Employer of Record in Iceland

Only 499 EUR per employee per month

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Rivermate's Employer of Record (EOR) solution helps companies hire remote employees in Iceland . We take care of global payroll, taxes, benefits, compliance and HR activities. So you can focus on growing your business. Our Employer of Record (EOR) solution is beneficial to companies that want to hire remote employees in a breeze. On this page you will find employment information for Iceland.

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1. Grow your team in Iceland with Rivermate as your Employer of Record (EOR) / PEO

Payroll, benefits, taxes, and compliance can be difficult to manage in Iceland , particularly if you don't have established local relationships. You can hire employees in Iceland effectively, conveniently, and in full compliance with all relevant labor laws using Rivermate's global Employer of Record (EOR) solution. We handle the responsibilities and legal risks associated with foreign employment so you can concentrate on growing your company.

2. Summary

Iceland is a Nordic island republic in the North Atlantic Ocean with the fewest people in Europe. Reykjavik, Iceland's capital and biggest city, is home to more than 65 percent of the country's population (together with its surrounding territories). Iceland is the only segment of the Mid-Atlantic Ridge that rises above sea level, and its central volcanic plateau erupts almost every day. The interior is characterized by a plateau with sand and lava fields, mountains, and glaciers, with several glacial rivers flowing to the sea via the lowlands. Despite its high latitude close beyond the Arctic Circle, Iceland boasts a mild climate due to the Gulf Stream. Summers are cool due to its high latitude and marine influence, and most of its islands have a polar climate.

The colonization of Iceland started in 874 AD, according to the old text Landnámabók, when the Norwegian chieftain Ingólfr Arnarson became the first permanent resident on the island. Norwegians, and to a lesser degree other Scandinavians, came to Iceland in the following centuries, bringing with them thralls (slaves or serfs) of Gaelic ancestry.

The island was ruled as an autonomous nation by the Althing, one of the world's oldest operating legislative assemblies. Iceland surrendered to Norwegian power in the 13th century after a period of civil war. The Kalmar Union, founded in 1397, brought together the kingdoms of Norway, Denmark, and Sweden. Iceland therefore followed Norway's accession to the union, falling under Danish control upon Sweden's withdrawal from the union in 1523. In 1550, the Danish monarchy forcibly brought Lutheranism to Iceland.

Following the French Revolution and the Napoleonic Wars, Iceland's quest for independence took shape, culminating in 1918 with the foundation of the Kingdom of Iceland, which shared the current king of Denmark via a personal union. During the occupation of Denmark during WWII, Iceland decisively chose to become a republic in 1944, therefore breaking the last official links with Denmark. Despite the suspension of the Althing from 1799 to 1845, the island republic is recognized with preserving the world's oldest and longest-running parliament.

Iceland depended heavily on subsistence fishing and agriculture until the twentieth century. Following World War II, industrialization of the fisheries and Marshall Plan help provided prosperity, and Iceland rose to become one of the world's richest and most industrialized countries. It joined the European Economic Area in 1994, which expanded its economy into industries including as banking, biotechnology, and manufacturing.

Iceland has a market economy with minimal taxes in comparison to other OECD nations, as well as the world's highest trade union membership. It retains a Nordic social welfare system that offers its residents with universal health care and tertiary education. Iceland scores high on democracy and equality indices, as well as third in the world in terms of median wealth per adult. The United Nations' Human Development Index placed it as the fourth-most developed nation in the world in 2020, and it ranks first on the Global Peace Index. Iceland is nearly entirely powered by renewable energy.

Icelandic culture is based on the country's Scandinavian roots. Icelandic, a North Germanic language evolved from Old West Norse and closely related to Faroese, is spoken by the majority of Icelanders. Traditional Icelandic food, Icelandic literature, and medieval sagas are among the country's cultural legacies. Iceland has the lowest population of any NATO member and is the only one that does not have a regular army, instead relying on a lightly armed coast guard.

Hiring talented employees in a short span is not an easy task. Partnering with an Employer of Record (EOR) like Rivermate in Iceland is your best option, giving your organization enough time to focus on other aspects of international expansions like project management and inventory management. The EOR takes care of all the compliance and legal issues while helping you speed up hiring using their knowledge of domestic employment practices and virtual onboarding tools. Top EORs also have provisions for the e-signing of documents to enable faster onboarding.

3. Public holidays

4. Types of leave

There is no information about the types of leave for this country.

Paid time off

Employees are entitled to at least 24 days of paid annual leave, but collective agreements may provide for more. Employees frequently take vacation time during the holiday season, which runs from May 2 to September 15.

Employees are also paid a holiday allowance, which is usually paid at the start of the vacation or on a monthly basis. The vacation pay is deposited into a separate bank account.

Public holidays

The following public holidays are observed in Iceland:

New Year’s Day

Maundy Thursday

Good Friday

Easter Monday

First Day of Summer

Labor Day

Ascension Day

Whit Monday

Icelandic Republic Day

Commerce Day

Christmas Eve

Christmas Day

Boxing Day

New Year’s Eve

Sick days

During the first year of employment, employees are given two sick days per month. Employees often become entitled to more sick leave as they work for an employer for longer periods of time, and collective bargaining agreements may provide for additional sick leave. If the employer requests it, the employee must notify the employer of his or her illness as soon as possible and provide a doctor's note. Employees are also entitled to paid sick leave to care for sick children under the age of 13 under many collective bargaining agreements. Employees who are unable to work because of illness may be eligible for social security benefits.

Maternity leave

After the birth or adoption of a child, both male and female employees are entitled to five months of paid leave. They also get two additional joint months, which can be split between them or taken by only one parent if they prefer. The leave must be used before the child reaches the age of 18 months.

Employees can also take up to 13 weeks of unpaid parental leave if they have a child under the age of eight.

Paternity leave

There is no statutory paternity leave in Iceland.

Parental leave

Other than the already mentioned terms regarding maternity leave in Iceland, there are no other provisions regarding parental leave.

Other leave

5. Employment termination

There is no information about employment information for this country.

Termination process

Terminations must be in writing and take effect at the start of the following month.

Notice period

The notice time is usually between one and three months, however a collective agreement may provide for lengthier notice periods.

Probation period

Probation periods in Iceland last for three months.

Severance pay

Severance is not needed but may be provided in accordance with the terms of the agreement.

6. Working hours

There is no information about the working hours for this country.

General working schedule

Iceland's standard workweek is 40 hours. The majority of employees work eight-hour days, five days a week. Employees may not work more than 48 hours per month on average.


Employees who work more than their regular hours are entitled to overtime pay or compensatory time off.

7. Minimum wage

There is no information about the minimum wage for this country.

Iceland has no official minimum wage. Minimum wages, on the other hand, are determined by collective bargaining agreements that typically cover a single economic sector.

Even though Iceland has no official minimum wage, we can estimate what lower-wage jobs pay in the country. The Efling, Iceland's largest labor union, has its own minimum wage figures. As of 2021, the minimum monthly salary in Efling is 351,000 ISK for a full-time position.

While this may not apply to all Icelandic workers, it is a fairly standard figure for the country. These are gross figures for employees who are at least 18 years old and have worked for the same employer for at least six months. As of 2020, the minimum salary of 351,000 ISK is approximately equivalent to 2720 USD.

8. Employee benefits

There is no information about the employee benefits for this country.

Iceland has a national healthcare system that is open to all citizens and legal residents who have lived in the country for at least six months. The national system provides almost all medical care, but there are a few private providers.

9. Taxes

There is no information about the taxes for this country.

Corporate tax

Iceland has one of the lowest corporate income tax rates in the world, at 20%. The 20% is designed for limited liability and limited partnership businesses. Other kinds of legal entities (e.g., partnerships) are subject to corporate income tax at a rate of 37.6 percent. Non-resident companies doing business in Iceland are taxed at the same rate as resident corporations.

Individual income tax

Income tax is deducted at the source, often known as pay-as-you-earn (PAYE). Each employee is entitled to a personal tax credit of 53,895 ISK each month (2018), which is deducted from taxes. Credit that has not been utilized may be passed to one's spouse. Employee pension insurance is mandatory at 4% of gross income (employers must offer a minimum of 8%), and another 4% of total income may be deducted for private pension insurance (if so, the employer is obliged to pay additional 2 percent premium for the benefit of the employees).

If an individual's yearly income is less than 1,750,782 ISK, no income or municipal tax must be paid. The yearly personal tax credit (646,740 ISK in 2018) equates to the first 1,750,782 ISK not being taxed.

If a child's yearly income reaches 180,000 ISK, he or she must pay a 6% income tax.

VAT, GST and sales tax

The standard rate of value-added taxation is 24%. A limited range of consumer products and services are subject to a lower VAT rate of 11%. (e.g. food, hotels, newspapers, books, and energy like electricity, heating and fuel).

10. VISA and work permits

There is no information about VISA and work permits for this country.

The nation's visa rules must be followed in order for a foreign person to enter the country without difficulty. Since Iceland ratified the Schengen Agreement, its visa policy is similar to those of the other 25 countries in the Schengen Area.

Foreign people must acquire a visa to enter Iceland if they are of a particular nationality and want to remain for a certain amount of time. The Iceland visa policy promotes visa-free access, however the length of stay varies depending on the nationality of persons traveling there.

According to Iceland visa policy, a valid passport or national ID card issued by one of the Schengen nations is needed at border crossings for easy admission. Nationals from visa-exempt countries must produce a passport valid for at least three months after their projected entrance date in order to acquire a visa-free stay of up to 90 days in Iceland for tourist, business, transit, or medical treatment.

However, it should be noted that these same nationals will need a valid electronic travel authorization (ETIAS) to visit Iceland for the same duration of time. Prior to coming to Iceland for a longer amount of time or for other reasons, the same nationals will need to apply for a Schengen visa through an Icelandic government diplomatic office.

Regardless of the reason or length of stay in Iceland, all other nationalities are required to get a visa.

Tourists may visit Iceland based on their country, but they must satisfy certain standards ahead of time. In return for showing a valid Schengen ID card upon arrival at border control, Iceland visa policy allows nationals of other Schengen member nations to enter the country visa-free for an indefinite amount of time.

The remainder of Iceland's visa-exempt residents are permitted a maximum tourist stay of 90 days without requiring a visa provided they produce a valid passport at the Icelandic border. In contrast, the European Union plans to implement the ETIAS system for acquiring online travel authorizations by 2022, making it mandatory for all visa-free visitors from outside the Schengen Area who desire to visit Iceland for 90 days.

The ETIAS free visa waiver application is available online and must be authorized by the board. It would enable inhabitants of these nations to visit Iceland as many times as they like for up to 90 days per admission into any Schengen country. All other foreign nationals must apply for a Schengen tourist visa at Iceland's embassy or consulate before entering the country for tourism purposes.

You should apply for this document a few weeks before you need it so that it may be processed before your travel.

11. Employer Of Record service terms

There is no information about the Employer of Record (EoR) service terms for this country.

Employment contracts

Identities of the parties

Place of work

Nature of the employee’s job

Date the employee will begin work

Duration of the contract (if it is for a fixed term)

Information about paid leaves

Notice period in the event of termination

Employee’s pay

Normal working hours for the workweek

With Rivermate being your Employer of Record (EoR) in Iceland, you do not have to worry about the employment contracts, as we take care of that.

Minimum assignment length

There is no set length for assignments. This is usually indicated in the employment contract for fixed-term employments.

Payment currency

United States Dollar (USD)

Canadian Dollar (CAD)

Euro (EUR)

Norwegian Krone (NOK)

Danish Krone (DKK)

13.Opening a subsidiary in Iceland

There is no information about the working hours for this country.

How to set up a subsidiary

Subsidiary laws

13. Why choose Rivermate as your Employer of Record / PEO in Iceland

Establishing an entity in Iceland to hire a team takes time, money, and effort. The labor law in Iceland has strong worker employment protection, requiring great attention to details and a thorough awareness of local best practices. Rivermate makes expanding into Iceland simple and effortless. We can assist you with hiring your preferred talent, managing HR and payroll, and ensuring compliance with local legislation without the hassle of establishing a foreign branch office or subsidiary. Our PEO and Global Employer of Record (EOR) solutions in Iceland give you peace of mind so you can focus on running your business. Please contact us if you'd like to learn more about how Rivermate can help you hire employees in Iceland via our Employer of Record (EOR) / PEO solution.

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