Finding and recruiting Top Talent in Iceland can bring potential tripwires for companies taking steps to build their international profile. The “Land of Ice and Fire” in the North Atlantic is as big as Denmark, Belgium, and the Netherlands combined. Iceland may be outside the world’s top 100 nations for Gross Domestic Product, but its citizens are the world’s sixth richest on per capita GDP.

Iceland is not part of the European Union but enjoys a strong relationship through the European Economic Area Agreement of 1994, which brought together the EU states and the four members of the European Free Trade Association (EFTA) – Iceland, Liechtenstein, Switzerland, and Norway – to benefit from freedom of movement for people, goods, services and capital.

This potential – and the challenges it brings – underlines why Bradford Jacobs’ global experience is indispensable for taking the smartest recruitment route into Iceland.

Recruiting in Iceland

Iceland has successfully left the economic collapse of 2008 far behind. It now has a thriving tourism sector, although with skills shortages in some sectors and one of the lowest unemployment rates in Europe. Besides tourism, leading sectors include medical and pharmaceutical products, geothermal and hydropower, and traditional and hugely important aluminium smelting, fishing, and fish processing. Iceland aims to boost skills, innovation, and diversification in the economy and workforce.

Encouragingly for incomers, Iceland is expected to need 2,000-plus foreign workers each year to join the workforce and balance the effects of an ageing population. Recruits offering the expertise to match the skills shortages will have an advantage. The recruitment process for individuals can hinge on finding companies that need those skills, then searching their job sites for vacancies and looking for contacts such as LinkedIn.

Upon arrival, recruits will find that Iceland’s Labour Code and a raft of supplementary legislation, plus collective and trade union agreements, safeguard the employment rights of employees. Recruitment is the first stage of making your company operational and competitive in Iceland. Once recruited, companies must consider the implications of handling payroll for their staff and deal with the tax and social insurance authorities. Foreign companies can establish a subsidiary to undertake these responsibilities, but strict registration procedures must be followed.

These include the following:

  • Obtaining the employee’s identification number (kennitala, kt), which is both the Personal ID and the System ID, which enables state and regional authorities to obtain information on individuals
  • Registering employees with the Directorate of Internal Revenue and Customs (Skatturinn)
  • Ensuring staff are covered by the provisions of Iceland’s State Social Security Institute (Tryggingastofnun) for pensions, health, and disability insurance
  • They are electronically submitting the employee’s Form, A-271, with all required documentation for registration on the National Registry and submitting Form A-272, confirming the employer’s agreement with the employee.
  • They assist foreign employees in attending the Registration Office on arrival with the correct documentation and ensuring employees staying longer than six months are legally domiciled with Registers Iceland. Different rules may apply to non-EEA citizens and Nordic nationals.
  • Ensuring non-EU/EEA citizens have the correct residence permit from the Directorate of Immigration and notify Registers Iceland so the individual can be entered on the Population Registry
  • Ensuring employees comply with Iceland’s multi-layered state personal tax system, which has three categories, plus municipal taxes
  • Remitting taxes to the Iceland Directorate of Revenue and Customs each month and collecting refunds or making extra payments on five dates each year
  • Filing returns by March 10 of the year following the calendar tax year, preferably electronically

Employees' Legal Checks in Iceland

A variety of legislation protects employees in Iceland against discrimination both in the workplace, at the pre-hire interview stage and in how positions can be advertised. Apart from general rules under the Labour Code, specific legislation includes the Act on Gender Autonomy, the Act on Equal Treatment in the Labour Market, the Act on Equal Treatment Regarding Race and Ethnic Origin, and the Act on Equal Status and Equal Rights of Women and Men.

Employees’ background checks can include the following:

  • Criminal Records: Employers can ask the applicant’s permission to access records or ask the individual to supply them if relevant to the position, such as in finance or childcare, for example.
  • Medical History: It must be relevant to the demands of the job for the employer to ask about medical records; otherwise, it is specifically prohibited.
  • Credit History: Employers need the applicant’s permission to collect credit records if they are relevant to the type of job.
  • Drug Records/Tests: Permitted in strictly limited circumstances, where drugs could affect operational safety or the good name of the company.
  • Visas/Working Permits: It is required to ensure the applicants have the required and relevant permits to work in Iceland.

Basic Facts when Recruiting in Iceland

Companies hiring staff for International Expansion into Iceland must comply with a framework of employment and taxation regulations. Some are subject to mandatory state regulations, while collective and trade union agreements can improve on the basic statutory minimums.

  • 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 job. Oral contracts are permitted under law but not advisable.
  • The contract/agreement must be given to the employee within two months of starting work.
  • The contract/agreement should include names of all parties; start date and, in case of a fixed-term contract, the end date; any trial period; salary and benefits; working hours and breaks; vacation entitlement; termination and notice periods; applicable collective or trade union agreements.
  • 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.
  • 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.
  • Contracts for non-EU or EEA citizens must include valid work permits and visa details.
  • There is no legal requirement for contracts to be drawn up in Icelandic.


For more information, download our free guide or get in touch with our consultants here