The term you will often hear when payroll in Iceland is discussed is ‘collective bargaining’. It works here since most organizations will find that the employees are comfortable negotiating their compensation and employment benefits 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 benefits in addition to what is stipulated in the collective agreements.
Understanding the Elements of payroll in Iceland
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 be worked for only 40 hours in a week. There can be overtime allowed, but the overall limit has been fixed at 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.
The Iceland government has not mandated any minimum wage level. 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. Some minimum service requirements are applied to calculate this entitlement.
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 in 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 first of the month for the previous month.
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. They can take help from local service providers in the formulation and preparation of payroll in Iceland.
Whether you employ just 50 or 1,000, these agencies have the potential to operate as outsourced payroll preparation outfits. They are familiar with the process of preparing payrolls and have the full knowledge of the statutory requirements in Iceland, based on their experience. They use 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; they will assure you of complete confidentiality.
The advantage of engaging the outsourced service providers is that they can go beyond just preparing the monthly payrolls for your benefit. They can also prepare and electronically submit the various returns to be filed 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.
Some of the complicated payrolls like for the crew for film production in Iceland are also handled by these agencies.
For any services like this and others in Iceland, contact Swapp Agency.