Establishing and managing payroll in Ecuador
If your organization is planning an expansion to Ecuador, it is important to understand that the process of hiring and setting up payroll in the country can be difficult for foreign companies, with complex administrative processes, different languages, and potential delays.
Many organizations choose to outsource this difficult phase, bypassing the administration to focus on the real work of expanding in Ecuador. At Horizons, we offer full Ecuador payroll outsourcing services for organizations expanding into the country, whether you have already registered a legal entity in Ecuador or not.
Why choose the Horizons payroll solution?
If you have an entity
If your organization already has an entity in Ecuador, Horizons can set up your Ecuador payroll and manage all associated HR, administration, and compliance work.
This service is an ideal option for larger businesses interested in committing long-term to their Ecuador expansion.
If you don’t have an entity
For organizations that have not established an entity in Ecuador, we can offer a more comprehensive payroll outsourcing service using our Ecuador subsidiary to act as employer of record, while also taking care of HR, contracts, legal compliance, and more.
This flexible service helps you to achieve all the key benefits of hiring locally in Ecuador with the ability to scale rapidly and a reduced level of risk.
Ecuador payroll guide
Taxation and withholdings in Ecuador
Income tax in Ecuador is paid via a Pay As You Earn (PAYE) model, so employers need to withhold their employees’ taxes and file a report at the end of every tax year. The taxation is progressive, so higher earners pay a higher percentage in tax. Rates vary from 0% to 35%.
Employees and employers in Ecuador need to pay a percentage of salary into the nation’s social security program, paying 9.45% and 12.15% respectively. The employer contribution changes after the employee has been with them for more than two years.
Entitlements and terminations rules in Ecuador
Employees in Ecuador on fixed-term contracts are generally entitled to 30 days of notice prior to termination. Employees are also usually entitled to a severance payment which is often calculated as 25% of monthly salary for every year of service.
How to establish payroll in Ecuador
To establish and run payroll yourself, your organization will need to follow Ecuador’s unique regulations. You may need to travel to the country in person, and you will likely need to open bank accounts and register with multiple authorities, set up an entity, and more.
Alternatively, you can choose to outsource the setup and administration of your Ecuador payroll to a global PEO. At Horizons, we provide extensive payroll support for Ecuador, helping you avoid the hassle of navigating the country’s complex legal framework.
Manage payroll in Ecuador
Whether it’s EOR service or just payroll management, Horizons’ employment experts can help you get started in 24h.