What are the options that the employee has to access the employer’s retirement?

Who They have been working for the same company for 25 years. under dependency relationship, have the right to an employer pension and two ways to collect itaccording to the Labor Code.

What are the conditions that must be met to retire in Ecuador?

The first is a monthly pension until death the retiree and up to a year later his heirs collect.

the other way is receive a single payment through the Global Retirement Fund, which cannot be less than 50% of the unified salary received by the person multiplied by the number of years of service. No discount applies.

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“It is calculated that way and the worker is paid in advance. That agreement is made at the notary’s office, so it is fixed for both parties with some certainty that the employer has freed himself from his responsibility to cancel the employer’s retirement, and if the employee fails to comply, he has a more formal document to claim in court “, says Bárbara Terán, professor at the Universidad San Francisco de Quito (USFQ).

those who are between 20 and 24 years old under a dependency relationship in the same company can also collect a proportional part of their employer retirement in the two ways already described, just in case they are untimely fired.

With 25 years of work or more for the same company, you have the right to receive employer retirement, either by resignation or dismissal. This is paid monthly or in a single amount (Global Retirement Fund) as long as there is an agreement.

IESS fails to comply with the ruling of the Constitutional Court and its own Resolution 641 on the calculation of retirement pensions

The Ministry of Labor can calculate what can be received from monthly or global retirement. The information required is age, number of years worked and remuneration for the last five years. With these data, the entity delivers the result, the monthly pension or the minimum global amount that the employee must pay.

The monthly pension method is mandatory. The one that is voluntary is to accept the Global Retirement Fund.

Roberto Apunte, a professor at the SEK International University, says that since it is a right, the cause must be met for it to become effective, which in this case is working for the same company for 25 years. “They can force you, coerce or negotiate, all they want, but the worker has up to three years from then to follow a trial in which he must prove that he was pressured to resign, that would be a little finer. The resignation is a unilateral decision.”

In practice, more ways of covering this labor right are applied, which is allowed as long as it is an agreement between the employer and the employee.. One way is the deferred payment of the Global Retirement Fund “which is not prohibited by law, but it is not foreseen either, therefore it is one of those gray areas where a judge is going to have to rule on whether it is worth it or not. it is worth paying in installments”, indicates Terán.

The idea of ​​retirement is that people have the opportunity to live with dignity after finishing their career. “The employer pays this value (Global Retirement Fund) in advance and the worker decides how to manage, but the law has not provided that it can or cannot be paid in installments (every two, three, four, five years or as agreed). Justice will have to issue a sentence indicating how many installments can be canceled or how spaced the payment can be allowed so that it is not an abuse, “says Terán.

In the public area, that is, in state entities, he adds, only what is expressly permitted by law can be done, so in those cases the two established official ways apply.

At private areaHowever, everything that is not prohibited is allowed, so that is why these agreements are made to cover the employer’s retirement in installments, every so often. “In this hybrid matter that is labor law, sometimes it is only allowed to do what is in the Labor Code and other times decision-making is allowed to the will of the parties.”

An example. The Labor Code determines that workers must earn at least the salary established by the Government each year. On the other hand, the freedom of the parties allows someone to hire or not hire a certain person. “There is no rule that obliges to hire or not a person. There are broader labor standards than others that are more restrictive,” says Terán.

Alternatives if the employer does not comply with the employer retirement

The retiree must go to a labor court and request the execution of the agreement of the Global Retirement Fund. There are no legal outlets to not cover this labor right.

“The Organic Law on Humanitarian Support (approved in the face of the crisis generated in the midst of the pandemic) did not publish any regulations related to retirement. It does establish modifying agreements between employer and worker, but these do not reach the post-employment relationship, that is, there is no article that says that the amount of retirement or the way of paying it could be changed, “says Terán.

A tendency that companies make to calculate the Global Retirement Fund is to multiply half of the last salary received by the worker by the number of years of service.

What is normally done is that these agreements are made in minutes before a notary.

Companies necessarily have to make reports on labor obligations owed to workers through actuaries.

When an amount is received that the worker considers does not correspond, he could go to the Ministry of Labor, but there is a risk that the authority will say that it no longer has competence since they watch over the rights while the employment relationship is in force, he assures the specialist.

“It would be worth exhausting that route because it is much faster and a lawyer is not needed, it is cheaper. When there is a trial involved, one is needed. All universities have free legal clinics that follow these cases, but not everyone has access,” says Terán.

Yes, you can go to a labor inspector to make the calculation of what you should receive from your employer’s retirement before the dismissal occurs, through an information form.

The calculation of the monthly pension is derived from a process. First you have to make an average of the remunerations of the last 5 years of the person. 5% is calculated from this result and this value is multiplied by the number of years of service.

Later that amount is divided by the age coefficient that is in the Labor Code. Each of the ages of people has a coefficient. “The logic is that older people will live less, so if a very old person retires, that person will receive retirement for much less time, therefore, her monthly pension has to be higher, and vice versa. A younger person who retires will receive it for a longer time, but the monthly value is going to be smaller”.

The result of the division for the coefficient is further divided by twelve and the monthly value to be received is obtained.

There is a maximum monthly pension amount. “The person can earn a maximum of the average unified basic salary of the last year (when he retires). In this case, the law protects the employer who will have to pay the monthly salary. The intention is that the employer does not spend paying pensions and that prevents him from hiring new people, “says Terán.

But finally, the employer can agree with the employee a payment higher than the ceiling established by law. “The minimums are prohibitive, the maximums are the ceilings that apply when a worker earns a lot. If the company wants to pay more and agrees to that, fine; but it is not a right that the retiree can claim”.

Which if it is prohibited, it is to monthly pay the total amount of the Global Retirement Fundhe adds, because it would be a lower value than what would come out if the monthly pension is calculated as described.

Karla Villacís, an expert in labor law at Lexvalor Abogados, affirms that certain parameters are taken into consideration, such as the age of the worker. “Another variable is the gender issue, since women have a longer life expectancy than men, according to general statistics, the five best salaries are still taken into account.”

Paying a person over time, throughout his life, is not the same as making a single payment after completing his years of work, says Villacís. “Obviously money has a cost over time. Since I am now paying everything cumulatively and I am never paying again, there is a discount rate that is applied when canceling the Global Fund”, he indicates.

The problem, he adds, is that in practice actuaries do not agree on the discount rate that should be applied when paying in a lump sum. “That is where there is variation, since an actuarial company calculates a different rate than another, that is why different values ​​are also produced with respect to what the Ministry of Labor may indicate,” says Villacís.

The discount rate is not regulated and that is what allows any opportunity in practice for these variations to exist, says the specialist.

In these circumstances it is difficult for the employer and the worker to reach an agreement. “As there is no agreement, you cannot pay that total value, which ends up being very onerous for the company and it says that it costs a lot, so they prefer to pay a part and the rest in installments,” says Villacís.

They are mixed modality agreements that are reached. “These between the parties are always possible, in labor matters it is viable as long as the two parties agree and it does not imply a waiver of rights.”

Those who access monthly employer retirement have double allocation with that of the Ecuadorian Institute of Social Security

There are conflicting criteria regarding the elimination or not of the right to employer retirement. Terán says that this alternative was established when the country had the sucre as its official currency and the retirement pensions provided by the Ecuadorian Social Security Institute (IESS) were negligible.

“The currency we had did not allow the worker to have a decent old age after working due to the devaluation of the currency. Now in the IESS it is quoted in dollars, there are some for which you can pay up to $2,000 a month”, he asserts.

The regulations have caused employers not to want to keep workers beyond 20 years of service, adds Terán. “The debate is about more rights for those who already have a job or more opportunities for those who don’t.”

A contrary criterion has Aim. If you spend between 20 and 24 years working for the same company, what fits is the employer’s proportional retirement when you are fired and the severance pay that is paid when you have less than 20 years working for a company no longer applies. It is not that there is double cancellation.

“For the businessman, any cost that can be reduced is a benefit for his profitability, since his profits would increase, obviously I will always try to keep my production costs lower, which is why they agree that retirement be eliminated employer”, specifies Note.

The issue, adds the specialist, is that profitability should also depend on production efficiency. “They should not anchor the profit solely on the operating value of a machine, which is perhaps a fixed cost, but rather on the production efficiency costs that make that payroll more productive. At the end of the day I would have dissatisfied workers.”

Also, one option is be more cautious regarding the final costs of the companies, taking into account that tenths, compensation for dismissals or employer retirements must be covered, if applicable, as well as the contributions of affiliation to the IESS of each one of the employees. “You have to properly manage working capital to always have the necessary resources to cover those obligations, regardless of whether you sell or not. Have a financial backing, calculated, studied. That is a bit of the social contract,” says Apunte. (I)