Definitive Guide to Hiring in Faroe Islands

Hiring in Faroe Islands

Hiring employees compliantly in Faroe Islands means doing it yourself or using an Employer of Record like Global Expansion. You should be careful using independent contractor agreements in Faroe Islands so that you don’t run afoul of employment laws. To hire an employee compliantly and offer them mandatory benefits and compliant agreements, you can:

(a) Establish your own new legal entity, banking, accounting and payroll service in Faroe Islands; or

(b) use an Employer of Record like Global Expansion who can handle all of the details for you.

Labor Laws in Faroe Islands

Employee Probation Period

• There is no general legislation regarding probationary periods.
• However, a probationary period of up to three months may be agreed.

Annual Leave in Faroe Islands

• In general, the annual holiday entitlement is 6 weeks, in addition to public holidays.

Holidays in Faroe Islands

Maternity Leave Faroe Islands

• Mothers have the right to paid leave 4 weeks before childbirth and 14 weeks after birth.
• On top of that the parents are entitled to paid leave for 34 more weeks that they can divide between them as they wish.

Paternity Leave Faroe Islands

• Fathers get 4 weeks of paternity leave
• On top of that the parents are entitled to paid leave for 34 more weeks that they can divide between them as they wish.

Sick Leave in Faroe Islands

• Loss of income due to illness may entitle you to sickness benefit.
• One condition is that you have had employment for at least 5 weeks before the sick leave begins.
• And the maximum period of receiving the benefit is 40 weeks.
• If offered, you have a duty to accept any medical treatment helping you regain the ability to work, in order to keep your entitlement to sickness benefit.

Working Hours in Faroe Islands

• Normal working hours are around 39 hours per week in the private and public sector.

Overtime in Faroe Islands

• Work in excess of normal working hours is compensated with an overtime supplement.

Termination of Employment in Faroe Islands

• Circumstances leading to dismissal can arise at any workplace.
• An example of circumstances relating to the employee could be serious breach of the employment contract.
• Examples of circumstances relating to the employer/ enterprise could be a necessary reduction in the size of the workforce or reorganization.
• An employee cannot be dismissed because she is pregnant. If the employer cannot prove that the dismissal is unrelated to the pregnancy, the dismissal is unlawful.
• This is stipulated in the pregnancy law.
• The period of notice correlates to the seniority of the employed person.
• For an hourly employed worker who has been employed for 6 months the period of notice is at least 7 working days.
• While for a worker receiving regular monthly wages (employed under the terms of the agreement of the Faroese General Workers` Union, Føroya Arbeiðarafelag) who has worked for more than 6 months and less than 2 years the period of notice for dismissal is 2 months.
• For salaried employees (e.g. in the Office and Retail Workers` Union, S&K) who have been in work between 6 months and 3 years (excluding temporary or probation period employment) the period of notice is 3 months.

Notice Period in Faroe Islands

• The period of notice correlates to the seniority of the employed person.
• For an hourly employed worker who has been employed for 6 months the period of notice is at least 7 working days.
• While for a worker receiving regular monthly wages (employed under the terms of the agreement of the Faroese General Workers` Union, Føroya Arbeiðarafelag) who has worked for more than 6 months and less than 2 years the period of notice for dismissal is 2 months.
• For salaried employees (e.g. in the Office and Retail Workers` Union, S&K) who have been in work between 6 months and 3 years (excluding temporary or probation period employment) the period of notice is 3 months.

Faroe Islands Salary and Wages

13 / 14th Month Salary in Faroe Islands

• No
• There is no statutory requirement to pay the 13th or 14th month salary.
• Employees are entitled to 5/6 weeks holidays which they have to take by the 2nd of May.

• In addition to taxes all employees with full tax liability have to pay a number of mandatory contributions.
• These are withheld from the income in the same way as ordinary taxes.
• Residents between the age of 16 and 66 working in the Faroe Islands are liable to contribute to the Unemployment Scheme (ALS).
• The contribution to ALS is 1 percent.
• Residents between the age of 16 and 66 working in the Faroe Islands are liable to contribute to the Parental Leave Fund (BAS).
• The contribution to BAS is 0.86 percent of the taxable income.
• All individuals up to the age of 67 with full tax liability in the Faroe Islands are required to save up for a pension.
• The required pension saving increases by 1% each year and is now 8%. Academic employees already pay 15% or more of their salary to a pension scheme set up by their trade union.
• Employees with an employment contract stating that the employment is for a fixed period of time may be granted an exemption from compulsory pension contributions for up to a total of 60 months.
• All employees under the age of 67 liable to pay tax in the Faroe Islands have to contribute to the Labor Market Supplemental Pension Fund (AMEG).
• The contribution is 3 per cent of the taxable income.
• All residents over the age of 18 have to pay a monthly contribution to the National Health Insurance.
• The contribution is a fixed amount of DKK 175 and 0.7 percent of the taxable income.

Immigration Faroe Islands

• Nordic citizens from Denmark, Iceland, Norway, Sweden and Finland are free to move to the Faroes to work, study and live.
• Citizens from all other countries need a Work and Residence Permit before they can take up residence or employment in the Faroes.
• This also applies to EU citizens; since the Faroe Islands are not a member of the European Union, the regulations on free movement for citizens of EU countries do not apply to the Faroes.
• In order to receive permission to work and reside in the Faroes, foreign nationals need to apply with the Danish Immigration Service, which will process the application in consultation with the Faroese Government.
• Furthermore, conditions for obtaining a visa for the Faroe Islands are similar to the conditions for obtaining a visa for Denmark.
• Visa is required for entering the Faroe Islands regardless of the person having a residence permit in Denmark.
• Correspondingly, a visa is required when entering Denmark, even though the person has a residence permit in the Faroe Islands.
• The assessment of your application is normally based on whether your labor and your qualifications are in demand on the Faroe Islands.
• When processing your application, SIRI pays particular attention to the following criteria:
  • Whether there are available professionals residing on the Faroe Islands who are qualified to carry out the job in question (applies only to certain types of applications), and
  • whether the nature of the job in question is specialized enough to warrant a residence and work permit.
• Your salary and terms of employment must correspond to Faroese standards. This means that your salary, holiday entitlements, terms of notice etc. must not be inferior to the standards within the professional field where you are going to work.
• A residence permit for the Faroe Islands can be granted with a validity of up to 1 year from the date a decision is made on your case.

Value Added Tax (VAT) in Faroe Islands

• Value added tax (VAT) is a consumption tax on sales and is levied whenever a sale of goods and services occurs throughout the distribution chain.
• VAT is also levied on the import of goods.
• A standard rate of 25 percent is applied on most goods and services.
• Some goods and services are exempt from VAT.
• Among these are certain cultural activities and sports, personal transportation, financial and insurance transactions and literary, compositional and other artistic activities.

Mandatory Benefits in Faroe Islands

• These are mandatory benefits as postulated by law
• These include probationary period, annual leave, public holidays, sick leave, maternity leave, paternity leave, overtime pay.
• Statutory benefits also include social security benefits

Payroll Accrual in Faroe Islands

Country Accruals Additional Information

Description

If an employer contributes towards an employee’s pension, provident or other retirement fund, these contributions will be exempt from employment income tax as long as their total monthly contribution does not exceed 15% of the staff member’s monthly income.

Payroll Accruals Additional Information

Accrued Benefits in Faroe Islands

Why use Global Expansion to hire in Faroe Islands

Establishing a branch office or subsidiary in Faroe Islands can be time-consuming, expensive and complex. With such a robust labor market in place, one must pay great attention to detail when structuring employment because Faroe Islands labor laws are complex.

The company also has a responsibility to comply with specific employment practices dictated by Faroe Islands law to maintain its good standing as an equal opportunity employer.

Global Expansion makes it easy for you to expand into Faroe Islands. We'll help you hire your candidate of choice, handle HR matters and payroll, and ensure that you comply with local laws without the burden of setting up a foreign branch office or subsidiary. In addition, you'll have complete control and direction over your employees.

We enable you to stay in control of everything. Our Faroe Islands Global Professional Employer Organization (PEO) and Employer of Record (EOR) solution provides you with peace of mind to focus on running your company and the security to enter new markets.