Government reverses field on IESS independent worker affiliation; latest issue involves construction workers

Mar 17, 2014

After announcing two weeks ago that all independent professionals must join Ecuador’s Social Security system, the agency has decided that it does not have the authority to make membership mandatory.

The first order by the Ecuadorian Institute of Social Security (IESS) claimed that business owners and professionals who are not currently part of the Social Security system were required by law to join, and to pay 20% of their salaries into it. The order was challenged not only by those affected but also by former IESS administrators who claimed that the current IESS administration was misinterpreting the law.

According to attorney Mateo Estaban, the rule could have affected about 100 expat business owners in Cuenca and a 1,000 expats nationwide.chl cordero1

IESS Director Fernando Cordero acknowledged the error late last week and said membership in the system would be voluntary although he encouraged professionals to join. “We made a mistake in our announcement and we are hereby correcting it,” Cordero said. He said the error was made when IESS Assistant Director Raúl López was handed an internal document minutes before a press conference two weeks ago and did not have time to review it before presenting it.

On Saturday, President Rafael Correa also acknowledged the mistake and said the government could not force independent professionals to join Social Security. “It is voluntary,” he said. “We hope many of them will join anyway and, if they do, we expect them to pay the required fee.”

It was the second embarrassming about-face for IESS in less than month. In late February, the agency rescinded its unrestricted “voluntary” membership offer to those who have not paid into the system through employment deduction. That change was prompted by concerns that too many sick and elderly volunteer members would put a financial strain of health care services offered by IESS.

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Meanwhile, another controversy surrounds an order from the Ministry of Labor and IESS that all construction workers be included in the Social Security program. Construction company owners say that the rule should not be applied to workers hired by the job. “It applies an unfair burden to the building industry,” says Hermel Flores, president of the Ecuador Chamber of Constrcution.

“Builders need many workers to perform a specific short-term tasks. These are not traditional full-time employees and groing through the IESS registration procedure for them requires time and expense,” Flores said. He added that if the new rules stand, it will drive construction costs higher.

The government says it is concerned about the welfare of workerss after they retire or if they are injured on the job.

Meetings between the government and builders are scheduled this week to discuss the issue.

Photo caption: IESS Director Fernando Cordero.

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