Workforce and Obligations

Workforce and obligations in Iceland

Workforce Characteristics

Adaptability is an integral characteristic of the Icelandic workforce and is a source of national pride that has been a crucial attribute when taking on new tasks. This adaptability is attributed to the need for flexibility and multi-tasking in a small society and a long history of harvesting the riches of a harsh nature.

The total population in Iceland was 377,280 at the end of Q1 2022. 60% of the population is aged 20 to 64.

The Icelandic labour market is open to foreign workers who fall under the rules of the EEA Agreement. Workers from countries not belonging to the EEA area are on the other hand required to work under work permits issued to their respective employer by the Directorate of Labour.  

Iceland has a high level of education. The literacy-rate is close to 100%.

Most Icelanders are multilingual, speaking English and a Scandinavian language and generally another European language for those with secondary education.

Iceland ranks among the top nations in the world when it comes to the availability of skilled labour and the availability of scientists and engineers per capita according to international comparative studies by bodies like IMD and World Economic Forum.

Iceland´s workforce is considered to be very balanced between service and production industries or in production.



Contractual Obligation

Employers are obliged to draw up a written contract of employment or terms of employment confirmed in writing, no later than 2 months after the work began.


Wages are for the most part collectively bargained between various labour unions and employer associations with some exceptions when unions are negotiating with specific companies.

Length of Work Week

In general a work week is defined as 40 hours pr. week, divided into five eight hour working days from Monday to Friday.

Social Security Obligation

Employers pay monthly social security contributions on all remuneration paid for dependent personal services and presumptive employment income of the self-employed. The rate in 2016 is 6.90%.

Sick Leave

A worker is entitled to two days sick leave for every month of employment. The employee thus has two days after one month of employment, four days after two months of employment, etc.

Maternity/Paternity Leave

Each parent has the right to a 6-month maternity/paternity leave, with six weeks transferable between parents. The right expires when the child reaches 24 months of age.

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For further information on the benefits of establishing a business in Iceland please feel free to contact us.