Temporary work agencies

The Act on Temporary Work Agencies entererd into force in the beginning of 2006. The purpose of the Act is to clarify the situation regarding the effect of Icelandic collective labour agreements in Iceland irrespective of whether the workers have a direct employment relationship with the relevant companies or if they work through a temporary work agency. The legislation also references the provisions of the EEA Agreement about freedom of the exchange of services as well as the rules on the free flow of workers between the EEA member countries. The Act also prohibits the temporary work agencies from making their employees pay a fee for getting a job.

Only temporary work agencies established in Iceland, in other EEA countires and in Switzerland may operate here in Iceland. Foreign temporary work agencies need to demonstrate that they are legally registered and are licensed to operate in their homeland. 

All temporary work agencies, Icelandic as well as foreign, must register the company and all of it's employees who work for the company here in Iceland, with the Directorate of Labour. Foreign temporary work agencies must have a representative here in Iceland if they are operating for more than 10 days a year.

A temporary work agency is defined in the Act as a service providing company that hires out employees to user companies against a fee. The employees work under the supervision of the user. Temporary work agencies shall provide the Directorate of Labour with such information which the Directorate feels is necessary in order to monitor the implementation of the Act, including copies of the contracts of employment of all the employees and the service agreements with the user corporations.

Tax issues: Employees working on behalf of temporary work agencies are liable to pay tax on any employee income that they earn here in Iceland. With respect to the payment of payroll tax it is important whether the employee has an E-101 certificate from the homeland. For more details see announcement 3/2005 from the Directorate of Internal Revenue.

Registration takes place by clicking here

Registered temporary work agencies:

Registered temporary work agencies according to Act No. 139/2005 on Temporary Work Agencies

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