Ecuador grants ten days paid paternity leave to fathers. In cases of multiple births or delivery by cesarean section, it will be extended for five more days. In case of premature birth, the leave is increased by eight days and when the child is born with a disease – degenerative, terminal or irreversible, or with a degree of severe disability, the parent can take paid leave of up to 25 days. In the event of death of the mother during childbirth or while enjoying maternity leave, the father may make use of all, or where appropriate, of the remaining part of the maternity leave that would have corresponded to the mother if she had not died.  

Termination of Employment

Notice Period

It is not mandatory to give notice to terminate a contract. Both employers and employees can terminate a contract without notice by paying a sudden dismissal bonus. Fixed-term contracts can be terminated by giving a notice of at least 30 days by the employer and 15 days by the employee. In case of termination without notice, employers must pay the employees compensation equal to 25% of their last monthly remuneration for each year of service with the employer. This compensation is in addition to any severance pay to which the employee is entitled.

Severance Benefits

Severance benefits are paid to employees whose contract is terminated untimely, as follows: Up to three years of service – Three months of remuneration  More than three years of service – One month of remuneration for each year of service without in any case that value exceeding 25 months of remuneration  In case of sudden dismissal without notice, employees are entitled to a sudden dismissal bonus equal to 25% of their last monthly remuneration for each year of service with the employer. 

Social Security

Pension

All employers in Ecuador must register their employees with the Ecuadorian Institute of Social Security (IESS) that provides pension benefits. There is no fixed age for retirement. Retirement pension is granted from the month a member ceases employment and fulfills the following requirements: Age Years of contributions Any age 40 or more 60 years or older 30 or more 65 years or older 15 or more 70 years or older 10 or more Retirement pension is calculated as average of five best years of income on which contributions are paid. This average is multiplied by the annual coefficient corresponding to the number of years of contributions. Pension coefficient is increased by 0.0125 for each additional year of contribution beyond 40 years.  In addition to regular pension, retirees also receive an additional month's pension as Christmas bonus in December. A fourteenth pension is paid in the month of September of each year, for pensioners from the Sierra and Amazon regions; and in the month of April, for those of the coast and insular region. The amount is equal to a unified minimum wage, in force in the year of payment. 

Dependents/Survivors Benefit

The Ecuadorian Institute of Social Security (IESS) provides survivors' pension to widowed spouses, cohabitants, children under 18 years of age or disabled, and in absence of these, to financially dependent parents of a deceased member. The members must have been recipient of old age or invalidity pension or active member with at least 60 contributions. The surviving spouse of legal cohabitant receives 60% of the pension the deceased was entitled to. If there are children, they receive the remaining 40% of the pension divided proportionally. In the absence of these, parents of the deceased receive 40% of the pension the deceased was entitled to. The right to pension ceases upon death, remarriage or reaching 18 years of age.  In case of death due to work injury or occupational disease within 180 days of the accident or beginning of disease, employers are liable to pay survivors pension to the heir of the deceased. This pension is paid as 60% of the pension the deceased was entitled to. If there are children, they receive the remaining 40% of the pension divided proportionally. In the absence of these, parents of the deceased receive 40% of the pension the deceased was entitled to. 

Invalidity Benefit

The Ecuadorian Institute of Social Security (IESS) provides disability pension to insured members who are permanently incapable of seeking temporary or definitive job proportionate to their ability, strength and training due to non-occupational reasons. To be eligible for this benefit, insured member must have paid at least 60 monthly contributions of which six must be immediately prior to disability. Unemployed insured members can avail disability benefit if their disability occurs within 2 years of being unemployed, provided they have paid a minimum of 120 contributions. Disability pension is granted after medical approval from IESS qualifying physician and rehabilitation efforts. After this, a temporary subsidy is granted for up to a year. If the condition does not improve after that, an economic analyst proceeds to calculate the benefit and pension for life. Pension is calculated as average of 5 best years of income on which contributions are paid. This average is multiplied by the annual coefficient corresponding to the number of years of contributions. In case of disability due to work injury or occupational illness, benefits are paid by employers. The employer will be obliged to pay for medical treatment and supply and renew normal use of prosthetic and orthopedic devices, the use of which is deemed necessary due to the injury suffered by the victim. 

Taxation of Compensation and Benefits

Personal Income Tax

Income tax in Ecuador is applied on the income obtained by natural persons, undivided estates and companies, whether national or foreign. The tax year is from January 1 to December 31.  Resident taxpayers are considered persons who stay in Ecuador for more than 183 days in a 12-month period. They are taxed on their income from Ecuador and abroad. Non-residents are taxed on their income from sources in Ecuador.  Income tax rates for residents are progressive from 5% to 37%. Non-residents are taxed at a flat rate of 25% on their income. 

Immigration

Types of Visas

Temporary visitor visa – issued to those who wish to visit Ecuador for tourism purposes for 90 days. Visa holders are prohibited from carrying out work activities.   Diplomatic visa – issued to foreign diplomatic, consular agents or international organization.  Temporary residence visa – issued for temporary stays in Ecuador for the purposes of employment, protection, investment, attending seminars or conferences, religious purposes, study, business activities, research, etc. It is valid for stay of up to 180 days.  Permanent residence visa – issued to foreign nationals who want to settle in Ecuador and who prove temporary residence in Ecuador for more than 21 months. It can also be issued to foreign nationals for the purpose of marriage to an Ecuadorian or permanent resident in Ecuador or a minor or person with a disability who is dependent on on an Ecuadorian person or those who have permanent residence. Nomad Visa — issued to foreign nationals who want to work remotely for a foreign company while physically residing within Ecuador. These visas are valid for up to two years.

Work Permit

Foreign nationals wanting to work in Ecuador are granted a temporary residence visa valid for up to 2 years, provided they submit proper documentation. Foreign employees who wish to work in public sector require special permission from the Ministry of Labor, while those working in private sector do not require any special permission.

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