Employing in Iceland

Access and hire global talent & deploy them anywhere in the world by removing restrictions from only hiring from local markets.

Enter the Icelandic market without the requirement of opening a local entity.

Expanding into
Iceland

Iceland is one of the world’s most spectacular nations. Set in the North Atlantic between the United Kingdom and Greenland, the “Land of Fire and Ice” has a magical landscape of volcanoes, glaciers, forests, and valleys, bubbling hot springs and geysers.

Icelandic countryside with mountain
Icelandic countryside with mountain

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Expanding to countries such as Iceland can bring both excitements to the possibilities, and significant stress to ensuring the entity with the country’s rigorous legal structures and laws. Ensuring compliance without sufficient knowledge of the country’s laws also adds to the stress of getting your new entity off the ground and ready to test new markets. Going at it without the proper support can increase the costs, time and risks involved.

Global expansion is a step to make for any business, regardless of what you wish to achieve. The opportunities that can come with an expansion can be both incredibly exciting as well as intimidating and confusing, especially when you consider all the registration procedures that need to be done and the documentation required.

Each new markets bring new challenges, and these can be worked through more efficiently and cost-effectively with the support of a Professional Employer Organisation (PEO) such as Bradford Jacobs, especially through our Employer of Record (EOR) framework.

This can be best utilised when businesses are just beginning their expansion process and require more information before committing to incorporating an entity and fully establishing themselves in that market.

Country EOR Guide - Bradford Jacobs

Download our Guide to Iceland

Learn all about expanding into Iceland and see what we can do to make your expansion easier.

Download our Guide to Iceland

Learn all about expanding into Iceland and see what we can do to make your expansion easier.

Country EOR Guide - Bradford Jacobs

Hiring Staff
in Iceland

Hiring Staff
in Iceland

The Main Sectors of the Icelandic Economy

The country focuses on the following key sectors, which all have a significant impact on the country’s economy:

Agriculture has been one of the leading industries of Iceland for centuries. Only about 5% of the total population is involved in farming in modern-day Iceland. Only about 1.2% of Iceland’s territory is seen as arable land, mainly confined to lowland areas. Carrots, potatoes, cabbages, turnips, kale, and bananas are some of the food crops grown in the country. Livestock rearing is also increasing rapidly in Iceland, with farmers keeping a wide variety of animals such as goats, sheep, and cattle.
Tourism is the largest service industry in Iceland, but the banking sector also significantly promotes the country’s economy. During the global financial crisis, Iceland’s banking sector was heavily affected – however, this sector was overhauled, with only three major banks currently in operation. Any smaller banks have either been consolidated or acquired by the big three, including Arion Bank, NBI, and Islandsbanki.
Tourism also plays a significant role in Iceland’s economy, accounting for over 20% of the country’s total GDP. A tourism boom started in 2010 and is still growing, with an increasing economic significance. The number of tourists also increased, surpassing the 2 million mark in 2017. Most tourists to Iceland arrive in the summer months, and most are drawn from South and Central Europe. In 2017, it was recorded that the industry is responsible for about 42% of the total export revenue. The industry is also responsible for over 20% of the country’s employment.
Iceland’s growing manufacturing industry is mainly boosted by hydropower generation. The country has the world’s most significant electricity production per capita – this power is a result of the large-scale availability of hydroelectric and geothermal energy sources. Hydropower is the primary source of industrial and home electrical supply in the country and has played a significant role in the growth and development of the manufacturing sector.

The most important components of the manufacturing industry are the power-intensive industries which mainly produce export products. The manufacturing industry accounts for 35% of all export goods, a 13% increase from 22% in 1997.

Iceland is one of the most significant fisheries nations in the Northeast Pacific. The most important species of fish harvested is cod, with an average catch of 150,000 tons every year. The fishing industry is one of the critical industries in Iceland, directly employing around 5.3% of the total workforce and contributing 11% to the GDP directly (25% if an account is taken of the indirect effects of the ocean cluster).

However, it is also estimated that around 20% of the labour force depends on fisheries and related sectors. Most jobs are provided by companies that manufacture fisheries equipment or companies engaging in processing marine products.

The Main Sectors of the Icelandic Economy

The country focuses on the following key sectors, which all have a significant impact on the country’s economy:

Iceland geothermal bathing pools
Agriculture has been one of the leading industries of Iceland for centuries. Only about 5% of the total population is involved in farming in modern-day Iceland. Only about 1.2% of Iceland’s territory is seen as arable land, mainly confined to lowland areas. Carrots, potatoes, cabbages, turnips, kale, and bananas are some of the food crops grown in the country. Livestock rearing is also increasing rapidly in Iceland, with farmers keeping a wide variety of animals such as goats, sheep, and cattle.
Tourism is the largest service industry in Iceland, but the banking sector also significantly promotes the country’s economy. During the global financial crisis, Iceland’s banking sector was heavily affected – however, this sector was overhauled, with only three major banks currently in operation. Any smaller banks have either been consolidated or acquired by the big three, including Arion Bank, NBI, and Islandsbanki.
Tourism also plays a significant role in Iceland’s economy, accounting for over 20% of the country’s total GDP. A tourism boom started in 2010 and is still growing, with an increasing economic significance. The number of tourists also increased, surpassing the 2 million mark in 2017. Most tourists to Iceland arrive in the summer months, and most are drawn from South and Central Europe. In 2017, it was recorded that the industry is responsible for about 42% of the total export revenue. The industry is also responsible for over 20% of the country’s employment.
Iceland’s growing manufacturing industry is mainly boosted by hydropower generation. The country has the world’s most significant electricity production per capita – this power is a result of the large-scale availability of hydroelectric and geothermal energy sources. Hydropower is the primary source of industrial and home electrical supply in the country and has played a significant role in the growth and development of the manufacturing sector.

The most important components of the manufacturing industry are the power-intensive industries which mainly produce export products. The manufacturing industry accounts for 35% of all export goods, a 13% increase from 22% in 1997.

Iceland is one of the most significant fisheries nations in the Northeast Pacific. The most important species of fish harvested is cod, with an average catch of 150,000 tons every year. The fishing industry is one of the critical industries in Iceland, directly employing around 5.3% of the total workforce and contributing 11% to the GDP directly (25% if an account is taken of the indirect effects of the ocean cluster).

However, it is also estimated that around 20% of the labour force depends on fisheries and related sectors. Most jobs are provided by companies that manufacture fisheries equipment or companies engaging in processing marine products.

Commercial Laws
in Iceland

Tax and Labour Authorities in Iceland

Iceland Revenue and Customs – known locally as Skatturinn, this organisation is responsible for collecting individual and corporate tax payments and documentation in the country, receiving remitted income contributions and providing top-quality service to ensure residents and citizens understand their tax responsibilities.

The Directorate of Labour – The Directorate forms part of The Ministry of Social Affairs and manages the employment service of the entire country, as well as social funds such as the Unemployment Insurance Fund, Maternity/Paternity Leave and Parental Leave Funds, and the Wage Guarantee Fund. They also work on or assist in numerous labour-market relates projects.

Ministry of Social Affairs – is responsible for the administration and policymaking of social affairs and social security in Iceland as prescribed by law, regulations, and other directives.

General requirements

  • Contracts are invalid if they offer inferior terms to those stipulated by law or collective agreements
  • Employers intending to engage an employee for more than one month and to work eight hours a day must provide a written contract or statement outlining the fundamentals of the role. Oral agreements are permitted under law but not advisable
  • The contract must be given to the employee within two months of starting work
  • Terms of the contract must comply with minimums set out by collective agreements
  • Employers applying for work permits for foreign nationals must supply an employment contract with the application
  • Contracts for non-EU or EEA citizens must include details of their valid work permit and visa
  • The typical contract is open-ended; fixed-term contracts are allowed. Successive fixed-term contracts should not generally exceed a total of 24 months, although there is no limit for managerial personnel. Probation periods must not exceed three months
  • There is no legal requirement for contracts to be drawn up in Icelandic

Commercial Laws
in Iceland

Evening view of Icelandic town

Tax and Labour Authorities in Iceland

Iceland Revenue and Customs – known locally as Skatturinn, this organisation is responsible for collecting individual and corporate tax payments and documentation in the country, receiving remitted income contributions and providing top-quality service to ensure residents and citizens understand their tax responsibilities.

The Directorate of Labour – The Directorate forms part of The Ministry of Social Affairs and manages the employment service of the entire country, as well as social funds such as the Unemployment Insurance Fund, Maternity/Paternity Leave and Parental Leave Funds, and the Wage Guarantee Fund. They also work on or assist in numerous labour-market relates projects.

Ministry of Social Affairs – is responsible for the administration and policymaking of social affairs and social security in Iceland as prescribed by law, regulations, and other directives.

General requirements

  • Contracts are invalid if they offer inferior terms to those stipulated by law or collective agreements
  • Employers intending to engage an employee for more than one month and to work eight hours a day must provide a written contract or statement outlining the fundamentals of the role. Oral agreements are permitted under law but not advisable
  • The contract must be given to the employee within two months of starting work
  • Terms of the contract must comply with minimums set out by collective agreements
  • Employers applying for work permits for foreign nationals must supply an employment contract with the application
  • Contracts for non-EU or EEA citizens must include details of their valid work permit and visa
  • The typical contract is open-ended; fixed-term contracts are allowed. Successive fixed-term contracts should not generally exceed a total of 24 months, although there is no limit for managerial personnel. Probation periods must not exceed three months
  • There is no legal requirement for contracts to be drawn up in Icelandic

FAQ

An Employer of Record (EOR) in Iceland serves as the legal employer for staff on behalf of another company. This setup allows the client company to operate in Iceland without setting up a local entity, handling responsibilities such as compliance with Icelandic laws, labour contracts, payroll, and tax contributions. The EOR simplifies the hiring process, taking care of legal and administrative tasks, thereby allowing the company to focus on their core operations and strategic goals.

To hire talent in Iceland, companies can use a combination of talent acquisition strategies and an Employer of Record (EOR). The EOR handles legal and administrative duties, allowing the company to employ staff without a local entity. Companies must comply with local labor laws, which include prioritising EEA citizens and managing work permits for non-EEA workers. Additionally, talent acquisition involves strategic recruitment practices, aligning with local employment standards and ensuring proper visa and social insurance processes.

Managing payroll in Iceland can be complex due to detailed compliance requirements. Companies have several options including setting up a subsidiary or using an Employer of Record (EOR) or Professional Employer Organisation (PEO) services. These services handle employee registration, tax, and social security filings, ensuring compliance with Icelandic regulations.

In Iceland, you do not necessarily need to establish a local entity to hire employees. Companies can utilise Employer of Record (EOR) services to legally employ staff without setting up a subsidiary. However, if you prefer to establish a direct presence, you can set up a subsidiary as a local entity, which involves a more complex registration process and compliance with Icelandic laws.

FAQ

An Employer of Record (EOR) in Iceland serves as the legal employer for staff on behalf of another company. This setup allows the client company to operate in Iceland without setting up a local entity, handling responsibilities such as compliance with Icelandic laws, labour contracts, payroll, and tax contributions. The EOR simplifies the hiring process, taking care of legal and administrative tasks, thereby allowing the company to focus on their core operations and strategic goals.

To hire talent in Iceland, companies can use a combination of talent acquisition strategies and an Employer of Record (EOR). The EOR handles legal and administrative duties, allowing the company to employ staff without a local entity. Companies must comply with local labor laws, which include prioritising EEA citizens and managing work permits for non-EEA workers. Additionally, talent acquisition involves strategic recruitment practices, aligning with local employment standards and ensuring proper visa and social insurance processes.

Managing payroll in Iceland can be complex due to detailed compliance requirements. Companies have several options including setting up a subsidiary or using an Employer of Record (EOR) or Professional Employer Organisation (PEO) services. These services handle employee registration, tax, and social security filings, ensuring compliance with Icelandic regulations.

In Iceland, you do not necessarily need to establish a local entity to hire employees. Companies can utilise Employer of Record (EOR) services to legally employ staff without setting up a subsidiary. However, if you prefer to establish a direct presence, you can set up a subsidiary as a local entity, which involves a more complex registration process and compliance with Icelandic laws.

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