Everything You Need to Know About Working in Iceland (2024)

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Employment in Iceland

At A Glance:

• Iceland recovery after the 2008 financial crisis has been impressive, in part thanks to the government’s unique management of the banks.
• Expats who are not citizens of EU/EEA countries must apply for a work and residence permit in order to work in Iceland.
• Iceland has a number of growing industries, including software production and tourism, which are contributing to the nation’s improving economic prosperity.

In terms of its economy, Iceland has been through some highs and lows. After joining the EU in 1994, Iceland was able to further diversify its economy, creating more job opportunities for expats. Despite the 2008 economic crisis which hit Iceland particularly hard, the country seems to be back on track for economic prosperity.

Iceland’s Economy

Iceland’s economy follows the Scandinavian model, comprising of a free market economy and an extensive welfare state. The main sector is the fishing industry which contributes 40% of all export earnings and over 12% of the GDP, as well as employing about 5% of the workforce.

Prior to the 2008 financial crisis, expats in Iceland benefitted from a low unemployment rate, high growth, and equal distribution of income. The crisis caused the Icelandic Krona to lose value, and, in a controversial move, the government allowed the country’s three largest banks to collapse. However, after receiving loans to stabilize the economy and reinventing itself with various reforms, Iceland has seen a remarkable recovery. In fact, in 2017, the unemployment rate is now 2.4% — almost the same as it was before the crisis.

There’s more to the economy than fishing: it has become increasingly diversified, attracting businesses in the fields of biotechnology and software production. Tourism is also vital — the number of tourists Iceland received in 2016 was almost 4.5 times their population. The country’s location also means that hydropower and geothermal sources are plentiful; they have attracted foreign investment which has furthered economic growth.

The Job Search in Iceland

For expats who dream of working in Iceland, persistence, patience, and perhaps certain qualifications will be needed. It is best to start your job search before you pack your bags; sites like EURES, for instance, allow you to search for jobs and find information about the country.

Employment agencies (ráðningarþjónustur) are often the best option for expats. These agencies are often free of charge for job seekers, and can help expats with certain expertise find their dream job. It is a good idea to register with one or more agencies. In addition, you could have a look at the classifieds section of local newspapers likeMorgunblaðiðorFréttablaðið; on Sundays, both newspapers have a special employment section, however, all job ads are in Icelandic.

The local branch of your trade union (stéttarfélag) may also be able to help. They are usually well-informed when it comes to current vacancies in your sector. If all else fails, there’s no harm in contacting a company with a speculative application.

Doing Business in Iceland

Visa Requirements for Iceland

Expats who are not citizens of EU/EEA countries have to apply for a work and residence permit in order to work in Iceland. The best bet for most expats is to apply for a permit based on professional qualifications. For this permit, you need to have specialized skills and an employment contract for a position which is not short-term. Once this permit has been approved, you can apply for a D-visa if necessary.

If you’re only looking for a short-term assignment, the shortage of laborers permit is best. Before you can apply for this permit, you need to make sure that the profession you are interested in currently has a shortage of laborers. If so, this permit allows you to live in Iceland temporarily. For more information on visa requirements in Iceland, please have a look at our article onMoving to Iceland.

Taxation in Iceland

Expats working in Iceland are required to pay the same taxes as locals. Taxes are automatically deducted from your salary. As of 2017, Iceland’s income and municipal tax is calculated on the following levels:

• 36.94% for income betweenISK 0–834,707 a month
• 46.24 % for income exceeding ISK 834,708 a month

Anyone who is older than 16 can apply for a tax card which grants taxpayers a personal tax allowance. You’ll need to make sure you give your tax card to your employer before you receive your first pay check. As a foreign citizen, you may benefit from a double taxation agreement between Iceland and your home country. To receive these tax benefits, you need to be subject to full tax liability in your home country. Please refer toRSK Ríkisskattstjórifor more information on taxation in Iceland.

Business Etiquette in Iceland

The good news is that English is widely spoken in business. It is important that you begin and end meetings with a firm handshake. Hierarchies are rather flat in Iceland and you should make sure that you treat all your business partners equally, regardless of their professional status. Precision and honesty are important and appreciated, and Icelanders tend to get straight to the point during negotiations.

As a matter of general courtesy, it is important that you arrive on time or maybe even a few minutes early to business meetings. If you realize that you will be late, you should call to let your business partners know. During a presentation, it is important to use relevant, supporting data and information which is to the point. Your Icelandic business partners expect the information they receive from you to be correct and honest, so avoid sugarcoating anything.