Hiring Employees – PEO versus Entity Setup in Ecuador

Ecuador’s legal and financial regulations may be complex for some foreigners and can change frequently. Seeking reliable, qualified legal assistance for this process is important in ensuring your company stays compliant and follows due process. The Ecuador Ministry of Labor (Ministerio del Trabajo) supplies a standard format for employee contracts.

Having a large working population with a good pool of candidates is appealing to new companies trying to expand into the Ecuadorean market. However, there are general employment rules in Ecuador that have to be considered before hiring employees.

While companies may write their own contracts individually, all contracts must be uploaded to the Labor Ministry’s website. Contracts for employees include a probation period of three months. During this probation period, employers can terminate the contract without severance. Companies can offer short-term contracts up to six months, as well. However, be aware that employers must pay people on these contracts an additional 35% of the agreed salary.
On the other hand, foreign employees need to obtain a work visa in order to work in Ecuador for three months or more.

Annual leave (including rest days) is legally set at 15 days after one year of employment. After five years of employment, employees are entitled to one extra day per year up to an additional 15 days. Ecuador also observes 12 national holidays. 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.

Biz Latin Hub can act as your local employer of record and assist you to successfully operate in this region. We invite you to learn more about our accounting and legal experts, our Hiring and International PEO solutions and hiring support that we can provide in Ecuador by reviewing our presentation below. This presentation was designed by our local experts and contains all the information you need to know when choosing to hire employees in Ecuador.

If you have any more questions about how to hire employees in this vibrant country, reach out to our friendly team in the Ecuador office today.

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