Employment in Iceland

Iceland's labour market includes direct applications to companies, vacancies listed by Vinnumálastofnun (VMST), EURES vacancies and employment agencies. VMST, the Directorate of Labour, connects jobseekers and employers, provides job-counsellor support and reviews vacancy listings, but it does not interview applicants or conclude employment contracts. Public listings are generally open for applications. A CV and cover letter are common application documents. There is no single mandatory placement channel. In 2025, Iceland had an average of 225,700 employed people, an employment rate of 77.8%, labour-force activity of 81.4% and unemployment of 4.3%. Average actual working time was 35.9 hours per week. Unemployment among people aged 16 to 24 was 9.2%. The rate was 4.9% in the capital region and 3.2% in the other regions. VMST and Ísland.is offer job information with regional filters for the Capital, West, South, East, North East, North West, Westfjords and Southern Peninsula. EURES provides access to vacancies across the European labour market. An atvinnusamningur is the employment agreement between the worker and the employer. The worker has a right to receive it in writing within two months of starting work. It should state the names and kennitala, the national identification number, of both parties, the workplace and address, job title, duties, start date, temporary or permanent status, holiday rights, notice period, wages, working hours, pension fund and the applicable kjarasamningur. A kjarasamningur is a collective wage agreement that sets minimum terms for covered work. Its minimum terms apply even when the worker is not a union member. The agreement may provide better terms through the individual contract. Terms below the applicable collective minimum are not valid. Union membership itself is voluntary. There is no single national wage rate for every occupation. Collective agreements set minimum rates according to factors such as occupation, age, seniority and education. The contract should state the agreed salary and payment arrangements. Each pay cycle, the employer provides a launaseðill, or payslip, showing hours, daytime work, overtime or shift pay, holiday pay, bonuses, withholding tax, public charges, pension contributions, union dues and other deductions. Holiday bonuses and December bonuses are common where the relevant sector agreement provides for them, usually in proportion to the qualifying period. The exact wage, notice period, bonus, holiday and pension terms depend on the occupation, sector, employer and applicable agreement. Wage claims after an employer's bankruptcy fall within the Wage Guarantee Fund and VMST's responsibilities. The employer withholds staðgreiðsla, or payroll tax, from wages and pays it to Skatturinn, Iceland Revenue and Customs. In 2026, the personal tax credit is ISK 72,492 per month or ISK 869,898 per year. The income-tax brackets are 31.49% on monthly income up to ISK 498,122, 37.99% on the portion from ISK 498,123 to ISK 1,398,450, and 46.29% on the portion above ISK 1,398,450. A worker tells each employer how to allocate the personal credit and tax treatment, especially when holding more than one job. Iceland has not used tax cards since 2016; tax services are handled through Skatturinn's service portal. After moving to Iceland, the credit generally applies from the arrival date. A non-EEA worker normally needs legal domicile in Iceland to receive the credit and is generally subject to unlimited tax liability under the relevant rules. Pension contributions form part of normal employment deductions. The employee contribution is at least 4% of total wages, and the statutory or collective combined contribution is commonly at least 15.5% including the employer contribution. An optional supplementary pension arrangement commonly involves an employee contribution of 2% or 4% with an employer contribution matched according to the contract or fund rules. The payslip shows the deductions. The worker should select or confirm the pension fund when starting the job and check which fund the contract and collective agreement use. Workers have legal and collective protections concerning working conditions, health and safety, working time, minimum rest, holidays and summer leave, sick leave, parental protection, equality, protection from harassment and violence, data protection and termination. Employers have to keep working-time records. Night work is generally limited to eight hours in a 24-hour period, while overtime and shift arrangements depend on the contract and kjarasamningur. Shifts should be scheduled in advance. The Administration of Occupational Safety and Health is the relevant occupational-safety authority. European Economic Area nationals and EFTA nationals generally do not need a work permit. A stay exceeding three months normally requires registration with Registers Iceland, including registration of lögheimili, the person's legal domicile, and a kennitala. Complete registrations are processed within a maximum of ten working days. Short paid employment of less than three months can use a Skatturinn system ID where applicable. A system ID identifies the person for administration but does not create residence or other rights. Nordic nationals follow a separate registration process. Most non-EEA workers need a residence permit and a temporary work permit. The permit is tied to the named worker and employer, so changing employer generally requires a new permit. The worker may not start work before the permit is issued. Permit categories include expert knowledge, shortage of labour, athlete, special circumstances, family reunification and specialised service or collaboration. The shortage-of-labour category is exceptional and normally requires evidence that the employer first sought workers in Iceland, the EEA, EFTA states and the Faroe Islands. From 8 July 2026, responsibility for processing and issuing these permits moved from VMST to the Directorate of Immigration. A residence-permit work application costs ISK 80,000. An expert-knowledge permit can last up to four years, while a shortage-of-labour permit generally lasts up to one year. Work-permit and residence-permit conditions can affect each other, and losing the job can affect the right to stay and work, so a non-EEA permit holder should contact the Directorate of Immigration immediately after job loss. A regulated profession may require recognition of foreign qualifications or a professional licence from the responsible Icelandic authority. Foreign craftsmen may need an ENIC/NARIC assessment and confirmation of professional rights. These requirements are separate from finding an employer and from signing the employment agreement. An employer or worker generally ends employment on the last day of the current month, with the notice period determined by the applicable collective agreement. The worker normally continues working during the notice period and receives the agreed wages. When a person receiving a VMST-linked benefit starts a new job, the person should notify VMST and provide the new employer's union, pension-fund and supplementary-pension details. If no new job follows, unemployment support becomes a separate subject from employment itself. Before signing, compare the written contract with the applicable kjarasamningur, confirm the permit or registration status, and verify current wage, notice, bonus, holiday and pension terms for the occupation and sector.