Payroll compliance in Ecuador
Ecuador has made great strides in recent years to reduce the complexity of its regulatory environment – including the 2020 enactment of the Law for Tax Simplification and Progressivity. This has contributed to Ecuador dropping to 40th place in TMF Group’s 2022 Global Business Complexity Index, down from its ranking as the 18th most difficult place to do business in 2021, and 10th most complex in 2020.
- The country’s labour laws are enshrined in the Ecuadorian Labour Code, which regulates the terms and conditions of employment contracts such as wages, hours of work, legal holidays and paid vacations, labour unions, strikes and severance compensation.
- In Ecuador, it is mandatory to pay a 13th salary and even a 14th salary payment. The 13th salary – equivalent to one-twelfth of gross annual income – must be paid either monthly or as a single annual payment by 24 December. The 14th salary (or school bonus) – equivalent to Ecuador’s unified basic monthly salary – must also be paid either monthly or as a single annual payment by 15 March in coastal and island regions, or by 15 August in Amazon and mountain regions.
- Employment of foreigners is not restricted in Ecuador except in certain sectors, such as oil & gas and transportation, where the government sets a maximum of 20% foreign employees.
If you’re doing business in Ecuador and are looking to learn more about the country’s labour laws, incorporation procedures, tax implications and compliance requirements, download a copy of our full country profile, Doing business in Ecuador.