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How to hire remote employees in
Hiring in Iceland can be notoriously difficult—but not when you know what you’re doing. If you want to hire remote talent in Iceland, you have two options: Hire people as contractors, or hire them as employees.
If you want to successfully hire in
Iceland
, you have two options:
Laws about hiring contractors are significantly more simple in
Iceland
. Onboarding talent takes days, not weeks or months. Both you, the company, and your talent have more flexibility. And in many cases, since you’re remote, the talent you’re hiring is better classified as a contractor, anyway. Of course, it’s not possible in every case, but it’s what we built Thera for.
This is the long route. You can either establish a physical presence with an entity and register as an employer, or you can use an Employer-of-Record (EOR) solution. Odds are, you’ll find using an EOR to be the easier route. Still, using an EOR in
Iceland
is expensive—it can often be $500 per month per employee—and sometimes prone to lengthy onboarding times.
Hiring contractors is normally the easier, faster, more flexible choice—but don’t just take it from us. Below are the specific benefits and drawbacks to hiring contractors in
Iceland
.
Hiring employees takes months, at the minimum. When you hire with Thera's locally-generated contracts, it’s a matter of days or weeks. This means you can hire the best talent, fast, without losing them to a hellish procession of paperwork.
It costs just $0 to sign up for Thera, then $25 per month to hire your contractors with Thera. If you hired employees manually (or did contracting on your own), you’d likely be on the hook for thousands of dollars each month. Setting up an entity alone can cost tens of thousands of dollars.
Hiring contractors in
Iceland
means you’re generally not on the hook for things like health insurance and paid time off. This makes hiring flexible for you, and it gives your talent more options.
Hiring employees is a bigger commitment, and can open you up to increased liabilities and regulations. When you hire contractors overseas, your biggest risk is misclassification—but laws surrounding contractor classification are often significantly more straightforward.
The contractor life isn’t for everyone—some people want the security that being an employee often appears to provide. Though it’s rare, this does happen, and it’s one disadvantage of manage an all-contractor team.
Most countries’ contractor-employer relationship laws stipulate that the employer can’t set fixed working hours, among other things. These laws give contractors more freedom over how and when they do their work than an employee would have. In reality, however, most contractors are willing & able to work on the company’s schedule—it’s a matter of setting expectations beforehand.
If you’re hiring contractors in
Iceland
, you can pay them with Thera in a single click. You won’t need to worry about complicated wire transfers, fees, or currency conversions. We’ll take care of it all. Just make a click and your contractor will get paid in their currency of choice. This is a valuable bonus for talent in countries where the local currency is particularly weak—most people appreciate the ability to receive their payment in stronger currencies.
If you’ve read up until this point, you’ll know that it’s easier, cheaper, and more flexible to hire contractors in Iceland than employees. Still, there are valid reasons why you might want to hire employees instead. The content below is for you—we’ll cover employer taxes and obligations in Iceland.
Two days’ holiday shall be granted for each working month during the past holiday allowance year, two weeks or more constituting one month in this respect, shorter periods not being counted.
If a person is absent from work due to illness or accident while he is receiving wages, or is on holiday, this shall constitute working hours for the purpose of this article.
Sundays and other public holidays shall not count as holidays in this respect, nor the first five Saturdays during holidays.
The holiday allowance year shall be reckoned from 1 May to 30 April. The minimum holiday for each year is 24 working days.
There are 15 public holidays.
The duration of sick leave entitlement provided to workers is dependent on how long they have been employed by their employer:
Both parents have an equal, non-transferable, right to take three months’ leave in connection with:
irrespective of whether they work in the private or the public sector, or are self-employed.
They are also able to divide a further three months’ leave between themselves as they wish.
A parent obtains the right to payments from the Maternity/Paternity Leave Fund after it has been active on the domestic labor market for six consecutive months prior to the first day of the maternity/paternity leave.
A parent’s working time in other EEA countries is taken into account if the parent has been employed in Iceland for at least one month during the last six months prior to the first day of the maternity/paternity leave.
These payments amount to 80% of average gross wages or calculated remuneration being based on a continuous twelve-month period ending six months prior to the birth of child.
Each parent is entitled to payments from the Maternity/Paternity Leave Fund for four months following the birth or adoption of a child; Payments may begin one month before the child is born.
In addition to maternity and paternity leave, parents have the right to take one unpaid leave from work for up to 13 consecutive weeks to care for a child up to age 8.
Adoption Leave - . The right to maternity/paternity leave in connection with adoption or permanent foster care shall expire 24 months after the child arrives in the home.
Child Care Leave - Parents are entitled to 12 days in each 12-month period for the illness of children under the age of 13.
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The principal rule in Iceland is that employers and employees are equally authorized to cancel employment
contracts without stating the reason for this.
Employees are generally hired without time limits, in which instance the employment contract is cancelled with a termination notice period as stated in the collective agreements.
The employment termination notice is mutual and such employment cancellations shall be in writing and in the same language as the employee’s employment contract.
The employee has the right to an interview regarding the end of his employment and the reasons for the termination of his employment and can request them to be stated in writing.
A request for the interview shall be given within 96 hours from the employees’ knowledge of the contract ́s termination.
Should the employer fail to fulfil the said request the employee is entitled to another interview with the employer in the presence of his or her union representative or other representative of the union, should he or she request so.
Notice periods range from 12 days to six months (three months are common), depending on rules of the applicable collective agreement.
The notice period in Iceland is:
Notice periods range from 12 days to six months (three months are common), depending on rules of the applicable collective agreement.
An employment which has been terminated by either party remains intact until the end of the notice period, which means that rights and obligations under the agreement remain unchanged during the period.
The parties can however come to an agreement to end their relationship before the notice period expires.
The notice periods are as follows:
There is no legal right to severance pay.
The probation or trial period is of 3 months.
Hours of daytime work are according to collective agreements defined as 40 hours per week, divided into five eight hours working days from Monday to Friday, and wages determined as weekly or monthly wages.
Paid coffee brakes, usually 35 minutes, are included in the 8-hour work day.
Day time hours usually start 07:00(general workers, industrial workers) but the time they end differs based on what collective agreement applies.
For general workers it ends at 17:00 hours but for industrial workers it is usually at 18:00 hours.
Overtime pay is paid work in excess of 8 hours per day and 40 hours per week.
Work performed outside day time hours is remunerated with overtime pay.
It is not permitted to pay day-time wages for work performed during hours outside daytime hours even though the worker in question has not done his full 8 hours in day-time.
Overtime is paid at an hourly rate equaling 1.0385% of the monthly wages for regular day work.
Work on major holidays is paid with an hourly pay equaling 1.375% of the monthly wages for regular day work, in addition to the 8 hours' day-time wages.
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