Gibson Watts Global: PEO & EOR Services

ICELAND PEO & EOR

Hire in Iceland without a local entity today

As a Global PEO & EOR service provider, we pride ourselves on our global reach, in-country knowledge, and ability to swiftly and efficiently mobilize workers around the world. Our robust PEO/EOR covers everything from global HR, payroll, compliance, in-country support, immigration, visas, and more.

Get started and hire in Iceland today with Gibson Watts Global.

DID YOU KNOW
    • Renewable Energy Leader – Iceland runs almost entirely on renewable energy, with geothermal and hydropower supplying nearly all electricity and heating.
    • Creative and Skilled Workforce – With a strong emphasis on education and innovation, Icelanders excel in tech, design, and sustainable industries.
    • Nature Inspires Innovation – Iceland’s dramatic landscapes, from volcanoes to glaciers, foster creativity and problem-solving, making it a unique environment for global talent.

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ICELAND EOR Services

A gateway to the Arctic with skilled talent

Iceland offers a strategic location in the North Atlantic, a highly educated workforce, and a rich cultural heritage. However, navigating Icelandic labor laws, tax regulations, and employment practices can be challenging for foreign businesses.

Partnering with an Employer of Record (EOR) in Iceland allows companies to hire and manage employees compliantly without establishing a local entity. An EOR handles all aspects of employment, including payroll, employment contracts, benefits, and compliance with Icelandic labor laws, enabling companies to focus on their core operations.

Working in ICELAND

Financial Year Dates

The fiscal year runs from 1 January to 31 December.

Minimum Wage

As of 2025, the starting minimum wage for full-time employees is approximately ISK 454,977 per month. Industry-specific adjustments may occur, particularly in sectors like construction or hospitality.

Standard working hours

The standard workweek is 40 hours, typically divided into five 8-hour days.

Overtime

Overtime in Iceland is strictly regulated. Employees are entitled to:

  • A minimum of 150% of the regular hourly wage for hours worked beyond the standard 40-hour week.
  • Overtime may not exceed 2 hours per day or 12 hours per week unless otherwise agreed in collective agreements.
  • Some collective agreements specify higher overtime rates for night shifts, weekends, or public holidays, often up to 200% of the standard wage.

Holiday Allowance

Employees are entitled to a minimum of 24 working days of paid annual leave.

Sick Leave

Employees are entitled to sick leave, with compensation varying based on the duration of employment and agreements.

Maternity & Paternity Leave

Maternity leave is 12 months, with each parent entitled to 6 months, of which 6 weeks are transferable to the other parent.

Public Holidays

Iceland observes the following national public holidays:

  • New Year’s Day
  • Good Friday
  • Easter Sunday
  • Easter Monday
  • Labour Day
  • Ascension Day
  • Whit Sunday
  • Independence Day
  • Commerce Day
  • Christmas Eve (half-day)
  • Christmas Day
  • Boxing Day

Social Contributions

Employee Contributions

  • Pension fund: 4% of gross salary
  • Unemployment insurance: 1% of gross salary
  • Income-based social security contributions (for healthcare, parental leave, and other benefits): ~6.35% of gross salary

Employer Contributions

  • Pension fund: 8% of gross salary
  • Unemployment insurance: 1.5% of gross salary
  • Health and social security contributions: ~7.15% of gross salary

Income Tax

Iceland employs a progressive personal income tax system. In 2025, the tax brackets are as follows:

  • Income up to ISK 472,005 per month: 31.49%
  • Income between ISK 472,006 and ISK 1,325,127 per month: 37.99%
  • Income exceeding ISK 1,325,127 per month: 46.29%

Health Care

Iceland provides universal health care through the National Health Insurance Fund (NHIF). All residents are covered, while employers often offer optional private insurance to complement public services.

Visas

EU/EEA/Swiss Nationals: No work permit required.

Non-EU Nationals: Typically require a residence permit for employment. Common types include:

  • General Work Permit for full-time employment
  • Seasonal Work Permit for temporary work in tourism or agriculture
  • Entrepreneur Visa for starting a business in Iceland
  • Family Reunification Visa for dependent family members

13th salary?

Iceland does not mandate a 13th-month salary. However, some collective agreements and individual contracts may include provisions for additional bonuses or payments.

Cultural Information

Icelandic culture emphasizes family, community, and tradition. Communication is direct but respectful, and punctuality is valued.

Cuisine is central, featuring lamb, seafood, and skyr. Festivals, music, and folk traditions are deeply ingrained, reflecting Iceland’s strong connection to nature and history.

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