Laws and Policies in Ecuador

Employment Contracts in Ecuador

Employment relationships are governed by the Ecuadorian Labor Code.

Contract Requirements

• Must be in writing and registered in the Ministry of Labor system.
• Contracts should include:
  • Job role & responsibilities
  • Salary & payment schedule
  • Work hours
  • Benefits & leave
  • Duration (if fixed term)
  • Termination terms

Types of Contracts

• Indefinite-term contract (most common)
• Fixed-term contract (allowed only in specific cases)
• Seasonal or temporary work
• Part-time contracts
• Telework / remote work contracts

EOR ensures the correct contract type and proper registration to avoid penalties.

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Working Hours in Ecuador

• Standard working hours: 40 hours per week
• Daily limit: 8 hours/day
• Workweek: Monday–Friday typically
• Overtime:
  • 150% of hourly rate (daytime)
  • 175% of hourly rate (night)
  • 200% for work on rest days or public holidays
• Night work: 22:00 to 06:00 (additional premiums apply)

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Employee Leave in Ecuador

Annual Leave

• 15 days of paid vacation after 1 year of service
• After 5 years → additional 1 day per year (max 30 days)

Sick Leave

• Employee receives 100% pay
• Employer pays first 3 days
• Social Security Institute (IESS) pays from day 4 onwards

Maternity Leave

• 12 weeks of paid leave
• Paid jointly by employer and IESS
• Protection from dismissal during pregnancy continues 1 year after return

Paternity Leave

• 10 days paid leave (extended for complications or premature birth)

Public Holidays

Ecuador has 14+ national holidays, all paid.

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Employee Benefits in Ecuador

Mandatory Benefits

• 13th-month salary “Christmas bonus”
• 14th-month salary “School bonus”
• Employer social security contributions
• Severance & notice pay
• Vacation & holiday pay
• Occupational hazard insurance
• Reserve funds (after one year): 8.33% of salary

Social Security (IESS)

• Employer: 12.15%
• Employee: 9.45%
• Covers: health insurance, disability, maternity, pension, work risks

Additional Common Employer Benefits

• Private health insurance
• Meal allowances
• Transportation benefits
• Performance bonuses

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Payroll & Tax Requirements

Payroll Currency

• USD (official currency)

Income Tax for Employees

• Progressive tax from 0% to 35%
• Withheld at source by employer/EOR

Employer Costs

• Social security: 12.15%
• Reserve fund (after first year): 8.33%
• Vacation, bonuses, severance obligations

EOR manages all payroll deductions, filings, and reconciliations per Ecuadorian regulations.

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Employment Laws and Labor Compliance in Ecuador

Ecuador has strict employment protections. Major regulations include:

Key Labor Rules

• Written contracts are mandatory
• Strong job security—terminated employees receive severance
• Collective labor rights are recognized
• Foreign employees must have valid work visas
• Employers must register all employees with IESS

Termination Rules

• Notice period: Not required, but severance applies
• Unfair dismissal:
  • Severance equals 50% of monthly salary per year of service (minimum 3 months’ salary)
• Voluntary resignation compensation: 25% of monthly salary per year of service
• Termination for cause: Allowed but must be justified and approved by the Ministry of Labor

Workplace Safety

Employers must follow mandatory safety protocolsnce:

Governed by occupational health & safety regulations

Risk assessments and medical exams may be required

• Employees are entitled to severance pay depending on tenure and salary type.
  • Indefinite-term contracts: 30 days’ salary for the first year + 20 days per additional year.
  • Fixed-term contracts: Remaining value of the contract.
• Employers must provide notice or payment in lieu.