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Iceland PEO & Employer of Record

Expand your organization into Iceland even without an Icelandic entity

The island nation of Iceland may be small and geographically isolated, but it has gone from strength to strength since the infamous collapse of its financial system in 2008. The country now has a diverse, growing economy, and attracts significant foreign investment. While Iceland is an excellent place to expand, the business and cultural differences can be a shock to many, and delays are possible.

A popular way of bypassing the complex administrative procedures is to outsource the work to a global professional employer organization (PEO). At Horizons, our comprehensive PEO, employer of record, and payroll services are designed specifically to help businesses of all kinds expand abroad faster and more efficiently, including into Iceland.

With a dedicated in-house recruitment team, we can also handle your hiring and HR. We can use our Icelandic subsidiary as employer of record so you don’t even need an established entity in Iceland to hire locally. Our services can save you thousands in expansion costs and kickstart your expansion into Iceland.

Our Iceland PEO simplifies your expansion

Horizons enables your business to expand its operations into Iceland without setting up a legal subsidiary.

Rapid Market Entry

Horizons will enable you to source, hire, and onboard professionals across Iceland in as little as 48 hours.

Cost-Effective Expansion

Our PEO solution can help you benefit from cost savings of up to 85%, without the need to establish a Icelandic entity.

Payroll Outsourcing

Simplified Iceland salary & payroll processing, including any tax, withholdings, and any other required contributions.

Employee Onboarding

Utilize the relevant provision for all types of Icelandic labor contracts, whether a fixed-term or open-ended contract.

Onsite Legal & HR Team

Full support for Iceland-specific contract renewals, terminations, annual leave management, HR, and strategic guidance.

Ensure Full Compliance

We ensure that employment contracts are fully compliant and adhere to Icelandic labor laws and best practices.

Hiring in Iceland: Employment law overview

📝 Employment contracts in Iceland

Employment contracts in Iceland can either be verbal or written, but we strongly recommend always producing a written contract for every employee. These contracts should contain any details of the role, such as salary/wage and any benefits, should be written in the Icelandic language, and use the local currency of the Icelandic krona.

⏰ Working hours in Iceland

A standard working week in Iceland is 40 hours, with five eight-hour days. Anything above this should be paid at overtime rates, which should be at least 180% of normal pay.

📅 Public holidays in Iceland

1 Jan
New Year’s Day
9 Apr
Maundy Thursday
10 Apr
Good Friday
12 Apr
Easter Sunday
13 Apr
Easter Monday
23 Apr
First Day of Summer
1 May
Workers’ Day
10 May
Mother’s Day
21 May
Ascension Day
1 Jun
Whit Monday
17 Jun
Independence Day
3 Aug
Commerce Day
8 Nov
Father’s Day
24 Dec
Christmas Eve
25 Dec
Christmas Day
26 Dec
St. Stephen’s Day
31 Dec
New Year’s Eve

🏖 Vacation leave in Iceland

Employees in Iceland are generally entitled to a minimum of 24 days of paid vacation leave annually.

😷 Sick leave in Iceland

Employees in Iceland receive two days of paid sick leave for every month of employment. Additionally, mothers can take up to 12 days off every 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 their child. A following three-month allowance can be shared between the parents. Additionally, there is an allowance of up to four months of unpaid leave for childcare.

💰 Terminations and severance in Iceland

Employees in Iceland are generally entitled to between one week and six months of service, depending on length of service. Employers must also hold a meeting with employers to explain the circumstances and reasoning for the termination.

Probation periods are generally limited to three months.

🏦 Taxation in Iceland

Employees in Iceland must pay an income tax, which is on a progressive scale ranging from 20.6% to 31.8%, and a municipal tax of 14.44%.

The corporate rate in Iceland is generally 20%. However, there are different rates for different types of businesses, such as partnerships.

🏥 Health coverage in Iceland

Iceland has a public healthcare system, so employers do not need to nor are expected to provide private medical insurance.

💳 Compensations & benefits in Iceland

Compensation laws in Iceland

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

Benefit management in Iceland

Establishing an Icelandic benefits system for your workforce can be difficult as a foreign organization. With the language and cultural differences, and a complicated, unique collection of employment laws, running a comprehensive and compliant benefits system can be very time-consuming.

Alternatively, you could use a payroll outsourcing firm to handle your Icelandic payroll. At Horizons, our Iceland payroll experts can set up and manage your benefits system for you, freeing you to focus on your successful expansion.

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