Contract Termination and Severance in Ecuador ​

Reasons for Contract Termination ​

A contract can be annulled with just cause (and labor authority approval) for reasons such as indiscipline, dishonesty, gross misconduct, or failure to adhere to regulations. In these cases, no severance is required.

Notice Requirements ​

For contract termination without cause, the law does not stipulate a notice period. However, employees cannot be dismissed if they have less than a year's tenure, essentially requiring a three-month notice period of 9 months. For business closures, a 30-day notice is mandated.

Severance Benefits ​

Employees terminated before the end of their contracts typically receive severance and a bonus known as "desahucio." Severance equates to one month's salary for each year of service up to 25 months. "Desahucio" is generally calculated as 25% of the monthly salary times the number of years worked for the employer.