Your Trusted Partner for Recruitment in Iceland

To better fulfill your recruitment needs, we at Remote People are here to help you find top talent in Iceland more effectively than recruiting on your own. Our team understands the local language, customs, and the intricacies of the Icelandic talent market, giving you a significant advantage in securing the right candidates.

We know where to advertise your job openings to ensure maximum exposure and attract the best talent. Additionally, we assist in designing competitive, locally-appropriate compensation packages that not only appeal to top candidates but also help you optimize costs. 

Get in touch with us to navigate Iceland’s recruitment landscape with confidence and ease.

Key takeaways

  • Iceland’s economy has grown by nearly ten times in the past 45 years and steady growth is projected to continue.
  • Workers enjoy very strong legal protections, and most are union members who bargain collectively on behalf of their members.
  • Icelandic workers have a very high level of English, which can greatly facilitate communication.
  • Recruitment agencies and Employers of Record are effective partners for sourcing staff in Iceland.
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Iceland is a sparsely populated island country born from volcanoes in the middle of the North Atlantic Ocean. Nordic settlers first came here in 874 to colonize the land which later came under Norwegian and then Danish rule. Iceland achieved independence from Denmark in 1918 and formally became a republic in 1944. Since that time, the small country’s population has more than doubled to around 380,000 people in 2024. Its economy has also greatly expanded. In 1980, Iceland’s GDP was $3.43 billion, and in 2024, it has increased almost tenfold to $32.92 billion. Iceland has low taxes compared with other OECD countries and a Nordic-style social welfare system with universal health care and education. It has also been the most peaceful country in the world since 2008 due to high safety and low rates of violence.

While Iceland’s population is only comparable to that of a medium-sized city, its people have a reputation for being hardworking and diligent. Their workplaces are also usually quite egalitarian and informal compared with much of the world. They also seem to be the seventh most productive workforce in the world according to the IMF’s calculation of the country’s per capita GDP. Icelanders also have the highest trade union membership rates in the world, with nearly all workers belonging to a union in one of four union associations. If you’re thinking about hiring Icelandic workers, there’s a lot to know about how to do it and what benefits they can bring to your organization. In this article, we’ll examine how to recruit them and keep them gainfully employed.

Overview of Iceland's Recruitment Industry

After a peak of 6.4% in 2020, the unemployment rate in Iceland in 2024 is down to a comfortable 3.8%. Around 232,900 people, or 80.6% of the population, were employed in the second quarter of 2024. This represents something of a tight labor market and that means it may be somewhat difficult to attract workers. For this reason, organizations planning to recruit Icelanders need to carefully consider their compensation packages, which can include good salaries, desirable benefits, and other perks.  

Iceland’s economy was once dominated by fishing but has since diversified considerably. Fish and fish products are still important, but so are tourism, aluminum and ferrosilicon production, software production, finance, and biotechnology. In 2023, nearly 29% of Icelanders were employed in the public administration, education, and health sector. This was followed by the wholesale and retail trade sector (11.3%) and the tourism sector (10.9%). Iceland is also one of the world’s biggest energy producers per capita and currently generates 100% of its own electricity through geothermal (27%) and hydro (73%) power. However, this sector employs just 1.5% of Icelanders. 

Icelandic workers are known to be hardworking and dedicated, often working more than one job to increase their personal productivity and, of course, pay. In most workplaces, people refer to each other by first name regardless of their positions and this creates a highly egalitarian and informal atmosphere. Iceland’s workers are also highly educated. As many as 40.6% of them hold university degrees, and essentially everyone has a complete secondary education or higher. This leads to a well-organized, highly knowledgeable workforce.

Employers in Iceland pay 17.85% of each employee’s salary to social security and pension funds. There is no minimum wage stipulated by law in Iceland; however, unions negotiate fair and reasonable wages for at least 85% of workers. The average monthly salary in Iceland is high, with an average of about 750,000-800,000 ISK (Iceland Krona) or roughly 5,450-5,800 USD.

Iceland’s small population means that many jobs are not widely advertised or even not advertised at all. Word-of-mouth communication is often the best way for local companies to fill their vacancies. It’s even recommended that workers simply send their information to companies they would like to work for as a form of job prospecting. At the same time, many organizations are now making ample use of social media to advertise both their corporate brands and new positions as they become available. Because of the tight labor market conditions at present, employers have a greater need to create detailed job advertisements and offer competitive compensation packages. They can post these on Iceland’s most popular job boards, including Alfred, Job.is, Morgunblaðið Newspaper, Starfatorg, Tvinna, and Vinnumálastofnun. Employers looking for recruits can also work with leading international recruitment agencies or Employers of Record (EORs) to help you fill their vacancies quickly and easily.

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What are the Benefits of Recruiting in Iceland?

Suppose you want to start a new business in Iceland, expand a company into this market, or just hire Icelanders for organization abroad. In that case, you’ll find many advantages related to employing these workers. These include:

Educated workforce

Icelanders are a highly educated group of people; essentially, all workers have a minimum of secondary education. As many as 40.6% of workers are university graduates, 35.3% have some form of higher education, and 24.1% hold secondary education qualifications.

Language skills

Icelanders speak Icelandic, a language descended from Old Norse which gives them the ability to roughly communicate with other Nordic peoples. They also have to learn both Danish and English in school and most Icelanders can communicate at a high skill level in these languages. These language skills can greatly help with communication as well as regional trade.

Strong work ethic

Icelanders place a high value on hard work, integrity, punctuality, and reliability. Employees are known for having a strong work ethic and being highly dedicated to their jobs. Their motivation is highly intrinsic and linked to these personal values.

Connections to Europe

While Iceland isn’t a member of the European Union (EU), it still has strong connections to this region both culturally and economically. Recruiting Icelandic workers can help employers build connections and gain insight into the EU market.

What Legal Considerations apply when Recruiting in Iceland?

As we’ve mentioned earlier, Iceland has the world’s highest rate of membership in professional and trade unions. This membership indicates a high value placed on respecting worker’s rights across the country. Iceland’s Labor Code, along with numerous acts, measures, and regulations, reflects this value. These laws help to protect both employees and employers so they can work together effectively and respectfully. For ongoing compliance with Icelandic regulations, many companies can benefit from the use of an Employer of Record in Iceland. The following points represent important legal considerations that inform recruiting in Iceland:

Contracts

Contracts in Iceland must be written and have to be provided to workers from the very start of their employment. They can be for fixed terms but if a term is not stated then they’re considered permanent. Any contract that gives less favorable terms than those in collective bargaining agreements is not legally valid. Probationary periods are limited to three months for most roles.

Working hours & overtime

Icelandic law defines a full-time job as one in which the employee works a maximum of 40 hours a week. While this is normally arranged as eight hours a day, five days per week, collective agreements can redistribute these hours differently. These working hours include a paid lunch break (typically 30-60 minutes) and a 15-minute coffee break each day. Work days cannot last longer than 13 hours. Overtime is paid at 0.875% of the worker’s monthly salary per hour for the first 162.5 hours of overtime each month. After that, this rate increases to 1.0385%. Overtime hours are not limited by law but instead are stipulated in workers’ contracts or collective agreements. Additionally, if a worker is called in to work on a weekend, they must be paid for at least four hours, even if their tasks take less time.

Workers are entitled to a minimum of 24 weekdays of paid leave per year. This increases to 25 weekdays after five years in the same line of work, 27 after five years with the same employer, and 30 weekdays after ten years with that employer. Workers also receive time off for 16 public holidays each year. If they work on these days, they must be paid 1.375% of their monthly salary for each hour worked. New employees are entitled to just two sick days per month. They’re entitled to two months of sick leave after one year with an employer, four months after five, and six months after ten years.

Parental leave

Both parents are entitled to three months of leave upon the birth, adoption, or fostering of a child. This leave is paid at 80% of their average salary prior to the leave. They may also take another three months of leave between them if desired. Each parent is also entitled to four months of unpaid parental leave for childcare reasons if they have worked for an employer for six months or more.

Notice and severance

Iceland generally practices at-will employment. This means that either an employer or an employee can terminate an employment contract at any time without having to state a cause. However, most contracts and collective agreements state notice periods that must be given to workers. These typically range from 12 days to six months with three months being the most common period provided. There is no obligation for employers to pay severance to their terminated employees.

Anti-discrimination law

Article 65 of the Iceland Constitution states that all people must enjoy the same human rights regardless of gender, religion, opinions, national origin, race, color, sex, property, or birth. The Act on Equal Treatment in the Labor Market (no. 86/2018) prohibits all discrimination in the labor market, which extends to all recruitment, hiring, and employment practices.

How to Choose a Recruitment Agency in Iceland

If you choose to work with a recruitment agency in Iceland or even an EOR that handles recruitment as well as employment services, you’ll find dozens of firms competing for your custom. It’s important to choose a service provider that you can trust to provide you with the specific talent you require for openings. To help with this selection, consider these factors:

  • Fees: Some agencies make it easy for you to compare their prices by posting them online while others require you to ask for quotes. Check through the details carefully and ask if there are any additional fees to avoid surprisingly high prices later on in the process.
  • Experience: Newer agencies may have great marketing features and offer attractive digital platforms. However, more established recruiters will have more experience and much deeper talent pools to pull talent from. Choose agencies that have specific experience recruiting in Iceland and not only general experience around the world.
  • Reviews and ratings: Read an agency’s reviews and ratings before hiring them. Any consistent problems with the quality of their candidates or the way they treat recruits should be easy to uncover.
  • Services: Be sure to select a partner that offers all the services you require for recruiting, onboarding, and even managing your employees’ HR needs long-term.

Iceland’s economy is steadily growing, and its workforce is growing more educated and well-compensated each year. While this isn’t a large labor market, Iceland can be an excellent location to hire employees either to work remotely or to help you start a new venture in the country.

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Navigating the complexities of hiring and workforce management across different countries can be challenging. Partnering with a reliable recruitment agency ensures you stay compliant with local labor laws, streamline the hiring process, and secure top talent. Learn how Remote People can help you recruit in the following countries:

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Ready to build your team in Iceland? Remote People’s recruitment services in Iceland can connect you with qualified local talent.

Contact us today to discuss your hiring needs and achieve your recruitment goals.