Remote’s guide to employing in Iceland.
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Land of fire (volcanoes), ice, and everything in-between (hot springs and geysers), Iceland combines a rich cultural history with strong economic performance, driven by extensive civil liberties, a high human development index, and a market economy with a vast social welfare system.
Iceland is the world’s most peaceful nation and along with its Scandinavian neighbors, boasts impressive performance on equality, democracy, per capita wealth, and environmental sustainability.
364,134 (est. 2020)
Ease of doing business
Cost of living index
VAT - standard rate
GDP - real growth rate
To employ in Iceland, companies must own a local legal entity in the country or work with a global employment solution. Managing payroll, benefits, taxes, and compliance in Iceland can get complicated, especially without established local relationships.
Remote’s global employment solution makes it easy for your company to employ workers in Iceland quickly, efficiently, and in full compliance with all applicable labor laws. We take on the responsibility and legal risks of international employment so you can focus on hiring great talent and growing your business.
Most employee entitlements are defined by collective bargaining based on the 1938 Act on Trade Unions and Industrial Disputes. With 91.8% of the workforce organized into unions, Iceland has the highest union membership rate. Overall, employees in Iceland enjoy protection against discrimination based on age, religion, sexual orientation, gender expression, and race.
Common questions that could come up during the hiring process include the minimum wage, overtime rates, and guaranteed paid time off. Remote can help you offer a complete, competitive, and compliant benefits package to your employees in Iceland.
Below are national public holidays applicable for all regions in this country. Remote customers have access to a detailed list of regional public holidays within the Remote platform. Sign up now to access all public holiday information.
|Saturday, January 1, 2022||New Year's Day (Nýársdagur)|
|Thursday, April 14, 2022||Maundy Thursday (Skírdagur)|
|Friday, April 15, 2022||Good Friday (Föstudagurinn langi)|
|Sunday, April 17, 2022||Easter Sunday (Páskadagur)|
|Monday, April 18, 2022||Easter Monday (Annar í páskum)|
|Thursday, April 21, 2022||First Day of Summer (Sumardagurinn fyrsti)|
|Sunday, May 1, 2022||Labour Day (Verkalýðsdagurinn)|
|Thursday, May 26, 2022||Ascension Day (Uppstigningardagur)|
|Sunday, June 5, 2022||Whit Sunday (Hvítasunnudagur)|
|Monday, June 6, 2022||Whit Monday (Annar í hvítasunnu)|
|Friday, June 17, 2022||Independence Day (Þjóðhátíðardagurinn)|
|Monday, August 1, 2022||Commerce Day (Frídagur verslunarmanna)|
|Saturday, December 24, 2022||Christmas Eve (half day) (Aðfangadagur)|
|Sunday, December 25, 2022||Christmas Day (Jóladagur)|
|Monday, December 26, 2022||Saint Stephen’s Day (Annar í jólum)|
|Saturday, December 31, 2022||New Year's Eve (half day) (Gamlársdagur)|
There’s no minimum wage mandated under Icelandic law; employers and employees can enter into collective bargaining to determine wage rates as they see fit.
For customers of Remote, all employee payments will be made in equal monthly installments on or before the last working day of each calendar month, payable in arrears.
We can help you get a new employee started in Iceland fast. The minimum onboarding time we need is only 20 working days.
Our team ensures your employees are onboarded and paid as quickly as possible while keeping your business compliant with all local employment legislation. The minimum onboarding time begins after the employee submits all required information onto the Remote platform. The onboarding timeline is also dependent upon registration with local authorities.
For all non-nationals of the country of employment, the Right to Work assessment (if applicable) will add three extra days to the total time to onboard. There may be extra time required if we need to follow-up on the right to work assessment.
Please note, payroll cut-off dates can impact the actual first day of employment. Remote has a payroll cut-off date of the 10th of the month unless otherwise specified.
At Remote, we’re obsessed with helping you craft the best possible employee experience for your team. We are leading the way in practicing “fair equity,” which means making sure employees everywhere have access to both the required and supplemental benefits they need to thrive (and that will allow you to attract the best local talent).
Our benefits packages in Iceland are tailored to fulfill the local needs of your employees. Typically, our packages contain some or all of the following benefits:
Learn how employment taxes and statutory fees affect your payroll and your employees’ paychecks in Iceland.
11.50% - Mandatory Pension Fund
2.00% - Supplementary (optional) Pension Fund (the employee can elect to supplement their pension by either 2% or 4%, and the employer then is obliged to match this with 2% in either case)
6.10% - Social security contribution (this contribution is calculation on the Gross salary + Mandatory Pension Fund + Supplementary Pension fund amounts)
1.55% - Union fee
0.10% - Rehabilitation Fund
10.17% - Vacation Allowance - once annually (this value is a minimum 10.17% of annual gross salary and can go up to 13.04% of annual gross salary, depending on the employees tenure with the employer)
4% - Pension fund contribution
31.45% on the first ISK 4,188,216 ($34147.70)
37.95% on the next ISK 7,569,948 ($61719.92)
46.25% on any income over ISK 11,758,159 ($95867.58)
Employees accumulate paid time off, depending on their tenure in the same line of work.
The minimum PTO entitlement is 24 weekdays annually, compensated at a rate of 10.17% of your normal wages. With five years of experience working in the same industry, you’re entitled to 25 weekdays off, paid at 10.64% of your normal wages.
After five years of employment with an employer, you’re entitled to 27 weekdays, paid at an 11.59% rate. This increases to 30 weekdays, compensated at a 13.04% rate after 10 years of employment with the same employer.
Employees can take the 16 public holidays off and are entitled to 1.375% of the normal monthly wages per hour if they’re expected to work on a public holiday.
Icelandic employees are entitled to paid sick leave proportional to their tenure with an employer.
During the first year of employment, an employee is entitled to two days of sick leave per month, which increases to two months of paid sick leave annually after the first year.
After an employee’s fifth year, they’re entitled to four months of sick leave, capped at six months off after the 10th year.
Pregnant employees are entitled to six months of maternity leave, starting up to a month before delivery is due, and compensated at a rate of 80% of the employee’s normal wages.
Fathers are entitled to six months of paternity leave, paid at a rate equivalent to 80% of the normal wages. One month of parental leave is transferable between partners and both parents’ leave entitlements can be exercised until the newborn turns 18 months of age.
In addition, parents can take up to 13 consecutive weeks of leave to care for children up to the age of eight.
Employee contracts can be terminated at will if prior notice is provided. Employers are not required to provide any specific reason for terminating an employee.
Both employers and employees are required to provide notice three months before resignation or termination unless otherwise specified in the employment contract.
There is no legally mandated severance pay, but unions can negotiate a mutual rate applicable to their members.
Probations periods are typically capped at three months into the new job.