Working in Iceland¶
It’s super easy for EU/EEA residents to relocate and work in Iceland. For knowledge experts it’s quite possible, and for anyone else it’s a long and difficult process.
EU/EEA Trade agreements¶
Anyone with citizenship within the EU/EEA area is allowed to relocate freely and work in Iceland without any special license or work permit. For anyone outside this area it becomes much more complicated.
Expert knowledge workers¶
When companies require expert knowledge workers that are hard to find in Iceland and other EEA countries, they may contract an expert and acquire a temporary work permit on their behalf.
Many companies are unaware of the tax benefits available to expert foreigners moving to Iceland. The tax benefits are for the worker, so it's up to the employee to submit the application.
More information on work.iceland.is/hiring-a-foreign-expert.
Worker's rights and legalities¶
On paper and when enforced, worker’s rights in Iceland are strong. However, many Icelandic companies do not respect worker’s rights. All workers earn 24 working days of summer holiday every year. They have additional sick leave rights and cannot be asked to work an excessive amount of hours. They are entitled to appropriate clothing and security at their workplace.
Minimum wage and legal stuff¶
The main legal contracts surrounding employment are Collective Bargaining Agreements (is. Kjarasamningar) and then the individual agreements between employee and employer. There are no laws that mandate minimum wages or minimum benefits. They are governed through the collective agreements of labor unions and employer groups.
In many cases, employees are legally required to be part of a union, or at the minimum, pay into a union. Knowledge workers and experts usually have more control over this and can choose between unions. Unions are either for government and private market workers, and then within those two main categories, they're divided into groups and unions based on type of work and education.
Although their main role is to negotiate salaries and other terms for work, unions offer their members all sorts of benefits, depending on the union. Benefits often include reimbursements for medical costs, legal assistance and summer house rentals at a low price. Unions also assist their members with issues relating to salaries, working conditions and such.
Examples of unions are VR, Efling, BHM and Starfsgreinasambandið. A list of all unions can be found here .
Pension funds & voluntary supplementary pension¶
The pension system in Iceland is semi-privatised. This means that the pension funds are independent funds, but paying into them is mandatory. Employees pay between 15% and 16% of their salaries into pension funds: 4% is deducted from the salary, and 11.5%1 rest is paid by employer (on top of salary). The biggest part of the Icelandic labor market is bound to certain pension funds by collective agreements, but for ~40% of workers, they have a choice to pick their pension fund. Information on the pension fund employees are members of should, by law, be stated in the employment contract.2
Employees have the option of contributing to supplemental, voluntary, pension. These are similar to 401k's in the US. Up to 4% is deducted from an employees salary before tax and deposited in a pension account, and the employer is required to match up to 2% (hence a 2% salary increase). There's a host of management companies to choose from, including all the pension funds and banks. In recent years, the government has leveraged the extra pension in creative ways, for example by allowing first time home buyers to directly deposit their extra pension into their mortgage. The additional pension can be withdrawn from the age of 60 years.
While employees are only allowed to deposit up to 4% of their salary in extra pension, employers can pay more towards the extra pension. If you're negotiating salary (and foresee that you'd like this extra pension) you can always ask for a higher percentage paid by the employer into extra pension.