Why hire in Iceland through an EOR
Two components, one clear total — 17.85%
Iceland's employer cost breaks into two clear pieces: a 6.35% payroll tax and an 11.5% mandatory occupational pension contribution, combining to 17.85% of gross salary. Recent collective bargaining agreements have also raised minimum wages and bonus amounts across several sectors — worth checking your figures reflect the current position, not an older one.
No entity required
Employ staff in Iceland without registering a company or filing your own tryggingagjald and pension contributions.
Current collective agreements applied
2025's bargaining round changed minimum wages and bonuses sector by sector — we apply the current figures.
Digital nomad visa understood
Iceland allows remote workers employed by foreign companies to stay for up to six months — useful context for short-term hires.
Independent advice
We apply the current sector minimum wage and bonus figures — 2025's bargaining round moved these more than most employers realise.
Deal directly, if you'd rather
One of our genuinely active markets
We've introduced clients to HR experts in Iceland as recently as this year — a real, active market for us. If you'd rather discuss your specific situation before committing, get in touch and we'll walk you through exactly what an Icelandic hire involves.
Ask about an Iceland hire →Employer costs at a glance
Iceland's headline numbers
Employer costs explained
A clean, stable two-part structure
Payroll tax — 6.35%, stable since 2022
The employer payroll tax (tryggingagjald) funds Iceland's broader social security system — healthcare, unemployment benefits, and disability coverage. It's applied to total gross remuneration, and the rate has held steady at 6.35% since 2022, giving genuinely reliable year-on-year budgeting.
Occupational pension — 11.5% employer, 4% employee
Separately, employers and employees aged 16 to 70 must both contribute to a pension fund, with a combined statutory minimum of 15.5% of gross salary — 11.5% from the employer, 4% from the employee. If an employee voluntarily adds an extra 4% of their own, the employer must match a further 2% on top.
What's genuinely current for 2026
New collective bargaining agreements concluded in late 2024 and early 2025 raised minimum wages across multiple sectors, along with vacation bonus and December bonus amounts — worth checking your specific sector's current figures rather than working from an older estimate.
Employment basics
What's standard for an Icelandic employment contract
Payroll tax
6.35% employer, stable since 2022
A reduced rate applies for fishing and agriculture sectors specifically.
Occupational pension
15.5% combined minimum
11.5% employer, 4% employee — both mandatory for ages 16 to 70.
Income tax
31.49% to 46.29%, three bands
Includes both national and average municipal tax combined.
Corporate tax
20%
One of the lowest corporate rates globally — separate from employee payroll costs.
Before you budget an Icelandic hire
Get our free spreadsheet of employer social charges across 150 countries and see how Iceland compares.
Common questions
Hiring in Iceland, answered
What's the real total employer cost in Iceland?
17.85% of gross salary — 6.35% payroll tax plus 11.5% mandatory occupational pension. Both are consistent, well-established rates, making Iceland genuinely predictable to budget for.
Have minimum wages changed recently?
Yes — new collective bargaining agreements concluded in late 2024 and early 2025 raised minimum wages and bonus amounts across several sectors. Worth checking your specific sector's current figure rather than an older estimate.
Do I need an Icelandic entity to hire someone there?
No — through an Employer of Record arrangement, we become the legal employer, handling tryggingagjald and pension contributions, while you keep full control of the person's day-to-day work.
Ready to talk about an Icelandic hire?
Tell us the role and sector and we'll give you the real, current cost and the fastest compliant route — including if that's not us.
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