How to Hire an Employee in the Faroe Islands

At a Glance 

The Faroe Islands are a self-governing nation within the Kingdom of Denmark, and hiring there needs to be treated as its own process rather than an extension of a Danish setup. A Danish entity, a Danish employment contract, or an EU compliance framework doesn't automatically cover someone based there, since the islands run their own tax authority, TAKS, their own labor rules, and sit outside the European Union. Getting it right means confirming the hire's eligibility to work, picking the right structure, whether a local entity, a contractor arrangement, or an Employer of Record with confirmed Faroese coverage, and building the contract, pay, and payroll registration around Faroese rules specifically. 

Are the Faroe Islands part of Denmark for employment purposes? 

The Faroe Islands are part of the Kingdom of Denmark but govern themselves under the Home Rule Act of 1948, which gives them their own parliament, the Løgting, and control over most domestic policy areas including labor law and taxation, while Denmark retains authority over areas like foreign affairs and defense. This means a Danish business entity has no automatic legal standing to employ someone based in the Faroe Islands, and Danish employment law does not directly govern a Faroese employment contract. A company that already has a Danish entity, or uses an Employer of Record for Danish hires, cannot assume that same setup covers a Faroese hire without confirming it separately, since the islands maintain their own tax authority, TAKS, and their own approach to labor regulation. 

Are the Faroe Islands part of the European Union? 

No. The Faroe Islands are not part of the European Union, despite Denmark's EU membership. The Faroese parliament rejected EU membership in 1974, when Denmark itself joined what was then the European Communities, and negotiated a trade relationship instead. This means EU labor directives, trade rules, and regulatory standards that apply automatically in Denmark do not extend to the Faroe Islands by default. What does apply is a free trade agreement covering goods, mainly fish and fish products, not services, labor mobility, or employment standards, so a company used to relying on EU-wide compliance frameworks when hiring across Europe needs to treat the Faroe Islands as its own case. 

Does someone need a work permit to work in the Faroe Islands? 

It depends on citizenship, and the answer surprises people who assume EU rules apply here too. Citizens of the five Nordic countries, Denmark, Iceland, Norway, Sweden, and Finland, can move to the Faroe Islands to live and work with no visa, work permit, or residence permit required. Everyone else, including EU and EEA citizens, needs a work and residence permit, because the Faroe Islands sit outside the EU and its free movement rules don't apply locally. Non-Nordic applicants apply through the Danish Immigration Service, which processes Faroese applications in consultation with the Faroese Government, or through the Faroese Immigration Office directly. Confirming eligibility to work comes before anything else in the hiring process below, since it determines how much lead time the rest of the process needs. 

How do you hire an employee in the Faroe Islands? 

Once the hire's eligibility to work there is confirmed, hiring in the Faroe Islands follows a short, checkable sequence rather than a single registration form. 

Choose how you'll employ them

Companies without an existing Faroese setup generally choose between three paths. Registering a local business presence directly with Faroese authorities gives full control but carries the same setup and compliance overhead as registering anywhere else, scaled to a small jurisdiction with its own process. Engaging the person as an independent contractor avoids registration but carries the same misclassification risk in the Faroe Islands as it does elsewhere, evaluated against Faroese classification standards rather than assumptions carried over from Danish or Nordic frameworks. For most companies hiring one or two people, an Employer of Record is the fastest of the three. 

Confirm your Employer of Record covers the Faroe Islands specifically.

Nordic or Danish coverage from a provider doesn't automatically include the Faroe Islands, given how small and specific the jurisdiction is compared to larger Nordic markets. It's worth confirming directly with any Employer of Record, including Swapp Agency, whether Faroese coverage is something they currently offer, rather than assuming it falls under broader Nordic entity coverage. 

Build the contract around Faroese rules, not Danish ones.

Probation periods of up to three months are standard, agreed in the contract rather than fixed by a general statutory maximum. Notice periods scale with tenure, generally from around one month for newer employees up to several months for long-tenured staff, though employer guides disagree on the exact tiers, so confirm the applicable figure against the sector collective agreement that covers the role. Annual leave follows the Faroese Holiday Act, which mirrors Denmark's five-week statutory minimum, 25 days on a five-day week; some sectors, academia among them, negotiate six weeks through their collective agreement. Standard working hours run around 40 a week, and parental leave splits into four weeks for the mother before birth, fourteen after, four weeks for the other parent, and 34 further weeks the parents can divide between them. 

Set pay against the collective agreement that applies, since there's no minimum wage.

There is no national statutory minimum wage in the Faroe Islands. Pay floors come from sector-specific collective bargaining agreements instead, and they're enforced: the Faroese Workers' Union lists a general minimum hourly rate of DKK 144.99 under its current agreement, with separate rates for younger workers and a full schedule of overtime, weekend, and shift premiums. 

Register the employee and run payroll through TAKS.

New hires need a Faroese civil registration number, a P-tal, to receive wages: TAKS issues a temporary P-tal for anyone working 180 days or fewer without relocating, while moving permanent residence or working past that threshold triggers full Faroese tax liability on worldwide income from day one. On top of gross salary, TAKS lists these mandatory deductions for standard employees:  

1. Mandatory pension: 12% 
2. Labour market pension fund: 3.0% 
3. Health insurance: DKK 175/month + 0.70% 
4. Parental benefits fund: 0.86% 
5. Unemployment insurance (ALS): 0.6% 

These are listed as deductions from employee income. How much of the pension contribution an employer matches typically depends on the applicable collective agreement, so confirm that split with TAKS or an Employer of Record with direct Faroese coverage before running the first payroll. An Employer of Record with Faroese coverage handles the P-tal registration and withholding directly; a company registering its own entity needs to set this up with TAKS itself. 

What should a company weigh before hiring in the Faroe Islands? 

Beyond the legal and administrative steps, it's worth weighing the practical realities of the Faroese labor market itself: a small population, a currency (the Faroese króna, pegged to the Danish krone at parity, alongside the Danish krone which also circulates), and a talent pool that's limited compared to larger Nordic cities. For a company with a specific reason to hire someone based in the Faroe Islands, such as an existing relationship with a candidate there, these practical factors matter less than for a company weighing the islands as one option among several for building out a Nordic team, where a mainland market with more established infrastructure and a larger talent pool might fit broader hiring goals better. 

FAQ 

Does a Danish business entity allow a company to legally employ someone in the Faroe Islands?

No. The Faroe Islands govern themselves under the 1948 Home Rule Act with their own labor and tax authority, so a Danish entity does not automatically extend legal employment coverage to someone based there. 

Are Faroe Islands residents covered by EU employment law?

No. The Faroe Islands are not part of the European Union, so EU labor directives and standards that apply in Denmark do not extend there by default. A separate EU-Faroe Islands free trade agreement covers goods, mainly fish exports, but not labor or employment matters. 

Do EU citizens need a work permit to work in the Faroe Islands?

Yes. Even though Denmark is an EU member, the Faroe Islands are not, so EU free movement rules don't apply there. EU and EEA citizens need a work and residence permit to work in the Faroe Islands, the same as citizens of any non-Nordic country. Only citizens of Denmark, Iceland, Norway, Sweden, and Finland can work there without one. 

Is there a minimum wage in the Faroe Islands?

No. There's no national statutory minimum wage. Pay floors are set through sector-specific collective bargaining agreements, and the Faroese Workers' Union lists a general minimum hourly rate of DKK 144.99 under its current agreement. 

How much annual leave are employees entitled to in the Faroe Islands?

The Faroese Holiday Act sets a statutory minimum of five weeks, 25 days on a five-day working week, mirroring Denmark's Holiday Act. Some sectors negotiate more through collective agreements. 

What currency is used in the Faroe Islands?

The Faroese króna is used locally and is pegged at parity to the Danish krone, though the Danish krone also circulates and is widely accepted. 

Can an Employer of Record be used to hire in the Faroe Islands?

It depends on the provider. Coverage of the Faroe Islands isn't guaranteed just because a provider covers Denmark or other Nordic countries, so this needs to be confirmed directly with any Employer of Record being considered.