* Playroll continues to analyse immediate opportunities and fulfilled roles by recruitment partners, contractors and employers to identify in-demand jobs.

Capital City

Icelandic Krona (kr)


UTC +0 (GMT +0)

Employment Cost


Annual Leave

25 days

In-demand Specialties*
Aluminum Smelting, Fishing, Tourism

The Ultimate Guide to Hiring Employees in Iceland

Simplify hiring employees in by partnering with Playroll. Our Employer of Record (EOR) handles hiring, onboarding, payroll, taxes, immigration, benefits administration, and compliance. While you maintain control of day-to-day tasks and responsibilities.


Key Considerations Before Hiring In Iceland

Employing in Iceland requires employers to own a legal entity in the country and manage payroll, tax, benefits and compliance through their own in-country resources. Grow your team in Iceland with our Employer of Record solution, ensuring streamlined, compliant business expansion with no entity.

Playroll allows you to hire employee's in Iceland quickly, easily and we even automate tax document collection, benefits, payroll and more.

Good To Know

Iceland's competitive operating environment positions it among leading industrial nations globally.

With low taxes, high education standards, and competitive skilled labor costs, it attracts international businesses.

s an EEA member, Iceland aligns closely with EU commercial legislation, offering tariff-free access to key EU markets.

Its increasingly favorable business climate, coupled with the lowest corporate income tax rates in the EU, make it an attractive investment destination, supported by industrial sites and skilled labor availability.


Fundamental Aspects of Employment in Iceland

Icelandic labour law categorises contracts as either fixed-term or permanent, with no requirement for contracts to be in Icelandic. However, for employment lasting more than one month with a commitment of more than 8 hours weekly, a written employment contract is mandatory. This contract must include the following basic terms of employment:

  • Identification of both parties
  • Starting date (and duration for temporary contracts)
  • Workplace and working hours
  • Job description, duties, and responsibilities
  • Basic salary (including compensation, benefits, or payment details)
  • Number of holidays
  • Notice periods for termination
  • Pension funds
  • Reference to collective agreements

Probationary Period in Iceland

Typically, probation periods in Iceland extend for about 3 months.

Working hours in Iceland

The standard workweek in Iceland consists of 40 hours, distributed across five 8-hour days.

Overtime in Iceland

According to Icelandic Labour Law, any work exceeding the standard 8-hour workday qualifies for overtime compensation. The official hourly overtime pay rate is 1.0385% of the regular pay rate. Specific regulations exist for shift workers, and the total working hours, including overtime, should not surpass 48 hours per week.

Navigating Key Aspects of Payroll in Iceland

Iceland has a robust and complex payroll and tax system, and as an employer, it pays to understand payroll process basics.

1 January - 31 December

Fiscal Year in Iceland

1 January - 31 December is the 12-month accounting period that businesses in Iceland use for financial and tax reporting purposes.

Payroll Cycle in Iceland

The payroll cycle in Iceland is usually monthly, with employees being paid by the 1st of the following month.

Minimum Wage in Iceland

Minimum wages and salaries in Iceland

In Icelandic law, there is no national minimum wage; instead, it is established by the Trade Union to which the employee belongs. These Trade Unions set the minimum wage, taking into account factors such as the employee's age and job type.

Bonus Payments in Iceland

Icelandic law does not mandate a 13th or 14th-month salary. Nevertheless, collective agreements specify that employees are entitled to a Christmas bonus in December and a holiday bonus given between 1 May and 15 August.

Comprehensive Overview of Employment Taxes in Iceland

Understanding the tax obligations for both employers and employees is crucial when operating in Iceland's business landscape. This section explains how taxes and statutory fees affect payroll and individual earnings in Iceland.

Employer Tax Contributions

Employer payroll contributions are generally estimated at an additional 22.07% on top of the employee salary in Iceland.

Tax Rate Tax Type

Employee Payroll Tax Contributions

In Iceland, the typical estimation for employee payroll contributions cost is around 4%.

Tax Rate Tax Type

Individual Payroll Tax Contributions

Income tax in Iceland follows a progressive rate structure, with various factors, including household status and the number of children, potentially influencing the overall tax rates.

Tax Rate Income Bracket

Pension in Iceland

Individuals aged 16 to 70, both employees and employers, are required to contribute to a pension fund in Iceland. The minimum contribution rate stands at 15.5%, with employers contributing 11.5% and employees contributing 4%. The employee's contribution is deducted from their taxable income.

The tax-related information provided in this guide is intended for general guidance and informational purposes only. Reach out to our dedicated team for insights on remote hiring in Iceland tailored to your needs.

Easily navigate payroll, taxes and contributions with Playroll.

Grow your distributed workforce today!

Understanding the Protocols for Termination of Employment in Iceland

When it comes to terminating employment in Iceland, understanding the legal obligations regarding severance pay and contributions is essential. Below is a detailed overview of the key considerations for both employers and employees.

Termination Process

In Iceland, employers are not permitted to terminate employment at will outside the probation period and must have a just cause for termination. Compliant terminations include:

  • Voluntary employee resignation
  • Mutual agreement
  • Unilateral employer decision (based on probation, objective reasons, disciplinary dismissal, or unsuitability for the job)
  • Contract expiration

Notice Period

The minimum notice period for Icelandic employees is set at 7 days and will be increased according to the length of employment:

  • First 3 months of probation period: 1 week notice
  • Following the end of probation period: 1 month notice
  • More than 6 months of service: 3 months’ notice

Severance Pay

Icelandic labour law lacks specific provisions regarding severance payments. Nevertheless, employers are obligated to settle accrued benefits such as unused paid time off, Christmas bonuses, vacation bonuses, etc. upon termination.

Annual Leave Entitlements and Company Policies in Iceland

The annual leave entitlement in Iceland is 25 days for a full time worker. These can include public holidays on top of that or within those days, which would otherwise be unpaid.

Public Holidays in Iceland

Employees are entitled to paid holidays during festival holidays, which encompass both public and religious celebrations. This includes memorial holidays and religious holidays of Christian origin. The following are the 15 public holidays in Iceland:

Holiday Date

Paid Time Off in Iceland

Maternity Leave in Iceland

Paternity Leave in Iceland

Sick Leave in Iceland

Parental Leave In Iceland

Iceland's Benefits Built Into Playroll

Competitive benefits package in Iceland

Playroll is committed to providing tailored, competitive benefits packages that are designed not only to attract but also retain top talent worldwide. Our global team of benefits experts build custom local packages to ensure your employees in Iceland's needs are met. Typically our packages contain some or all of the following benefits.

Health Insurance
Pension or 401k
Life and Disability Insurance
Vision Insurance
Dental Insurance
Discounts & Perks

Playroll Supplementary Benefits For Employment In Iceland

Make your benefits package in Iceland a talent magnet with Playroll's local plans. We offer benefits that are compliant, comprehensive, and flexible — all at competitive rates. Speak with our local territory experts to explore the localized benefits we can offer you, while you scale your team.

Statutory benefits for employment in Iceland

The following are the benefits provided in Iceland:

  • Employee Sickness Fund
  • Pension Fund
  • Provident Fund
  • Social Security
  • Trade Union Fund
  • Private Healthcare - Allianz (optional)

Playroll allows you to provide localized benefits for employees in Iceland within minutes. All in one manageable online dashboard. If you'd like specific information about our benefits packages in Iceland create an account or contact our global expansion team, today.

Playroll Benefit Services

Playroll's Expertise in Facilitating Work Visas for Iceland

At Playroll we're all about empowering employees to work anywhere, making mobility possible for global teams. We sponsor visas and hire the employee for you, so you don’t have to worry about payroll, taxes, and more.

It's important to note, visa support can be complicated. There are many variables that affect whether sponsorship is possible, including one’s nationality, education, marital status, and the immigration policy for the country in question.

Unfortunately, this means we can’t support visas everywhere - with that being said, we handle the entire visa process in-house, and dig into your situation to give you an overview of what to expect if we're able to help with visa sponsorship in Iceland.

Playroll Immigration Support

Integrated EOR Platform

Legal and compliance experts are readily available to provide guidance and case-by-case Q&A support.

Accelerated Immigration Timeline

By leveraging dedicated support from in-house legal and compliance experts for case by case questions and more.

Hire in 50+ Countries

Accelerated Immigration Timeline

Acquiring a visa without an entity has never been easier, leverage Playroll's global coverage to sponsor and hire employees.

Playroll Visa Services

Hiring International Employees is Complex.

Playroll makes it easy!