Being part of Icelandic labour market is tempting considering high wages but unfortunately it’s mainly reserved for citizens of EU member countries.

How to get there

Iceland is a member of the EEA and thus workers from member states not only don’t need special work permit but also have priority before others. The only thing for them to do is to apply for a residence permit with the Icelandic Directorate of Immigration.

To employ a worker from countries outside the European Economic Area future employer must prove there’s no one with similar qualifications or experience on the domestic labour market nor in EEA countries.

Once it’s settled the prospect employer applies for limited work permit and residence permit for his/her future worker. And all that takes place before the candidate comes to Iceland. Funny fact is that if the person involved is already in Iceland when applying for the limited work permit for the first time, s/he is asked to leave the country.

For more information on that subject please see here:

The demand

Icelanders need foreign labour force not only due to great number of tourists that are coming to Iceland every year but also due to changes in demographics. Icelandic population is ageing. Today there are six workers for every pensioner and in 25 years' time there will be only three. Also lot's of Icelanders are moving to other countries to work and settle. 

It's being predicted that Iceland will need around 2,000 workers every year for next 20 years.

Working hours

Generally Icelanders work 8 hours per day (40 hours per week) and the business hours are from 9 am to 5 pm and during the summer months (June, July and August) from 8 am to 4 pm.

Icelanders are hardworking and like to finish things they’ve started and partially due to that fact they do work long hours. Another reason, is their will to maintain high living standards in this very expensive country. The average for men is 47 hours and for women 42 hours per week. Interestingly, women, who represent 45.5% of the Icelandic workforce, represent the highest number of women in the labour market among all the OECD countries.

Thus working overtime is quite common in Iceland and employees are either paid for the extra hours or get additional days off. All working hours have to be compatible with laws and wage contracts. Generally speaking, the maximum working week including overtime should not exceed 48 hours.

Flat structure

An institutional ownership of companies is uncommon for Icelanders. They’re accustomed to companies of people. With flat hierarchy, not only everyone can talk freely to their managers but also superiors can talk directly to relevant workers. From this point of view, it increases motivation as one doesn’t want to disappoint any of their workmates but also boosts sense of being under surveillance with managers among regular workers. On the other hand, though Icelandic managers prefer not to interfere with workers’ ways of handling tasks. They require from employees to take initiative and act upon their own decisions rather than wait to be told what to do. Thanks to that the atmosphere in Icelandic workplaces is very ambitious but also inspirational.


The minimum income is 280.000 ISK per month for a full-time position for an employee who has reached the age of 18 and has worked for at least six months in the same company.

An average salary of a general worker (eg. cleaner) is at the level of the minimal salary - 280.000 ISK ($2.700 and €2.300) per month, for a skilled worker (eg. chef) it’s 450.000 ISK ($4.300 and €3.700) and for a professional (eg. architect) 850.000 ISK ($8.100 and €7.000). Given amounts are before tax.


Taxes are quite high – they constitute 36,94% for salaries up to 655.850 ISK monthly and if the salary is higher the tax is 46,24%.

There’s personal tax credit in the amount of 52.907 ISK (or 634.884 ($6.100 and €5.070) per year).

If we are considered a specialised worker there are tax exemptions for us. The rule applies to foreign experts, hired to work in Iceland, who enjoy personal tax incentives. A special tax deduction allows that only 75% of the income is considered taxable for the first three years of employment, fulfilling specified conditions.

There’s a lot more about taxes in references and resources if you’re interested.

Holiday pay, overtime and supplements

Holiday pay is called Orlof and constitutes minimum 10,17% of our monthly wages and is being paid every month. As a result, during whole year we’re collecting 13th salary.

For every overtime hour we’re being paid 1.0385% of the monthly wages and for work during public holidays 1.375% (there’s 13 public holidays during a year).

If we’ve been employed for at least 12 weeks including the turn of April/May we are entitled to vacation supplement proportionally to our employment period. Full year supplement in 2017 is 46.500 ISK and in 2018 48.000 ISK ($460 and €380).

Same refers to Christmas supplement with this difference that we either need to work during the first week of December or simply work for 12 consecutive weeks during last 12 months. Full supplement for 2018 is 89.000 ISK ($860 and €710).

Which gives in total almost half of regular monthly salary.

Summing all together we are able to collect 2 additional monthly wages during full working year.


Both employees and employers are required to pay premiums into pension funds: collectively a minimum of 12% of gross salary. The employee pays 4%, deductible from the income tax base, and employer provides a minimum of 8%. The compulsory employer and employee-financed pension system provides benefits amounting to 50-60% of full time earnings during employment. 

No matter the form of earnings after three years of residency in Iceland (if done between 16 and 67 years) one acquires the right to an old age pension. Of course we’re aiming at the highest income from our business but even if we take for calculation’s sake the average office salary of 500.000 ISK we get a humble pension after 50 years on Iceland = ISK XXX. What’s more, even after 10 years of running a business on Iceland we can count on ISK XXX. BUT pension payments are taxed as wage income. More about pension system is in references or resources.


Working Icelanders have a minimum of 24 days of paid leave a year and in addition they also benefit from 13 public holidays. The most common time for Icelanders to take their holidays is in July and August so this must be taken into consideration when planning business trips to Iceland. At those times business will slow down just like at Christmas and Easter time.

Maternity leave

To be entitled to the Maternity/Paternity Leave one must work for six consecutive months prior to the first day of the maternity/paternity leave. Parents who are studying or without attachment to the labour market are also entitled to benefits. 

Both mother and father, have an independent right to maternity/paternity leave of up to three months due to a birth, adoption or the taking of a child into permanent foster care.

In addition, parents have a joint right to three additional months, which may either be taken entirely by one of the parents or divided between them. Statistically men take up to 80 days of paternity leave and women around 180 days. Parents can choose to take the leave at their convenience in an 18 months period following the birth.

The amount of benefit is 80% of gross average salary of the parent taking the leave.