back-arrow

Back to EOR

Employer of Record (EOR) in Ecuador

Employer of Record in Ecuador

Skuad’s Employer of Record Ecuador (EOR) solutions make business expansion to Ecuador easy and hassle-free. Our unique HR platform allows companies to hire exceptionally talented employees in Ecuador, without having to set up a separate legal entity. It streamlines the process of hiring and onboarding a remote team by handling payroll management, taxation, and other legal compliances. To learn more about Skuad, Book a demo today.

Ecuador at a Glance

Population 17,899,534 (2021)
Currency US dollar (USD)
Capital Quito
Language Spanish (official language), Kichwa, and 24 other languages
Gross Domestic Product (GDP) 6183.8 USD (World Bank Report as of 2019)
Government type Democracy with the elected President

Reach out to us today to know more about how Skuad’s Ecuador EOR services can help you expand your business successfully.

Employment in Ecuador

Ecuador, a country rich in cultural and ecological heritage, is a thriving market to expand into. Ecuador depends on the export of agricultural, petroleum, and aquaculture products and is a developing economy. It holds the distinction of being the eighth-largest economy in Latin America. The Government of Ecuador is also encouraging participation from the private sector.

The labor in Ecuador is unionized. Most labor laws in Ecuador focus on preserving employee rights. These ensure that the employees get a fair share of the work they put in.

Employment Contracts in Ecuador

Though not mandated by employment laws in Ecuador, the best practice would be to document every employment contract. The contract of employment in Ecuador should be articulated and inclusive of all terms and in Spanish as per the employment contract law in Ecuador. As per employment contract laws in Ecuador, contracts should include

  • Correct names of employer and employee
  • Location of employment
  • Exact joining date
  • Working hours (weekly)
  • Duties that the employee needs to perform
  • Probation and termination should be a part of the employment agreement in Ecuador 
  • Compensation details in USD
  • Payment cycle
  • Holiday and leave entitlement as per the Ecuador employment laws
  • Any other terms discussed and agreed upon

Completed contracts should be submitted to Ecuadorian Social Security for Employees.

Entitlements Explanation
Statutory Working Hours
  • 40 hours per week
  • 5 days/week
  • 8 hours/day
Overtime Eligibility
  • Maximum overtime allowed: 4 hours/day; 12 hours/week
  • The overtime rate for weekdays: 150% of regular pay. Overtime for the weekend: 200% of regular pay.
  • No law for overtime to Management, supervisors, administration
Minimum Monthly Wage USD 400 per month
Paid Public Holidays Public Holidays in Ecuador for 2021
  • New Year's Day
  • Carnival Day
  • Good Friday
  • International Labor Day
  • Battle of Pichincha Day
  • Declaration of Independence of Quito
  • Guayaquil Independence Day
  • All Souls Day
  • Day of the Dead
  • Cuenca Independence Day
  • Christmas Day
Annual Leaves
  • 15 days of annual leave after 1-year service
  • Extra day added after completion of 5 years and every subsequent year.
  • Capped at a maximum of 30 days
  • Period up to which annual leaves can be carried forward: 3 years.
Medical Leaves
  • No upper limit
  • Generally, 2 months of paid leave
  • During medical leave, employees entitled to at least 50% of regular pay
  • A medical leave of fewer than 3 days to be certified by the employer with Social Security medical center
  • If registered with the social security office, leave beyond 2 months are paid for by social security
Maternity Leave
  • For normal birth - 12 Weeks ( 2 weeks before, 10 weeks after delivery)
  • For cesarean or multiple births - 15 days.
  • Babies with special needs, including premature birth - 18 days
  • Children born needing severe medical attention: Additional 100 days
Paternity Leave
  • For normal birth - 10 days
  • For multiple births - additional 10 days
  • Babies with special needs, including premature birth - additional 90 days
  • Children born needing severe medical attention: Additional 25 days
Bereavement Leave 3 days
Adoption Leave 15 days from the day of adoption
Health Benefits Free for all employees under the Universal Healthcare plan.

Elements of the Employment Contract Laws in Ecuador

Ecuador takes employee wellbeing seriously. All employment terms must comply with Ecuador’s labor laws. Some of the stipulations include.

  • Documentation of employment contracts in Spanish recommended. 
  • Employers maintain physical records of employment for all employees 
  • The employer has to register all employees with the National Social Security program within 15 days of engagement.

Skuad can help you discover exceptional talent and onboard them. Using our tailor-made HR solutions, you can undertake expansion while remaining compliant with the employment laws of Ecuador.

Speak with a Skuad expert today to learn more about hiring in Ecuador.

Contractors vs. Full-time Employees

When choosing between contractors and full-time employees in Ecuador, do keep the following in mind. In Ecuador, all laws related to employment favor the employee in case of a dispute. Also, labor hiring intermediation is not allowed. So, Professional Employer Organizations (PEO) cannot operate in Ecuador.

However, incorporating a holding company in Ecuador is not mandatory for hiring. Companies can hire teams in two ways.

Hire full-time employees on the company payroll: All you need is to generate a permanent commercial establishment for your company. This ensures that your company falls under and operates under Ecuador's employment laws.

Hire contractors through civil services: Companies can hire contractors in Ecuador to provide consulting services and other specialized services. But, the services by these contractors should not form the core of the business. Also, only service providers can be contracted. The contractors need to provide services on their premises only.

Be it, party contractors or full-time employees, Skuad can take care of the hiring process for you. To learn more, book a demo with Skuad experts today.

Hiring in Ecuador

Hiring can be a huge challenge expanding into a different country. For hiring in Ecuador, companies can publish their openings on local radio and local publications or use job search platforms.

Some of the popular job search platforms are:

The background check also varies from employer to employer. With the lack of a global database, a pre-employment background check is not an easy feat. However, some checks commonly included are:

  • Criminal records
  • Education verification
  • References
  • Credit reports

One of the best ways to conduct a background check is from an unbiased third party.

Also, Ecuadorian labor laws mandate:

Anti-discrimination Provision for Hiring in Ecuador

Ecuador is very strict about preventing discrimination at the workplace and in the hiring process. Employees and prospective employees are protected against discrimination by the employer, including discrimination against

  • Sex
  • Race
  • Religion
  • Language
  • Place of birth
  • Cultural identity
  • Color
  • Nationality
  • Gender
  • Sexual orientation
  • Disability
  • Civil status 
  • Ideology
  • Health status 
  • Political orientation

Any violation can lead to serious consequences for the business.

Skuad’s EOR services can help you avoid encountering all these challenges. We take care of the compliance, hiring, payroll, onboarding, and other HR-related processes for you while you focus on business expansion. Book a demo today to learn more!

Probation & Termination

In Ecuador, all employee contracts may include a 90-day probation period. Upon completion of the probation period, the contract comes into effect. During the probation, either parties can terminate the contract without notice.

Ecuador’s labor laws favor the employees. Usually, employees can only be terminated in cases of breach of contract. Even in these cases, the employers need approval from the local labor inspector to take action.

Contracts can also be terminated for economic reasons. For fixed-term contracts, employers need to provide at least 20 days of prior notice to the employee. In almost all cases of termination of employment in Ecuador, the employer may need to pay severance to the affected employees.

Note: Managing Directors are not bound by any Civil Code, so there are no specific rules applicable to dismiss them. Also, Union leaders and pregnant women cannot be terminated either. (Source: Deloitte)

EOR Solution in Ecuador

Business expansion is a long-drawn process that calls for extensive planning, especially when expanding to a foreign country. It is complicated and can take up to several months to complete but by choosing the EOR route for hiring employees in Ecuador, you can fast-track the expansion process. Employer of Record Ecuador (EOR) solutions by Skuad can make expansion to Ecuador much simpler and a lot quicker for business. Our global outreach and a tech-enriched HR platform ensure compliance with local labor laws by managing employment responsibilities such as monthly payroll, work permits, employment contracts as well as taxation for your employees in Ecuador.

Types of Visas in Ecuador

Broadly, there are three types of visas in Ecuador.

  • Ecuador tourist visas can be for a duration of up to 90 or 180 days. As the name suggests, this visa is for tourists in Ecuador.
  • An Ecuador temporary resident visa is valid for two years. These can be renewed when nearing expiry. All foreign nationals traveling to Ecuador for a purpose other than tourism, including for work or business, require this visa. There are 14 sub-types under the temporary resident visa.
  • An Ecuador temporary resident visa is valid for two years. These can be renewed when nearing expiry. All foreign nationals traveling to Ecuador for a purpose other than tourism, including for work or business, require this visa. There are 14 sub-types under the temporary resident visa.

Types of Work Visas in Ecuador

The type of work visa depends on the kind of work that you need to perform and the time you need to spend in Ecuador.

  • 12-VI Visa: This work visa is for all foreign nationals who wish to travel to Ecuador for work.
  • 10-IV Visa: This is issued to contracted technical experts who are working for companies established in Ecuador.
  • 9-V Visa: The most common work visa. It is issued when foreign nationals with professional degrees desire to move to Ecuador to explore and practice their profession.

Requirements for Getting a Work Visa in Ecuador

The documents required to get an Ecuador work visa may depend upon the type of work visa needed. The requirements could also vary based on the kind of work. The requirements for getting an Ecuadorian work visa include:

  • A valid passport with a validity of six months from the date of entry into Ecuador
  • Completed visa application form
  • Receipt of payment of the visa application fees
  • Two copies of recent color passport-size photographs
  • An updated copy of the resume
  • Professional qualification certificates
  • A copy of the offer letter from the employer in Ecuador
  • Registration certificate issued by the ministry
  • A fitness certificate from a registered medical practitioner (including immunization certificate for COVID-19)
  • A no-objection certificate from the police from the applicant’s country of origin

Skuad experts recommend connecting with the nearest Ecuador Embassy or Consulate for the visa. You can get a list of all the necessary documents from here before applying for a visa. The final approval for the visa may take a little time, so please apply with enough time in hand.

Our industry experts at Skuad are happy to assist you with all your visa requirements. Please reach out to us today to know more.

Work Permits

To work overseas, foreign nationals generally need to carry a visa and a work permit. Are they the same? No, they are not. (Source: Differencebetween.net)

By definition, a work permit is a letter issued by a company wanting to hire a foreign national. These could be as laborers, for professional services, or technical services.

A Work Visa is a document issued by an immigration authority permitting foreign nationals to enter the country. You may need a work permit while applying for a work visa.

For work in Ecuador, you need a work visa to enter the country and work there. Speak to our experts to learn more about visa requirements in Ecuador.

Payroll & Taxes in Ecuador

Compensation for Employment

To set up payroll in Ecuador:

  • The company must obtain an Ecuadorian Tax ID.
  • Employee contracts with complete information must be uploaded to the government system.
  • The standard format on the Labor Ministry website must be used for uploading the contract. 
  • Employers are obligated to pay reserved funds, after completion of the second year.

As per Ecuador labor laws, unskilled laborers need to be compensated at least USD 400 a month. The Ecuador employment law mandates 13th- and 14th-month bonus payment as well. Also, employees are generally paid at least once a month, but usually twice a month. Common practice is to pay 40% of pay by mid-month and the balance 60% by the month-end. A part of the profits also needs to be shared with the employees as a bonus.

Taxation and Other Deductions

Ecuador follows a “Pay As You Earn” income tax model. The structure is progressive, so you pay a higher tax as your income increases.

For the year 2021, the income tax rates are as follows: (Source: Orbitax)

Individual Taxation Tax on column 1 Tax on excess (%)
From To
US$ 0 US$ 11,212 US$ 0 0
US$ 11,212 US$ 14,285 US$ 0 5
US$ 14,255 US$ 17,854 US$ 154 10
US$ 17,854 US$ 21,442 US$ 180 12
US$ 21,442 US$ 42,874 US$ 179 15
US$ 42,874 US$ 64,297 US$ 1072 20
US$ 64,297 US$ 85,729 US$ 1071 25
US$ 85,729 US$ 1,14,288 US$ 1072 30
US$ 1,14,288 onwards US$ 1428 35

Also, it is mandatory to contribute a part of your income toward the Social Security program. Employees need to contribute 9.45% of their salary toward Social Security. The contribution for employers is 12.15%.

Get in touch with Skuad experts, and let us take over payroll and taxation duties for you.

Incorporation: How to Set Up a Subsidiary in Ecuador

Incorporating a holding company or a subsidiary in Ecuador can help in expanding your business into Latin America. A subsidiary is the first step to set up operations here. Working on expansion can be daunting even for the most experienced businesses. By partnering with Skuad’s EOR solutions, you can dedicate your attention solely to the business side of expansion. Our team will take care of hiring, onboarding, managing payroll, taxation, and probation, and other benefits for you. With our deep knowledge of Ecuador’s labor laws, we ensure all our work is compliant with the local laws.

Setting Up your Subsidiary in Ecuador

With limited or no knowledge about Ecuador and its laws, setting up a subsidiary can be tricky. It can take up time and also lead to financial challenges. We recommend working with experts in the HR field to take care of your business needs to expedite expansion.

The easiest route for registering your subsidiary here would be as a Limited Liability Company (LLC.) This will limit the liability for the parent company and also offer freedom to the subsidiary to operate in Ecuador.

Subsidiary Laws in Ecuador

Some of the key considerations under the subsidiary laws in Ecuador are:

  • The subsidiary should have 2 to 15 members.
  • The share capital should exceed USD 400. 
  • You need to appoint a local legal representative who is aware of local laws.
  • Registration of the company is mandatory with the superintendent of the companies in Ecuador.
  • Present a list of shareholders for the subsidiary to the superintendent of companies with their name, nationality, domicile, and other details.

Steps Involved in Setting Up a Subsidiary in Ecuador

Setting up a subsidiary in Ecuador may include:

  • Identifying and listing the business purpose of the subsidiary
  • Creating the subsidiaries bylaws
  • Notarizing the deeds and appointments
  • Registering the subsidiary with the superintendents of companies
  • Getting a unique tax identification number in Ecuador
  • Opening a local bank account number
  • Depositing the required paid-up capital and share capital
  • Getting a license to perform an economic activity 
  • Obtaining the necessary approval from the local municipality

Setting up a subsidiary in a foreign country is profitable, but can lead to a lot of frustration. It takes time, money, and patience to expand to a foreign country. Before venturing into expansion, we recommend studying the new market and your preparedness to expand.

Partnering with Skuad’s EOR solutions can help expand into Ecuador faster. Connect with us to learn more about setting up your subsidiary in Ecuador.

Professional Employer Organization (PEO)

Like EOR, Skuad's Professional Employer Organizations (PEO) too can help expand across geographies. They can help you with your HR outsourcing customized as per your needs. This customization of services can also help you bring down your costs. Some of the primary services they offer include

  • Employee recruitment.
  • Complete payroll processing, compliance, and record-keeping.
  • Employee Benefits like medical help, educational help, etcetera.
  • Managing compensation for employees.
  • Help with compliance with local labor and other statutory laws.
  • Employee onboarding and other training needs.
  • Any other administrative HR tasks.
  • Other strategic initiatives like cost reduction and employee retention.

PEO collaborations are good for medium or small organizations looking at expansion. The major challenge with this collaboration is that you are still liable as an employer. Even though you may have a PEO partner, the onus of compliance is always on you. You may still need to set up a legal presence wherever you have your employees.

When it comes to Ecuador, it is illegal to take up services of PEO's.

Skuad's EOR solution is a good way to expand your business in Ecuador without setting up a separate entity. Our solutions help you to stay focused on your business and leave all business compliances, payroll processing and complete management work to us. Connect with Skuad to know more.

Start Hiring For Free Today

Hire and pay upto 2 contractors, for free, in 150+ countries.

Get Started For Free