The dos and donts of hiring employees in Ecuador

Today is the 6th and final installment in the series “Starting a business in Ecuador”.  

“I’d hire an employee in Ecuador but I don’t want them to sue me.”  I hear a lot.

“Are you dumb or just plain ignant.” I always want to respond.

It’s true, the employment laws are quite different in Ecuador then maybe what you’re used to, and at first glance seem to favor the employee.

But if you hire and fire right like we’ll talk about today you got nothing to worry about.

After you’ve defined your business idea, obtained your social security card, legally formed your business, found funding, gotten the RUC and permits, now you’re ready to hire employees. If you looking for a headhunters in the New Orleans area? Visit site.

The true beauty of starting a business is that if you can let go a little, you can quite easily form a living entity that will exist and flourish without you.

In Ecuador, like in most third world countries, you can find qualified labor very cheap.

For instance, last year I was managing my business, Hostal Murali, in Guayaquil, until I hired a young bi-lingual local guy to manage the business for me.  All it cost me was a bit over the minimum  wage ($318/month) and I completely extracted myself from the business.  The last few months as an owner I was barely even in the place as I dedicated myself to other things.

And you know what, Murali got even better.

You see, managing nor administration are not my strong-set, in fact, a lot of things aren’t.

It’s important to recognize that and understand there are many folks who can do it better than you.

The beginner entrepreneur always makes the mistake of thinking no one can do their job better than them.

So, what’s the best way to find qualified employees in Ecuador, quick?

– For me, the best way is to publish a ‘wanted employment’ ad in the Sundaypaper where you’re located.  In Quito, try El Comercio, on the southern coast try El Universo, in Cuenca, try El Mercurio. After placing an ad for my newest business, a hotel near the airport in Quito, my phone literally rang off the hook for two full days.

– Publish an ad online at or , those are two local favorites.  But be WEARY, dont put your personal cell number or email on these sites cause they will stay up there forever!  Get an email and a cell number only for the employee search, then ditch it.

How to hire employees legally in Ecuador?

To hire an employee in Ecuador, first you need to obtain your RUC, or tax ID number form the SRI, like we covered recently in a previous letter.  Than the easiest way is to get an accountant who will draw up the employment contract and register it in the Ministry of Labor (Ministerio de Trabajo) and help you affliate your employee to the Ecuador social security system IESS under your name or company.  I found an account that did both for me for one employee for a total of $50.  From that point on you will need to withhold about 9% of their salary and pay it to the IESS and you as the business owner will have to pay 12% on top of that in their name.  For an employee you have making the minimum wage in Ecuador ($318/month) that comes to around $50 a month you will have to pay for each employee you have.

What are your legal responsibilities to the employee?

In Ecuador, as mentioned above, you will need to pay 12% of the employees salary to the IESS each month, you will also need to pay the employee two bonus payments, the DECIMO TERCERO and DECIMO CUARTO, each are aqual to a full month of salary.  One is paid in December and the other is paid in the “back to school ” month (In the highlands this is August, on the coast it is March).  Also, once a year you will need to pay your employees a fraction of the on-the-books earnings of the business called UTILIDADES.  That’s about it.

How to fire employees without getting sued?  

Many employees in Ecuador after being let go fire their past employers.  It’s kind of an epidemic but they can’t get anything out of you if you follow the above rules and have proof you are current in their regular and bonus payments.  Upon firing an employee, or them deciding to quit, in Ecuador you have to pay them a final LIQUIDATION (liquidación).  The amount of this payment varies on how long they have worked for you and how high their salary was.  To give you an idea a friend of mine making $800 a month got fired from his job where he had worked for 6 years and they paid him around $7,000 dollars in liquidation. There is a formula that an accountant can help you with.

I recommend to do all the above with an accountant in Ecuador and even if a prior employee does sue you, if you affiliated them, paid them and their affiliation on time, paid the necessary bonuses and paid what you needed to pay in liquidation, they can sue all they want but they aren’t going to get anything from you. You can open website to learn what is considered to be wrongful dismissal, so you know how to act in accordance with law when you fire an employee.

That’s it, right from the mouth of an experienced business owner with employees in Ecuador… hire someone in Ecuador, you’ll be glad you did, I’ve had nothing but positive experiences.

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What you wont be good at in Ecuador

This is the 5th installment in the “Starting a Business in Ecuador” Series.

The next big step in starting your business in Ecuador is a fun one… buying stuff.

Furnishing it… in other words. Furnishing your business can help it reach the zenith of success, because every customer or client likes to visit a place which is pleasing to the eyes. Get a comfortable sofa for you to relax when things get tough at work, or maybe even consider bying a Modrest Kingsley Modern Marble & Rosegold Dining Table, when you want to engage your clients in a meeting with not only powerpoint presentations, but also some nice delicacies. All the furnishing hacks bodes well in business and mus be considered.

And it’s important you understand something before you attempt it.

No matter how long you live in Ecuador, no matter how well you speak Spanish… you’re still a foreigner, and locals will know it as soon as you open your mouth or maybe even when they see you a mile away.

You have to accept the fact that there are certain things we just cant do as well as the locals… like get the best prices on many things.

You can live in denial if you want to, or you can accept this and take measures to protect yourself against it like using a trusted local to do a lot of the shopping for you.

At 5’6, I’m short.

I have to accept the fact I will never be good at reaching things that are high up. I just won’t.

And you and I, being foreigners in Ecuador, very often just won’t be able to truly pay the prices the locals pay.

I aquaint this like when a guy goes into a gay club… they either going to get ya’ on the front end, or up the back… but be sure, they going to get ya’.

Particularly, when a foreigner buys at an open market in Ecuador, unless you really know what you’re doing, they going to get ya’ on either the price or the quality.

Never fails.

Keep this truth in mind before you go spend thousands of dollars on furniture, equipment and other items for your business, you could save yourself thousands by reading about them on unclutterer before buying.

Trust me, I know, after less than a week of my new business Quito Airport Suites being open, a bed rail broke, causing me to replace all of them with more sturdy ones, I had bought bad, in an open market in Ecuador. And it cost me a few hundred bucks.

Buyer beware, this aint Walmart anymore Dorothy.

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The $200k fu*k up in Ecuador

Today is the 4th installment in the series “Starting a business in Ecuador”.

“Damn, that sucks for that guy.” I said, standing across from a mentor of mine, an older Ecuadorian friend.

“Yep, it does.” He responded in Spanish.

We were in the street looking at a sparkly new hotel finished to the tee, but vacant and empty.

The location was great in the northern part of Guayaquil. The building was nice. They must have invested somewhere around $150-200k just in the construction.

And they could have done very well.

Yet why was the place vacant?

They couldnt get their permit.

You see, in Ecuador, before you start any street-side business that will require a sign, you will need to get a permit from the local Municipality called a “permiso de funcionamiento”.

After you determine your funding source, decide on your legal business type, and get your RUC, the next step in Ecuador when starting a new business should be to get your permit from the municipal.

Most foreigners think there are no zoning laws in Ecuador, actually there are, they just may be looser than what you’re used to in your home country.

Without a permit, yes, they can shut you down.


I’ve seen that on the coast of Ecuador and in the countryside all over the country it is much easier to get business permits and not as necessary as in the big cities like Quito or Guayaquil. But its still a good idea.

The permit is granted based on the tax ID number of the property (predio), so if you’re renting a place that had a previous business similar to the one you want you might already be good.

Specifically in the bigger cities, if the property is zoned residential, like the beautiful, yet vacant building I was standing in front of in Guayaquil, it could be VERY difficult to get business permits for certain businesses.

In this case, someone invested heavily in the building I was standing in front of without securing the proper permit ahead of time. Now due to being zoned residential, it was too late.

To figure out what a property is zoned for request the USO DEL SUELO of the property before you invest heavily.

Now, the use of the property or USO DEL SUELO can be changed, but it can be tedious and expensive to do so.

Money talks in Ecuador, in these cases a good lawyer with contacts just might be worth their weight in gold.

I’ve seen that if zoned correctly, most permits can be very cheap (often under $100) and usually take around 2 months to get approved.

No big deal.

The Municipal is the first place you should start. When applying for their permit they will tell you based on your business type what other permits are necessary. For instance, for a hospitality business you’ll need to pass inspections by the fire department and the environmental board besides getting the Municipal permit.

You would also need to get registered in the Ministry of Tourism, but this isn’t as urgent as the Municipal permit.

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A necessary evil in Ecuador: How to get your RUC

Today is the 3rd installment in the series “Starting a business in Ecuador”.




After defining your business idea, how you plan to fund it, and what type of legal entity your business will be, the next very important step in Ecuador is obtaining your tax ID number, or “RUC”.

If you’re thinking about ever doing any type of business in Ecuador it all starts with obtaining your “RUC”.

To get your RUC as a foreigner you need to be on any type of visa other than the simple automatic 90 day tourist visa stamp you get if you enter Ecuador with just your passport.

Tourists can get a RUC if they are on the 12-IV visa, applied for at an Ecuador consulate before coming to Ecuador.

If in the country on a visa other than the simple passport stamp (12-X) visa, all you have to do is go to your local SRI office in Ecuador (The IRS of Ecuador) and within a few hours you’ll have your RUC for free by taking a few copies of your passport and current visa and a utilities bill of your current residence in Ecuador (doesn’t have to be in your name).

Once you have your RUC you can get official numbered receipts made in your name, called FACTURAS.

Everyone you sell to will ask for a factura, it is the only way they will be able to write the expense off their taxes.

As a business owner in Ecuador its important to know that for most products you are required to collect a 12% sales tax called the IVA.

The good news is that the SRI is not as quite as sofisticated as the IRS in many ways and most people write off EVERYTHING they buy, right down to the KFC chicken for their kids, and in most cases at the end of the month don’t end up paying much IVA.

At the end of the year there is an income tax based on your gross profit on ECUADOR INCOME called the IMPUESTO A LA RENTA an approximate is the scale below:

up to $8910…you pay $0 tax
$8910-11350…you pay 5% tax
$11350-14190…you pay $122+ 10% tax
$14190-17030… you pay $406+ 12% tax
$17030-34060… you pay $747+ 15% tax
$34060-51080… you pay $3301+ 20% tax
$51080-68110… you pay $6705+ 25% tax
$68110-90810… you pay $10963+ 30% tax
$90810-and up… you pay $17773+ 35% tax

Most people, myself included, have an accountant that helps them sort out and minimize their tax liability in Ecuador but its still good to know what you are getting into.

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Funding your Ecuador start up through the backdoor

You don’t need money to start a business.

You need balls.

It’s true, for the right idea, the money seems to appear.

I arrived in Ecuador a little over a year and a half ago… a few thousand in debt from years of travel abroad.

Upon arrival I rented a hole-of-a-room in Quito with a shared bath for $60/month.


So how’d I get the money for my first venture, an intermediate-priced hostal in Guayaquil?

I used the good credit I had established to that point in my life to apply for several low-interest credit cards.  About 6 of them. I then paid a friend to their PayPal account to turn the money on the cards to cash.  It cost 2.2% in fees but cash advances had much higher interest rates than purchases. Melbourne weekly eastern provide you this kind of updates related with business earlier.

Then I got a personal unsecured line of credit from my bank in the US for $15k.  If you’ve been a bank customer for a while just ask and you’ll probably get one too.

And I picked up a partner.  Not just anyone, but an Ecuadorian friend of mine who also happened to be a hotelier.

And off I went.

Then I sold that business after a little over a year, and started a new hotel near the airport in Quito.  

To buy the furniture, I pre-sold my product before I was open… in the form of coupons for future stays at a discounted rate.

It worked.

So well in fact my long time payment processor closed my account without prior notice cause they didn’t understand the spike in sales.  Big pain.

Then I bought most of my expensive furniture in the same places, giving me leverage to negotiate discounts and payment plans. I was not much concerned about money, as to achieve perfection in one shot I was on the GetCash website looking for a loan. I was fortunate enough to come across a personal loans canada website, wherein I procured it.

I also looked into business loans for foreigners in Ecuador.

But the options were slim to none for a new arrival.  The big banks require you spend a certain amount of time in the country AND that you have your residency before they will even touch you.

Ultimately, I did find one institution that would lend a foreigner money for a business start up… my Ecuadorian credit union… Coopera Ltda.  The Coopera typically loans money to small businesses and if you have at least a few months of deposit history with them they don’t care much that you are a foreigner, they’ll lend you money.

Plus, I mean lets face it, your buck goes a lot farther down here in Ecuador.  In the US at my age I would probably be fetching coffee for somebody spending my days in a cubicle surfing sites while planning my next vacation to Latin America.
So there you have it.  You can’t use money as an excuse anymore!  The security you feel as an employee is only an illusion.  Don’t climb the corporate ladder to an $80k a year job or whatever… start multiple income streams that co-exist without you even being there.

And Ecuador is a great place for that!

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