Benefits and Compensation in Ecuador

What are Employee Benefits?

The additional perks that a company offers to its employees are known as employee benefits. The benefits are selected based on the company policy and prevailing labor laws. The most common benefits that are available for employees in Ecuador include paid leaves, sick leaves, maternity benefits, and additional allowances. 

Companies design employee benefits to keep their employees happy. Great benefits bring down the company’s turnover rate and contribute greatly to motivating the employees. Additionally, a company can attract the best new talent by providing competitive benefits. 

Ecuador also has several collective bargaining elements in place. These agreements factor in the satisfaction levels of the employees and hence, can act as a guiding principle. You must consider these agreements while drafting the compensation and benefits policy in Ecuador.

In addition to the mandatory benefits, several employers in Ecuador offer supplemental benefits to their employees. These benefits include a company car, private employee benefits insurance in Ecuador. 

Compensation Laws in Ecuador

The labor laws govern the benefits and compensation policy in Ecuador. However, a few collective bargaining agreements are in place that regulate some of the benefits. Let’s look at the laws governing employee benefits in Ecuador. 

• As per Ecuador’s Production Code, employers must provide employees with a dignified wage. 
• As per the law, the annual bonus paid to the employees should be 24 times the minimum wage. 
• The Labor Code states that employees must work for a maximum of 40 hours. Also, they are entitled to 15 days of annual paid leaves. 
• The constitution of 2008 bans child labor and employing any person with disabilities. 
• Companies in Ecuador must pay their interns. 
• All workers in the private sector have the constitutional right to form trade unions. 
• All employers must display the work schedule across their physical office. The work schedule must also clearly state the duration of breaks between a regular work day. 
• As per the Article 57 of the Work Code, 2005, overtime work should not exceed 2 hours a day. 

How to Design an Employee Benefits Program for Employees in Ecuador?

Understanding the steps to draft a compensation package in Ecuador is important. A benefits policy is a comprehensive guideline that states all the laws and the benefits the employee can avail of.

Let’s have a look at these important steps:

Step 1: Fix a budget and set your goals

• When you have a pre-decided budget, drafting a benefits plan becomes easier. Reach out to your senior management to get a budget for the activity.
• Now, decide on the objectives that you want to meet with the benefits plan. The size of the industry and the company will dictate these objectives.
• While framing the objectives, you must stay within the purview of the labor laws and the collective bargaining agreements.
• Some common benefits plan objectives can be keeping the employees motivated, attracting the best talent to the company, etc. 

Step 2: Know the industry standards and the employees’ expectations

• Before you finalize the elements of employee compensation and benefits in Ecuador, you must get an idea of the benefits other companies in the industries offer. 
• Once you have the insights from different companies, you can start creating your plan for employee benefits in Ecuador.
• Apart from the industry standards, you must also try to gauge the expectations of the employees working for your organization. 
• You can create a short survey to capture employee expectations from a benefits plan. 
• Also, you can use the results of the survey to eliminate any benefits that might go unused. 

Step 3: Add a level of flexibility

• All employees working in a company have varied needs. Therefore, it is important to make worker’s compensation in Ecuador flexible. 
• You can group the employees as per their levels and create benefits that will address their needs. 
• It is important to let the employees know how to use the benefits and the terms and conditions associated with a particular benefit. 

Step 4: Communicate with the stakeholders

• As soon as you have the first draft of your benefits plan ready, you can present it to the company’s important stakeholders.
• You can take their feedback and incorporate them into the final plan for employee benefits in Ecuador. 
• If the stakeholders suggest that a particular benefit will go unused, you can get them removed to save some cost.

Step 5: Analyze

• Post incorporating the feedback, you must go through the entire plan once. You must make the plan dynamic to sustain in different business environments.
• You must proofread the document to look for errors and correct them before you launch the employee benefits in Ecuador at a company level. 
• It would be best to design a few measurement measures to comprehend how the benefits plan operates to evaluate the strategy’s effectiveness and overall activity.

Types of Guaranteed Benefits in Ecuador

Here are some guaranteed employee benefits in Ecuador that employees across organizations can avail of. Let’s have a look. 

Minimum wage

• The minimum wage in Ecuador stands at $450 per month. The minimum wage is also called the unified basic salary in Ecuador. 

Working hours and overtime

• The maximum working hours in Ecuador is 40 hours a week. Therefore, the employees work for 8 hours, five days a week.
• Several collective bargaining agreements govern overtime payments in Ecuador. 
• Employees can work up to 4 hours as overtime in a day and 12 hours a week.
• Employees are paid either 150% or 200% of their regular salary, depending on the nature of work that they perform during the overtime hours. 

Paid leaves

• The employees can avail of paid leave benefits in Ecuador. They get 15 days of leave as annual leave.
• Employees must complete a year with the organization to enjoy the paid leave benefits.
• Once the employees complete five years of employment, the number of paid leaves they can avail of increases to 16.

Public holidays

• Ecuador follows a list of statutory public holidays defined by the Government of Ecuador and the collective bargaining agreements.
• Employees get leave from work on public holidays for 14 days. The list of public holidays is enclosed below:

Sick leaves

• If the employees have continuously contributed to the Ecuadorean Social Security Institute for 180 days before the onset of the illness, they can avail of the sick leaves.

• While the employer covers the first three days of sick leave, the IESS covers the remaining days.
• Employees need to furnish a medical certificate if they take sick leave. They must submit the certificate within the first 48 hours of their leave.

Maternity leaves

• Pregnant employees are entitled to maternity benefits in Ecuador. They can take a leave of up to 12 weeks.
• Out of the 12 weeks, they must take a two-week break before the due date. The employee can avail the remaining ten weeks post-childbirth. 
• The employees are entitled to 10 additional leaves if there are multiple births. 
• If the child is born with any disability, the employee can take additional 90 days as maternity benefits in Ecuador. 
• Employees who take maternity leave are entitled to full salaries for the 12 weeks. 75% of the wage is payable by social security, while the remaining 25% is taken care of by the employer.
• New mothers can work 6 hours instead of 8 for the first nine months post-childbirth. 

Paternity leaves

• Employee benefits in Ecuador include paternity leaves to fathers. Employees can avail of 10 days of paternity leaves.
• In case of multiple or complicated births, the number of paternity leaves increases to 15.
• If there is a case of premature birth, the employees can avail of 18 days of paternity leaves.

Parental leaves

• Once the maternity leave period ends, the employees can take a paternal leave of up to 9 months during the first year of the child’s birth.
• However, the employers or the social security system do not pay for these leaves.  

Bonus

• All employees in Ecuador receive an annual bonus on Christmas. 
• The bonus amount equals one-twelfth of the employee’s total annual income. However, the amount does not include the social benefits. 
• Employees who work for a prolonged period are also entitled to a discharge bonus. 

Health Insurance

• All employees in Ecuador get health insurance coverage. These policies come under the purview of the state. 

Severance Pay

• Employees whom the employer terminates receive severance pay. The severance pay ranges from 3 monthly payments to 25 monthly payments. 
• If the termination is sudden, the employer provides a dismissal bonus of 25% of the regular salary for each completed year of service. 

Employee Benefits for Expatriates

The employee compensation and benefits in Ecuador are offered to the ex-pats too. They have access to all the benefits the local employee avails. While employed in Ecuador, ex-pats can access health benefits and different allowances like food and travel. Some of the common perks that ex-pats enjoy are:

• Housing allowance
• Meal allowances
• Food allowances

The employees are also a part of the social security system in Ecuador. They enjoy all the leave benefits in Ecuador. Ex-pats also avail of the medical benefits for employees in Ecuador. Additionally, companies offer employees several benefits when they join the company. The clauses of these benefits are clearly stated in the employment contract. 

How are Employee Benefits Taxed in Ecuador?

Most of the offered employee benefits in Ecuador are taxable. It is because these benefits are considered fringe benefits. Employers in Ecuador tend to consider the monetary value of these benefits for calculating the employees’ tax liabilities. 

Ecuador follows a progressive taxation system where the tax rate ranges from 5% to 35%. However, employees receive a tax-free allowance of USD 11,310. 

Restrictions for Ecuador Benefits and Compensation

In Ecuador, most perks are subject to taxation. The employer shall make all timely tax payments to the relevant federal agencies and tax authorities. To determine the employee’s tax obligation, you must comprehend the monetary value of these employee benefits in Ecuador. 

When setting up an employee compensation and benefits policy in Ecuador, ensure your company is legal, and you have the right to conduct business there. Businesses must pay workers the minimum wage set by their various industries, as determined by the government. You must carefully consider all the labor laws the government creates while putting together a compensation package in Ecuador.

Supplemental Benefits for Employees in Ecuador

Employers can offer several supplemental employee benefits in Ecuador 

• Private health insurance: While all companies offer free medical benefits for employees in Ecuador, they also provide private health insurance to cover any health emergencies. Using these policies, the employees can also avail themselves of dental benefits in Ecuador. 
• Leave to attend school: If employers hire employees under 18, they allow them to attend school for two hours during the day. 
• Leave for commission work: Employees can take some time off to carry out some commission-based work. However, they need to inform the employer in advance if they want to avail of these leave benefits in Ecuador. 
• Education leave: Employees who have at least two years of experience in the same company and have more than five years of experience overall and who have a scholarship for study abroad in fields related to their work activity are eligible for a leave of absence for up to 1 year. Still, they are also eligible for payment for six months.
• Voting leave: The right to vote is an important right that falls under the employee benefits in Ecuador. Hence, the employees provide a 4-hour break to the employees to exercise their rights. 
• Bereavement leaves: If an employee suffers a loss of a member of their immediate family, they are entitled to a bereavement leave of up to 3 days. The employer pays for these leaves. 

How Multiplier Can Help with Benefits Management in Ecuador

When starting a firm abroad, finding qualified individuals who can contribute to their full potential may be difficult. While drafting employment contracts and providing employee benefits in Ecuador, employers must abide by local laws and ordinances. Using a global PEO platform like Multiplier, you may easily carry out all the activities in Ecuador. 

Multiplier provides access to a skilled and talented workforce who are well-informed about various facets of the business by assisting you in adhering to Ecuador’s labor rules. Doing this can increase your market reach and cut your labor expenditures. With the assistance of our trained professionals, you won’t need to establish a subsidiary in the nation to manage the workforce efficiently and draft excellent employee benefits in Ecuador alone.