Employment Law

Employment Contracts in Iceland

Employment contracts in Iceland can be oral or written, but we strongly recommend always having a written contract for each employee. These contracts should contain any details of the position, such as salary/wages and any benefits, should be written in the Icelandic language, and use the local currency, Icelandic krona.

Fixed Term

Indefinite

Working Hours in Iceland

The standard working week in Iceland is 40 hours, with a 5-hour working day and an 8-hour working day. Anything above this should be paid as overtime, which should be at least 180% of regular wages.

Holiday Policy

Iceland Holidays

Employees in Iceland are generally entitled to at least 24 days of paid leave per year.

Iceland Sick Leave

Employees in Iceland receive two days of paid sick leave per month. In addition, mothers can take up to 12 days off per year to care for a sick child.

Parental Leave in Iceland

Female and male employees in Iceland can take up to three months of leave after the birth of a child. The allowance for the next three months can be shared between the parents. In addition, there is unpaid parental leave allowance for up to four months.

Termination and Severance in Iceland

Employees in Iceland are typically entitled to between one week and six months of service, depending on length of service. The employer must also hold a meeting with the employer to explain the circumstances and reasons for terminating the contract.

The probation period is generally limited to three months.

Taxes in Iceland

Employees in Iceland must pay income tax at progressive rates ranging from 20.6% to 31.8%, as well as municipal tax of 14.44%.

The corporate tax rate in Iceland is generally 20%. However, different types of businesses (such as partnerships) have different tax rates.

Health Insurance in Iceland

Iceland has a public healthcare system, so employers are not required to and should not offer private health insurance.

Salary and Benefits

Icelandic Compensation Law

There is no legally mandated minimum wage in Iceland. Instead, individual minimum wages are determined by collective bargaining agreements and negotiations between employers and employees.

Welfare Management in Iceland

As a foreign organization, setting up an Icelandic benefits system for your employees can be difficult. Running a comprehensive and compliant benefits system can be time-consuming due to language and cultural differences, as well as complex, unique employment laws.

Alternatively, you can use a payroll outsourcing company to handle your Iceland payroll. At Remoly, our Iceland payroll experts can set up and manage your benefits system for you, allowing you to focus on successful expansion.