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Compensation & Benefits in IsIceland.






Country Capital



Icelandic króna (ISK)

When expanding to a new country, companies will often face unfamiliar requirements that may make compliance challenging. Here are a few useful tips to help you navigate the intricacies of benefits and compensation in Iceland.

Iceland compensation laws

The country does not have a national minimum wage, but collective agreements determine minimum wage requirements for various sectors.

The minimum wage for each labor market sector is established through negotiations in collective agreements involving social partners, and as a result, it varies across occupational sectors. Minimum wages are determined based on factors such as the nature of the work, seniority, and education.

The wage scales defined in collective agreements typically undergo annual adjustments, occurring January each year or upon the implementation of a new collective agreement

Many collective agreements require a monthly payment schedule where the employer distributes paychecks on the 1sT of every month for the month prior. Other sectors require a weekly or biweekly payment schedule.

Iceland’s compensation laws also require pay statements and overtime wages. Pay statements act as a receipt with information regarding the payment, including:

  • Pay period
  • Wage rate
  • Deductions
  • Holiday pay
  • Bonuses
  • Accumulated time off from reduced rest periods

Overtime wages equal 0.875% of the worker’s monthly salary per hour for the first 162.5 hours. After that, overtime wages equal 1.0385% of monthly wages. Employers should also include overtime wages in the pay statements.

Guaranteed benefits in Iceland

Employee benefits are as vital as wages and paychecks. Research to ensure your benefits packages align with national minimums and the requirements set in relevant collective agreements.

Minimum requirements in the country include vacation time, parental leave, and sick days. Collective agreements may have different policies based on your industry, but the national labor laws describe absolute minimums for these provisions.

Employees earn 2 paid vacation days for each month of work, for a total of 24 days a year. Vacation time pay is equal to 10.17% of annual income. Parents gain 9 months of paid leave for birth, adoption, or fostering. Pay is equal to 80% of standard wages.

Sick day provisions describe the required amount of paid sick leave a person should get based on their time with an employer. Before the first year, employees should receive 2 days for every month of work. These provisions may increase based on collective agreements from the country’s trade unions.

Iceland benefits management

Part of managing benefits for employees in Iceland includes determining what supplemental benefits to provide to bring in a greater talent pool. However, before providing additional benefits, companies need to consider that Iceland has non-discrimination rules asserting that any additional benefits must be granted to all employees equally.

Possible additional benefits can include:

  • Tuition reimbursements
  • Telecommuting opportunities
  • Gym memberships
  • Transportation stipends

Partner with G-P to build your everywhere workforce.

As your partner in global expansion, G-P will handle payroll and compliance, so you can focus on growing your team and scaling your business. Our market-leading Global Growth Platform™ is powered by the first fully customizable suite of global employment products and backed by the industry’s largest team of in-country HR and legal experts to streamline payroll management and help you offer competitive, compliant local benefits.

Learn more about our platform and request a proposal today.


THIS CONTENT IS FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSTITUTE LEGAL OR TAX ADVICE. You should always consult with and rely on your own legal and/or tax advisor(s). G-P does not provide legal or tax advice. The information is general and not tailored to a specific company or workforce and does not reflect G-P’s product delivery in any given jurisdiction. G-P makes no representations or warranties concerning the accuracy, completeness, or timeliness of this information and shall have no liability arising out of or in connection with it, including any loss caused by use of, or reliance on, the information.

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