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Faroe Islands

Salary and Compensation Insights

Explore salary structures and compensation details in Faroe Islands

Market competitive salaries

Understanding market competitive salaries is crucial for both employers and employees in the Faroe Islands. Offering competitive compensation is essential for attracting and retaining top talent, while employees can ensure they are fairly compensated for their skills and experience.

Factors Influencing Market Competitive Salaries

Several factors influence what constitutes a competitive salary in the Faroe Islands:

  • Job Title and Responsibilities: The specific role and its associated duties significantly impact salary expectations. Managerial positions naturally command higher salaries compared to entry-level ones.
  • Education and Experience: Educational qualifications and relevant work experience play a major role. Employees with advanced degrees and extensive experience can expect higher salaries.
  • Industry and Location: Salaries can vary depending on the industry. Competitive salaries in the finance sector, for instance, might be higher than those in hospitality. Location also matters, with Tórshavn, the capital, potentially offering slightly higher salaries compared to other areas.
  • Company Size and Performance: Larger, well-established companies often have the resources to offer more competitive salaries and benefits packages compared to smaller ones. Additionally, companies performing well financially might be more inclined to offer raises.

Determining Market Competitive Salaries

There are several ways to determine market competitive salaries in the Faroe Islands:

  • Salary Surveys: Reputable organizations conduct regular salary surveys that provide valuable data on average salaries for various positions across different industries and locations.
  • Government Resources: The Faroese government might publish data on national average salaries.
  • Recruitment Agencies: Recruiting agencies are familiar with current market trends and can provide valuable insights into competitive salaries for specific roles.
  • Job Postings: Examining job postings for similar positions advertised by other companies in the Faroe Islands can give you a sense of the salary range being offered.

Minimum wage

The Faroe Islands operate under a unique system regarding minimum wage regulations. Unlike many countries, the Faroe Islands do not have a statutory minimum wage mandated by national law. This means there's no universally applicable hourly or salaried minimum amount employers must pay their workers.

Collective Agreements and Market Forces

Wage levels in the Faroe Islands are primarily determined through collective bargaining agreements negotiated between trade unions and employer organizations within specific sectors. These agreements establish minimum salary levels, working hours, and other working conditions for various professions.

Legislative Reference

While there's no minimum wage law, The Faroe Islands Act No. 131 on Working Environment sets out a framework for employee rights and working conditions, including provisions for collective agreements.

Key Point

Collective agreements play a crucial role in establishing minimum wage benchmarks for different professions in the Faroe Islands.

Importance of Employment Contracts

In the absence of a statutory minimum wage, a clear and well-defined employment contract becomes critical. The contract should explicitly state the agreed-upon wage for the specific position.

Bonuses and allowances

In the Faroe Islands, employee compensation extends beyond the base salary. Many companies offer bonuses and allowances to attract and retain top talent.


Allowances are reimbursements for work-related expenses incurred by the employee. These can include:

  • Car Allowance: This covers the cost of using a personal vehicle for work purposes, including gas, insurance, and maintenance.
  • Overtime Meal Allowance: If employees work extended hours, they may receive an allowance to cover the cost of meals.
  • Living Away From Home Allowance: For employees relocating to the Faroe Islands for work, some companies offer an allowance to help with additional living expenses.

Important Note: Allowances can be taxed differently depending on whether they are paid directly to the employee or a third party.


Bonuses are performance-based incentives offered by employers on top of the base salary. Some examples include:

  • Performance Bonuses: These reward employees for exceeding targets or achieving set goals.
  • Profit-Sharing Bonuses: When a company performs well financially, employees may share in the profits through bonuses.
  • Sign-on Bonuses: Some companies offer sign-on bonuses to attract qualified candidates, especially for hard-to-fill positions.

Additional Considerations:

  • The specific types and amounts of bonuses and allowances offered by employers in the Faroe Islands can vary depending on the industry, company size, and employee position.
  • It's advisable to consult with a recruitment agency or human resources professional in the Faroe Islands to get more specific information about what is typical in your field.

Payroll cycle

In the Faroe Islands, understanding the payroll cycle is essential for both employers and employees.

Payroll Frequency

Typically, the Faroe Islands follow a monthly payroll cycle, with salaries paid once a month. This is in line with common practices in many European countries.

Salary Components

A typical Faroese Islands salary consists of several components:

  • Base Salary: This is the fixed monthly amount of compensation an employee receives before taxes and deductions.
  • Pension: Employers are required to contribute 3% towards the employee's pension plan.
  • Vacation Pay: Employees accrue vacation pay at a rate of 6.85% of their salary, which is paid out alongside regular wages or upon termination.

It's important to note that employers are responsible for withholding taxes and social security contributions from employee salaries before issuing net pay.

Payment Methods

Electronic bank transfers are the most common method for salary payments in the Faroe Islands, providing a secure and efficient way to receive funds.

The Faroese Working Environment Act outlines key regulations regarding payroll practices. These include:

  • Pay Slips: Employers are required to provide employees with payslips detailing their gross salary, deductions, and net pay amount.
  • Overtime: Overtime work is generally compensated at a higher rate than regular pay, as stipulated in the Act.
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