Payroll in iceland

Payroll in Iceland

The precise tax system makes the payment regulation in Iceland seems too complicated as workers pay a large part of their income to several government units. However, Iceland has a simple and straightforward process when it comes to foreign business entities entering its market, which is also why it makes it a good and safe place for business. In fact, Iceland ranked number 9 of the world’s most business-friendly economies according to the World Bank international study “Doing Business 2012,” up from 13th in 2011.

The success of businesses lies in the strength of their operation and people. One important aspect to see is its payroll process as it also concerns tax, assets, and overall fnancial health. Employees must be paid on time as stated in the agreement and the information on every payslip such as the amounts should be carefully looked at. Keeping a detailed, accurate, and up-to-date system of doing payroll is vital to ensuring that the business also adheres to the country’s regulations and laws.

The term you will often hear when payroll in Iceland is discussed is ‘collective bargaining’. It works here since most organizations will fnd that the employees are comfortable negotiating their compensation and employment benefts as a group rather than individually. Collective agreements are entered into between the employers and the staff unions. It has to be added here that there are many cases where appointments are made to positions with benefts in addition to what is stipulated in the collective agreements.

Understanding the Elements of Payroll in Iceland

Payroll is a crucial part of employment for both companies and workers, most especially when handling remote workers who are foreign to the country’s tax system. Employers have to understand the basics of the local labor laws before even starting to structure their payroll in Iceland. It must be clear to them that the workers in Iceland can work for only 40 hours a week, with an overtime limit fxed up to 48 hours. The employees are also entitled to availing compensatory off for overtime performed, in addition to the extra pay.

There has to be a written letter of appointment issued to each employee, irrespective of the collective agreement entered into with the employee union. The maximum time allowed to issue this letter of appointment is 2 months from the commencement of employment. On top of that, individual workers may still negotiate additional terms in the agreement.

The Iceland government has not mandated any minimum wage level, but compensation minimums can be determined by collective bargaining. The per capita income of Icelanders ranks quite high among the comparable nations, largely due to the small size of the population. If you want to know how much salary is paid to employees as per the payroll in Iceland, it’s 310,000ISK (around $2280 at the current exchange rates, 1$=136ISK). Employees in Iceland are

also entitled to two bonuses during the year, one in December before Christmas and the other in April which is called a vacation bonus. And although employees are not forced to work during holidays, their employers are not prohibited to request to do so.

Payroll Iceland

New Parents Can Claim Nine Months of Paid Leave

The Iceland government undertakes to pay 80% of the salary to parents on childbirth. This is permissible for three months each to the mother and the father. The next three months can be split by the couple as per their choice. This means they can enjoy all nine months to take care of their newborn babies.

Salary is paid by the employees on a monthly basis and usually credited on the frst of the month for every previous month.

Payroll Iceland

Payroll and Accounting Services

On the face of it, the government regulations on compensation and withholding of taxes, etc. may appear complicated to companies from outside of Iceland. This is why many companies are suggested to seek out help from a third-party company that ensures full compliance in payroll solutions as understanding tax systems can really be exhausting, not to mention it kills so much time.

Whether you employ just 50 or 1,000, agencies like Swapp Agency have the potential to operate as outsourced payroll preparation outfts efciently. It helps that it is familiar with the process of preparing payrolls and has full knowledge of the statutory requirements in Nordic regions like Iceland which ensures compliance to accurately pay the employees. It also makes use of the latest technology available to integrate the process of preparation of payroll in Iceland and can easily link it to the bank accounts of employees as needed. You need not worry about the security of the data you share with an external agency; Swapp Agency will assure you of complete confdentiality.

The advantage of engaging with outsourced service providers is that they can go beyond just preparing the monthly payrolls for your beneft. Most agencies like Swapp Agency also cater not just payroll services, but everything about employment-related tasks. It can also prepare and electronically submit the various returns to be fled with the tax authorities under Icelandic laws. The Internal Revenue Service in Iceland expects companies to submit the details of salaries paid to the employees so that they can cross-verify with the taxes paid.

For most, keeping up with the complexity of payroll is a tedious task, but its accuracy must always be observed. With that, it is suggested that companies who are starting to roll out payroll in Iceland seek professional help in running their accounting side. For any services like this and others in Iceland, do not hesitate to contact Swapp Agency.