Once a company has been established in Ecuador, you will need to hire employees to help you boost your business and take it to the next level. In Ecuador, the hiring process is rather simple, although to avoid contingencies and have efficient hiring there are some aspects that must be taken into account.
What Are the Requirements and General Conditions for Hiring Employees in Ecuador?
The first thing that must be taken into account when hiring employees in Ecuador is that the Ecuadorian labor legislation is very protective of workers’ rights. With this in mind, we’ve listed below some common characteristics and requirements for hiring employees in Ecuador:
- As a general rule, the working day is of 8 and hours from Monday to Friday.
- All workers must be affiliated to the social security (Instituto Ecuatoriano de Seguridad Social-IESS) from the first day of work. Companies must register the workers with the IESS within the first 15 days of the working relationship. Companies’ contribution to IESS is 11.15% of the worker’s salary.
- Contracts must be registered with the Ministry of Labor through the online system SUT (Unified Worker System).
- Employers must keep written records of signed contracts in their offices. The Ministry of Labor can review contracts and their registration at any time.
- Companies must distribute 15% of their profits to the workers. 10% among all workers equally and 5% according to family responsibilities (wife and children).
- Besides their normal salaries, workers are entitled to the thirteenth and fourteenth remuneration. The first is known as the Christmas bonus, and equals the twelfth of the amount received as compensation during the year, it must be paid by December 24 of each year. The second is equal to a unified minimum salary. For the year 2018 this amounts to USD 384.00 and must be paid by April 15 in the coastal region and by August 15 in the sierra region. Both remunerations can be paid monthly at the request of the worker.
- Workers who have worked in a company for more than one year are entitled to “reserve funds”, which is an additional monthly salary each year of work. This can also be paid monthly.
- Finally, workers are entitled to 15 days of continuous vacation. The legislation does not establish it but it is common practice to divide vacation days during the year.
What Should Labor Contracts Contain in Ecuador?
Labor contracts in Ecuador must include at least:
- Employer and worker data.
- The start date of the employment relationship.
- The position and description of functions to perform.
- The working day and the schedule, if applicable.
- The determination of the type of contract.
- The determination of the existence of a trial period.
- The remuneration and the form of payment.
- Any other condition that does not violate the rights of the worker.
What Are the Different Types of Employment Contracts in Ecuador?
Depending on the needs of the company, there are different types of employment contracts in Ecuador, among them are:
- Indefinite term contract: This is the most common contract, it does not have a fixed or definite term for its termination. These contracts can have a 90-day trial period. Fixed term contracts were eliminated in 2015.
- Eventual contract: They are used to meet extraordinary circumstances that may occur in the ordinary course of business such as replacement of workers for maternity, illness, vacation. The reason or circumstance and the term must be included in the contract. These contracts can not exceed 180 continuous or discontinuous days within a period of 365 days. Remuneration includes a surcharge of 35%.
- Occasional contract: They are used to solve emergent or extraordinary circumstances not related to the principal or habitual activity of the employer. It term can not exceed 30 days. Remuneration includes a surcharge of 35%.
- Seasonal contracts: Those that are made to meet cyclical or periodic needs, due to the discontinuous nature of the activities. Workers should be called every season.
- Certain/specific work contract: They are signed when the need is for a specific job and the remuneration includes the whole of it.
- Task contracts: It is one in which the worker agrees to execute a certain amount of work or work in the day. It is understood concluded the day or period of time, by the fact of completing the task.
- Contract by piece: It is one in which the work is done by pieces or in general, by units of work, and the remuneration is agreed for each of them, without taking into account the time invested in the work.
- Work or service determined within the business line contract: Its main characteristic is that once the work or activity for which the worker was hired is completed, the work relationship will end, with the payment of the eviction bonus being appropriate. For the execution of new works or services, the employer will have the obligation to hire again the workers who have rendered their services in the execution of previous works or services under this type of contract, even for the number of jobs required by the new work or service, being the power of the employer to choose the workers that he considers.
Looking for More Information About Doing Business in Ecuador?
Ecuador has mostly been overlooked as an destination for foreign investment but due its increasing economic stability and positive outlook for the coming years more and more people are taking notice. As attractive as it may be for potential investors, doing business in Ecuador can pose some challenges due to cultural and linguistic differences. At Biz Latin Hub, we have extensive experience in helping foreigners penetrate Latin American markets with our back office services and we have a team of local and expat professionals at the ready to support you throughout every step of your business venture. If you’re interested in finding out more on how we can help, feel free to contact our CEO, Craig Dempsey, here for more information.
Watch our video below to find out more about entering Latin American markets!