Navigating Ecuadorian Labor Law: A Specialist's Guide to Hiring Domestic Help

As a Certified Ecuadorian Real Estate Attorney, I guide clients through complex land acquisitions where meticulous due diligence is the only shield against financial loss. The same rigorous standard must be applied when hiring domestic help. The allure of a well-maintained property is quickly soured by a contentious labor dispute, which can lead to significant financial penalties and even liens against your assets.

Many expatriates mistakenly believe that informal, cash-based arrangements are the local norm. This is a critical and costly error. Ecuadorian labor law, governed primarily by the Código del Trabajo, is staunchly pro-worker and its mandates are not optional. This guide provides the legal and practical framework to hire domestic staff correctly, protecting your investment and ensuring a fair, lawful relationship with your employees.

The Legal Foundation: Your Core Obligations

All employment in Ecuador, including domestic service (servicio doméstico), is subject to the Ministry of Labor's oversight. Failure to comply with these regulations is not a private matter; it is a violation of state law.

The Employment Contract: Your First Line of Defense

A verbal agreement holds no legal weight for an employer and leaves you exceptionally vulnerable. A written contract, registered with the Ministry of Labor, is your foundational legal instrument. For ongoing domestic help, the standard is a Contrato de Trabajo a Plazo Indefinido (Indefinite Term Contract). This contract must be uploaded to the government's online platform, the Sistema Único de Trabajo (SUT), within 15 days of the employee's start date.

Your contract must clearly specify:

Parties Involved: Full names, cédula (national ID) numbers, and addresses.
Job Description (Cargo): A precise description of duties (e.g., Trabajadora Doméstica, Jardinero). Vague terms lead to disputes.
Working Hours (Jornada): The legal maximum is 8 hours per day and 40 hours per week. Any work beyond this is overtime (horas extraordinarias or suplementarias) and must be paid at a legally mandated premium (50% to 100% surcharge).
Remuneration (Remuneración): The monthly salary, which must meet or exceed the national Salario Básico Unificado (SBU). This figure is adjusted annually (As of 2024, it is $460 USD per month).
Probationary Period (Período de Prueba): A 90-day probationary period is permitted, during which the contract can be terminated with less complexity. However, all legal obligations, including IESS affiliation, apply from day one.

Hyper-Specific Detail #1: The Crucial Difference in Contract Types

While a Contrato por Obra Cierta (contract for a specific task) might seem suitable for a one-off project like building a fence, it is legally incorrect for continuous domestic help. Using the wrong contract type can be interpreted by the Ministry of Labor as an attempt to circumvent employee rights, potentially voiding the contract and defaulting you to the protective standards of an indefinite term relationship, often with penalties. Always use the Contrato a Plazo Indefinido for recurring roles.

Social Security (IESS): The Non-Negotiable Pillar of Compliance

Affiliating your employee with the Instituto Ecuatoriano de Seguridad Social (IESS) is your most critical legal duty. This is not optional. It provides your employee with healthcare, disability benefits, and a retirement pension.

The Process & Your Financial Obligation:

Employer Registration: You must first obtain an employer ID (código de empleador) from IESS.
Aviso de Entrada (Notice of Entry): Within the first 15 days of employment, you must register your employee in the IESS online system. This officially notifies the government of the employment relationship.
Monthly Contributions (Aportes): You are responsible for remitting monthly payments. The total contribution is 20.6% of the employee's declared salary. You, the employer, pay 11.15%, and you deduct the remaining 9.45% from the employee's gross salary.
Payment Slips (Planillas): Each month, you generate a payment slip (planilla) from the IESS website and pay it through an authorized Ecuadorian bank before the 15th of the following month.

Hyper-Specific Detail #2: The Danger of Under-Reporting Salary

Some employers are tempted to state a lower salary on the contract and IESS registration to reduce their monthly aporte, paying the difference in cash. This is a serious offense. If the employee requires major medical care, IESS may investigate the declared salary. If fraud is discovered, you will be liable for all back-payments with punitive interest (intereses por mora), substantial fines, and potentially the full cost of the employee's uncovered medical expenses. The risk is immense and the savings are trivial. Declare the full, true salary.

Beyond Salary: The "Hidden" Mandatory Costs

A common and costly blind spot for foreign employers is the series of legally mandated annual bonuses, known collectively as beneficios de ley. Budgeting for these is essential.

Décimo Tercer Sueldo (Thirteenth Salary): An annual bonus equivalent to one full month's salary, paid to the employee by December 24th. It can also be paid in monthly installments (mensualizado) if formally agreed upon.
Décimo Cuarto Sueldo (Fourteenth Salary): A bonus equivalent to one national SBU ($460 in 2024), paid by August 15th in the Sierra and Amazon regions, and by March 15th in the Coast and Insular regions.
Fondos de Reserva (Reserve Funds): After the first year of employment, you must pay an additional 8.33% of the monthly salary. This amount is typically paid directly to the employee's IESS account each month, though the employee can request it be paid directly to them.
Vacations (Vacaciones): After one year of service, an employee is entitled to 15 days of paid vacation.

Factoring in these mandatory benefits, your total annual cost for an employee is roughly 15-16 monthly salaries, not 12.

Termination of Employment: The Path to a Clean Break

Terminating employment requires a formal, documented process to avoid future claims. Simply letting someone go can result in a lawsuit for wrongful dismissal (despido intempestivo), which carries a hefty severance penalty.

Liquidación: When employment ends for any reason, you must calculate a final severance payment (liquidación). This includes payment for accrued vacation days, proportional parts of the décimos, and any other owed wages.
Acta de Finiquito: This is the critical final document. It is a formal settlement agreement detailing all payments made. Both you and the employee must sign this document.
Ministry Registration: The signed Acta de Finiquito must be uploaded and registered on the SUT platform. This action provides official, legal proof that the employment relationship has been terminated correctly and all financial obligations have been met.

**Hyper-Specific Detail #3: The Acta de Finiquito is Your Legal Shield**

An unregistered Acta de Finiquito is merely a private document. Only after it is uploaded and approved by the Ministry of Labor's SUT system does it become a legally binding instrument that shields you from future claims related to that employment period. Without this final, bureaucratic step, an employee could claim months or years later that they were never properly paid their severance, and the burden of proof would fall entirely on you.

⚠️ A Real Estate Attorney's Warning: Connecting Labor Liability to Property Risk

As a land specialist, I deal with encumbrances (gravámenes) that can cloud a property's title and jeopardize ownership. Think of an improperly handled employment relationship as a potential lien against your assets. An unresolved labor dispute can result in a court-ordered judgment against you. In Ecuador, this judgment can be enforced by seizing personal property, freezing bank accounts, or even placing an embargo (legal seizure order) on your real estate.

The due diligence you apply to vetting a property's deed (escritura pública) and ensuring it has a clean Certificado de Gravámenes from the Registro de la Propiedad is the same level of scrutiny you must apply to your employment practices. An informal handshake deal is the legal equivalent of buying property without a title search—an avoidable and potentially catastrophic risk.

Proceed with Diligence and Confidence

Hiring domestic help can be a wonderful part of life in Ecuador. By treating it as a formal business arrangement and adhering strictly to the Código del Trabajo, you create a relationship built on a foundation of respect, fairness, and legal security. This diligence protects you from severe financial and legal repercussions and allows you to enjoy your Ecuadorian property with true peace of mind.

Don't let legal complexities undermine your investment. Whether you are acquiring land or managing your property, ensure every step is legally sound.

Avoid Titled Land Pitfalls: Ecuador Property Acquisition Due Diligence Checklist