As payment for ecosystem services (PES) programs grow around the world, so have concerns over whether a focus on ecosystem services will also protect biodiversity. Biodiverse Ecuadorian páramo grasslands have become a hotspot for PES in an effort to protect water supplies, sequester carbon, conserve biodiversity, and improve rural livelihoods. However, the outcomes of PES-incentivized land management, particularly burn exclusion, on plant communities and their associated ecosystem services remain poorly understood. To address this science-policy gap, we evaluated plant richness and number and cover of the ten major páramo growth forms in two study areas with chronosequences of burn exclusion. Both species richness and number of growth forms was highest in sites with intermediate times-since-last burn and the cover of tussock grasses—critical to protecting soils and maintaining hydrologic function—recovered within 3–6 years after fire at both study areas, suggesting that PES programs targeting hydrologic services do not need to exclude burning to ensure adequate vegetation cover over the long-term. However, shrub growth forms were slower to recover, indicating that conserving the plant composition characteristic of less disturbed páramos requires some protection from burning. Findings provide broad lessons for PES programs focused on both biodiversity and ecosystem services and point to the importance of clearly defining PES ecological goals since land-use prescriptions may differ depending on the management objective.