Iceland
Make employment in Iceland easy. Let us handle payroll, benefits, taxes, compliance, and even stock options for your team in Iceland, all in one easy-to-use platform.
- Capital City
Reykjavík
- Currency
Icelandic krona (kr, ISK)
- Languages
Icelandic
- Population size
364,134
Facts & Stats
- Capital City
Reykjavík
- Currency
Icelandic krona (kr, ISK)
- Languages
Icelandic
- Population size
364,134
- Ease of doing business
Very easy
- Cost of living index
$$$$ (2021)
- Payroll frequency
Monthly
- VAT - standard rate
24%
- GDP - real growth rate
0.1%
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.
Grow your team in Iceland with Remote
Looking to employ workers in Iceland? Companies hiring in Iceland must either own a legal entity in the country or work with a global employment solutions provider, usually one that provides employer of record services.
Remote can employ your team in Iceland on your behalf through our local legal entity in the country and handle payroll, benefits, taxes, and compliance for your Iceland team. You can also pay contractors now in Iceland with Remote.
Risks of misclassification
Iceland, like many other countries, treats self-employed individuals or contractors and full-time employees differently. Misclassification of contractors in Iceland may lead to fines and penalties for the offending company.
Employing in Iceland
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.
Minimum Wage
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.
Payroll Cycle
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.
Onboarding Time
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.
16 Public holidays
Want to see and manage all holidays? Sign up for our free HRIS!
Effortless HR in Iceland: Take the Tour
Competitive benefits package in Iceland
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:
Health Insurance
Dental Insurance
Vision Insurance
Mental Health Support
Pension or 401(K)
Life and Disability Insurance
Taxes in Iceland
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)
Types of leave
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.
Employment termination
Termination process
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.
Notice period
Both employers and employees are required to provide notice three months before resignation or termination unless otherwise specified in the employment contract.
Severance pay
There is no legally mandated severance pay, but unions can negotiate a mutual rate applicable to their members.
Probation periods
Probations periods are typically capped at three months into the new job.
Fair Pricing in Iceland
Employer of Record
Hire and pay your global team
Starting at $599/month
for annual plans
Top features
Satisfaction guaranteed
No deposits or hidden fees
Zero onboarding or offboarding fees
Compliant equity incentives support including withholding and reporting
Built-in security and compliance
Fast onboarding (average 2-3 days)
Flexible, localized benefits
Top features
Only pay for contractors you actively work with
Work with contractors in 200+ countries
Create, edit, and sign tailored, localized contracts
Approve contractor invoices with one click or auto-pay
Transparent payments with complete visibility
Remote Payroll
Consolidate your multi-country payroll
$50
per employee/month
Top features
Reduce costs by centralizing payroll management
Ensure local compliance for every country
Direct support from in-house local payroll experts
Accurate, on-time, compliant payroll to level-up your employee experience
Tax and labor authority reporting handled for you
Top features
Guided onboarding and offboarding
Employee profile and document management
Time and attendance (time off and tracking)
Expense management and reimbursement
Employee self-serve on the platform and mobile app