You’re fired! – What happens in Ecuador

“Hey, step into my office for a minute.”

“Don’t sit down, this will only take a second.” I continued.

“You’re fired, get the f**k out.”

OK, so this wasn’t exactly how it went down eariler this week.

But can’t blame a guy for dramatizing once in a while.

If you’ve met me, you know Im a soft-spoken guy, don’t think I could do it like that.

But due to a change in business circumstances, I unfortunately had to let someone go.

In Spanish, as in Ecuador, its very clear cut. Someone either quits (renunciar) or you fire them (despedir).

Theres no wishy washy middle ground like “laid off” or “let go”.

And when you have to let someone go, as I did this week, its a little different down here.

You have to “liquidate” them meaning pay them a final one-time “severance” payment equal to 25% of all the salary you’ve ever paid them plus any unpaid bonuses due to them.

But first, when you fire someone in Ecuador, or if someone leaves your business voluntarily, you have to go see an accountant who makes the official document (Acta de Finiquito) that needs to be filed with the Social Security Department (IESS) and Ministry of Labor (Ministerio de Trabajo).

Then, a date is scheduled when both you and your employee will have to go in front of an inspector where you will have to pay your employee their liquidation (severance) settlement and both sign off.

Theres really no way to get around this legal process nowadays in Ecuador or your employee can sue you.

Except if you hire the right way.

Which I didn’t this time around. In my case, for an employee I hired making a bit more than the minimum wage who worked for me for 3 months, Im going to have to pay her around $450 for her liquidation.

For instance, one loophole i recently discovered that will allow you to legally not pay the extremely costly 25% lump sum severance payment to your employees in Ecuador when you let them go is to hire your employees on a temporary limited time contract… say for one year.

At the end of the year you let them go for reasons of “contract ending” and then you don’t have to pay them the 25% lump sum liquidation of all the salary they’ve earned while under you. You will only have to pay a much smaller amount equal to any unpaid bonuses due to the employee for that year.

You can then do like most and maybe give them a few weeks off and then hire them back.

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