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Employer of Record (EOR) in Iceland

What you'll learn

  • Country Introduction
  • Employment Terms
  • Minimum Wage and Working Hours
  • Statutory Leave Laws
  • Termination Process
  • Additional Information
Iceland Introduction

Iceland is a Nordic country in Europe that is considered the world’s most peaceful nation. About 65% of the population lives in Reykjavík, and the country has a very diverse landscape of volcanoes and ice. Iceland part of the Mid-Atlantic Ridge that rises above sea level, and it has a  central volcanic plateau that is almost constantly erupting. Iceland runs almost completely on renewable energy, and maintains a social welfare system that provides universal health care and post-secondary education for all of its citizens.

Employment Terms

There is no national minimum wage under Icelandic law, but collective bargaining agreements determine wage rates as they see fit. The average minimum wage is ISK 351,000 per month for a full-time position.

Standard working hours in Iceland are 8 hours per day, 40 hours per week. Overtime pay is mandatory, and employees can work a maximum of 162.5 hours of overtime per month.

Types of Leave

Parental Leave

Pregnant employees are entitled to 6 months of paid maternity leave that can begin up to 1 month before the baby is due, and is paid at a rate of 80% of the regular salary. Fathers can receive 6 months of paternity leave, also paid at 80% of the regular salary. One month of parental leave can be transferred between partners and both of their leave entitlements can be exercised until the baby is 18 months old.

Parents can also take up to 13 weeks of leave to care for a child up to 8 years old. Adoptive parents can also exercise the same leave entitlements as natural birth parents, where each partner can take up to 6 months of paid leave off work.

Sick Leave

Employees in Iceland can take paid sick leave depending on how long they have worked at their company. During the first year, employees are entitled to 2 days of sick leave per month, which then increases to 2 months of paid sick each year after the first year. The amount of leave increases each year and is capped at 6 months after 10 years at the company.

Paid Leave

There are 16 public holidays in Iceland, and employees are entitled to a minimum of 24 days of paid time off per year. After 5 years at a company, employees are entitled to 27 days off per year, and after 10 years can receive 30 days off per year.

Termination Process


Employment contracts in Iceland can be terminated at will with prior notice. Employers don’t have to provide a specific reason for terminating an employee, but the employee has the right to demand the reason for which they were terminated, and are also entitled to an interview to discuss the end of their employment.

Notice Period

Both employers and employees in Iceland are required to provide notice before resignation or termination (unless specified in the employment contract). For employers, the termination notice period is 1 month per year of employment.

Severance Pay

While there is no legally mandated severance pay in Iceland, unions can negotiate a severance payment for their members.

Additional Information

While a 13th month salary is not mandatory in Iceland, collective agreements provide for an employer-paid Christmas bonus payable in December, as well as a Holiday bonus between May and August.

Icelandic Krona (ISK)
Capital City:
Cost of Living Rank:
VAT (Valued Added Tax):
Employer TaxES

★  11.5% - Mandatory Pension Fund

★  6.1% - Social Security

★  1.55% - Union

★  0.1% - Rehabilitation Fund

Get Started in 3 Steps


Remote candidate

You've sourced a full-time employee or contractor located in a country where your company is not incorporated.


Cost Calculation

Pass us the details of your candidate and we will let you know exactly what it costs to employ your candidate in that country.


Onboarding & Admin

Sit back and relax as we onboard your new team member and take care of all the local compliances and admin work.

Same-day onboarding
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Available in 180+ countries
How Remofirst employs in Iceland

It can be prohibitively expensive to establish an entity in every country you want to hire talent in, so Remofirst will hire and pay your employee on your behalf while you manage their daily duties. Remofirst will handle formal HR procedures and employment contracts that adhere to local laws, so that you can simply approve invoices via our platform. When you work with an Employer of Record (EOR) you can compliantly hire the best employees around the world.

How employees in Iceland get paid
Your employee's hours, time off, holidays, bonuses, and commissions are automatically calculated into payroll. Remofirst will invoice you in either US Dollars (USD), Euros (EUR), British Pounds (GBP), Canadian Dollars (CAD), Australian Dollars (AUD), or Singapore Dollars (SGD) around the 15th of each month to make sure your employees in Iceland are paid on time in Icelandic Krona (ISK). To make it even easier, you can summarize your entire global team's salaries to aggregate them into one payment (instead of many individual payments).
Full-time Employees vs Global Contractors

Unlike full-time employees, contractors work on projects with multiple companies at a given time and are technically self-employed. Full-time employees are solely focused on their employer and usually receive benefits (such as health insurance, equity or stock options, and time off) as an additional form of compensation. While it can be cheaper to work with international contractors instead of paying benefits to a full-time employee, you run the risk of misclassification. It's recommended to work with an EOR for contractor onboarding and payments, so you can know that your international contractors are paid compliantly and on time.

Dependable support for employees
Whenever the employee or employer has a question about benefits, Visas, or anything else related to international employment in Iceland, they can speak with our customer support team to get answers from our team of experts.