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Hiring employees in Iceland (2026)
Here's what you need to know before you hire in Iceland: what it really costs an employer, the employment laws that shape the contract, and how an Employer of Record lets you hire compliantly without opening a local entity. Every figure below is sourced and dated.
17.9%Employer cost on top
ISK 513,000Minimum wage / mo
24 daysMinimum paid annual leave
Days, not monthsTime to hire via EOR
Last updated: September 27, 2026
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Iceland at a glance
The statutory facts that drive a hire in Iceland. Each row shows where the figure comes from and how current it is, so you can trust the number and check it yourself.
Pay & working time
| Minimum wageper month | ISK 513,000Current | National government · 2026 |
| Average wageper year | 100,605Aging | OECD · 2025 |
| Statutory work week | 40 hours/weekCurrent | National government · 2026 |
| 13th-month salary | noneCurrent | National government · 2026 |
Employer cost & tax
| Employer social securityof gross salary | 17.9%Current | Manual / editor · 2026 |
| Employee social securitywithheld from pay | 4%Current | National government · 2026 |
| Tax and mandatory contributions wedgeOECD, taxes plus non-tax compulsory payments such as mandatory private pension and health contributions | 41.6%Aging | OECD · 2025 |
| Corporate tax rate | 20%Current | OECD · 2026 |
Termination
| Notice period | 13 weeksCurrent | World Bank Employing Workers / B-READY · 2019 |
| Severance pay | 0 weeksCurrent | World Bank Employing Workers / B-READY · 2019 |
| Employment protectionOECD EPL, scale 0–6 | 2.2Dated | OECD · 2024 |
Leave & time off
| Paid annual leave (minimum, once eligible) | 24 daysCurrent | National government · 2026 |
| Public holidays | 16 daysCurrent | National government · 2026 |
| Maternity leave | 26 weeksCurrent | National government · 2026 |
| Paternity leave | 26 weeksCurrent | National government · 2026 |
| Parental leave | 17.3 weeksCurrent | National government · 2026 |
Labour market
| Retirement age | 67Current | National government · 2026 |
| Unemployment rate | 5.8%Current | OECD · 2026 |
| GDP per capita | $98,323Aging | World Bank Open Data · 2025 |
| Union density | 90.6%Dated | OECD/AIAS ICTWSS · 2023 |
| Collective bargaining coverage | 90%Dated | OECD/AIAS ICTWSS · 2024 |
Each row shows the year of the most recent citable source for that figure. Where a year looks old, that is the newest comprehensive source available, and we keep the sourced figure rather than substitute an unsourced newer one. Statutes may have changed since.
What it costs to hire in Iceland
Salary is only part of the bill. On top of gross pay you owe employer social security and statutory contributions. Here's what an example salary of $101,000 a year actually costs you as the employer.
| Gross annual salary | $101,000 |
| Employer contributions≈ 17.9% of gross | + $18,029 |
| Total employment cost | $119,029 |
Your EOR handles the filings
Illustrative, based on the employer social-security rate above. An EOR adds its own service fee on top of this total and runs the income-tax withholding and statutory filings, which are withheld from the employee's pay, not paid by you.
Employment-law essentials
The rules an EOR enforces in your contracts, and the ones most likely to trip you up if you tried to hire in Iceland on your own.
Working time
Statutory work week40 hours/week
Pay & 13th salary
Minimum wageISK 513,000
13th-month salarynone
Leave
Paid annual leave (minimum, once eligible)24 days
Public holidays16 days
Maternity leave26 weeks
Paternity leave26 weeks
Termination
Notice period13 weeks
Severance pay0 weeks
Statutory minimums shown. Collective agreements or contracts can be more generous; an EOR applies whichever is correct for the role.
EOR vs. opening your own entity in Iceland
Use an EOR when…
You're hiring one to a handful of people in Iceland.
You want someone working in weeks, not months.
You'd rather not own local payroll, tax and compliance.
You're testing the market before committing.
Open your own entity when…
You're scaling to a large local team long-term.
Per-employee EOR fees outweigh the cost of an entity.
You need full control of local employment and IP.
Choosing an EOR for Iceland
Providers with strong Iceland coverage onboard faster and carry less risk. A shortlist to start from:
EORRead Hire with Columbus review Visit website
EORMultiplier
From$459 (Core · billed annually)
EORPayoneer Workforce Management
From$199
EORRemoFirst
From$199
EORRemote
From$699
EORSwapp Agency
FromRequest a quote
Local players in Iceland
EOR and global-employment providers headquartered in Iceland:
IcelandSwapp Agency
Reykjavík
FromRequest a quote
Common questions about hiring in Iceland
Common questions about hiring in Iceland through an EOR.
Do I need a legal entity to hire someone in Iceland? +
No. An Employer of Record (EOR) already has a legal entity in Iceland and employs the person on your behalf, so you can hire compliantly without opening your own entity. You manage the day-to-day work; the EOR handles the local contract, payroll, taxes and statutory benefits.
How much does it cost to employ someone in Iceland? +
On top of gross salary, employers in Iceland contribute roughly 17.9% in social security and statutory costs. An EOR adds its own service fee on top of that total employment cost.
What is the minimum wage in Iceland? +
The statutory minimum wage in Iceland is ISK 513,000. Pay below this is not permitted, and an EOR will hold contracts to at least this floor.
How hard is it to terminate an employee in Iceland? +
Ending employment in Iceland generally requires a notice period of around 13 weeks and severance of about 0 weeks, subject to the reason for termination and the employee's tenure. An EOR runs the offboarding in line with local law to limit your risk.
How much paid leave do employees get in Iceland? +
Employees in Iceland are entitled to 24 days of paid annual leave, in addition to public holidays. Statutory leave is one of the entitlements your EOR administers automatically.
About the author
Robbin is the co-founder of EOR Overview, an independent research site for Employer of Record services. He has been in the international hiring space for over a decade.
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