Global HR Compliance in Ecuador

Comprehensive Guide to Hiring and Firing Workforce in Ecuador

Understanding Ecuador’s labor legislation is crucial for companies that hire international workforce or plan to expand their operations into Ecuador. This guide will help you navigate the complexities of local employment laws, ensuring compliance and strategic workforce management.

Reasons for Hiring International Workforce

Companies typically hire foreign workforce for two main reasons:

Market Expansion: Companies often hire local sales representatives to introduce and sell products in foreign markets. These representatives are tasked with exclusively promoting and selling the company’s products to local clients.
Accessing Unique Talent: Particularly in fields like IT, companies seek foreign talent with specialized expertise that is either unavailable or more costly in the home country.

Hiring and Compensation Compliance

Once the right candidate is identified, the challenge lies in hiring and compensating them in a manner that is compliant with international labour laws. Considerations include:

Compliance: Ensuring all employment practices adhere to global labour standards to avoid legal issues.
Long-term Retention: Strategies to retain top talent for prolonged periods.

Global Employer of Record Solution in Ecuador

Our Global Employer of Record solution facilitates the legal employment of your international workforce:

Employment Outsourcing: Similar to hiring in-house staff, but with workers located anywhere in the world. Acumen International is the legal employer, handling all employment responsibilities and risks on your behalf.
Comprehensive Management: We manage bonuses, vacations, and sick leave. We can also arrange additional logistical support, such as office and vehicle rentals, for foreign sales representatives.
Market Testing: This solution offers the flexibility to explore new markets with reduced risks and costs, allowing for easy withdrawal from non-profitable regions.

Global Hiring Expertise and Support

Single Provider Advantage: As your sole provider, Acumen International eliminates the need to coordinate with multiple staffing agencies and legal advisors, streamlining your operations and saving time and resources.
24/7 Professional Assistance: Our team of English-speaking experts provides continuous support, helping you navigate through language and legal nuances across different time zones.
Tailored Labor Solutions: We develop customized employment solutions that comply fully with Ecuador’s employment laws.

Local Compliance and Partnerships

Deep Local Insight: Our thorough understanding of Ecuadorian employment regulations ensures you can confidently employ skilled professionals in your industry.
Trusted Local Partnerships: With our established network, you can be assured that your workforce meets all local tax, social security, and immigration requirements.

Acumen International is committed to helping your business successfully manage its international workforce in Ecuador. Our expertise in global workforce employment is designed to simplify your expansion efforts.

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 replacing personnel absent for vacation, leave, sickness, or maternity, and to meet 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 executing a specific task for a remuneration that includes the whole of it, without considering the time invested in executing it.

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

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 company’s or business’s internal regulations or indiscipline. 
Lack of honesty or immoral conduct.
Serious offences are conducted against the employer, employer’s wife, family , or 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.

Unfair Dismissal in Ecuador

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 a 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 were dismissed due to discriminative circumstances.

Notice Period in Ecuador

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 labour 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:

Seniority	Corresponding amount
0-3 years	Three month’s salary
3 years or more	One month’s salary for each year of service, but not exceeding 25 months’ salary

Employee Benefits and Contributions in Ecuador

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 where 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, they are entitled to one extra day per year worked, up to 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 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 global employment 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.