Hire in Faroe Islands through our Employer of Record (EOR)

An Employer of Record (EOR) is a third-party organization that takes on the legal and administrative responsibilities of employing workers on behalf of another company. This arrangement allows businesses to hire employees in countries where they don't have a legal entity, effectively expanding their global reach without the need to establish a local subsidiary or navigate complex international employment laws.

For the Faroe Islands, an EOR can be particularly useful due to the archipelago's unique status as a self-governing region within the Kingdom of Denmark. This arrangement can help international companies navigate the specific legal and cultural nuances of hiring in the Faroe Islands while ensuring compliance with local labor laws and regulations.

How Does EOR Work?

An Employer of Record operates by becoming the legal employer of a company's workforce in a particular country or region. The process typically involves the following steps:

1. The client company identifies a candidate they wish to hire in the Faroe Islands.
2. The EOR enters into an agreement with the client company to employ the worker on their behalf.
3. The EOR handles all legal and administrative tasks related to employment, including:
   • Drafting and signing employment contracts
   • Managing payroll and tax withholdings
   • Ensuring compliance with local labor laws and regulations
   • Providing mandatory benefits and insurance
   • Handling visa and work permit applications if necessary
4. The client company maintains day-to-day management and direction of the employee's work.
5. The EOR invoices the client company for the employee's salary plus associated costs and their service fee.

Benefits of Using an EOR

Utilizing an Employer of Record in the Faroe Islands can offer several advantages for companies looking to expand their operations or hire local talent:

1. Simplified Market Entry: An EOR allows companies to quickly establish a presence in the Faroe Islands without the need to set up a legal entity, saving time and resources.

2. Compliance Assurance: EORs are well-versed in local employment laws, tax regulations, and cultural norms, ensuring that companies remain compliant with Faroese regulations.

3. Risk Mitigation: By taking on the legal responsibilities of employment, EORs help mitigate the risks associated with international hiring and employment practices.

4. Flexibility: Companies can easily scale their operations up or down in the Faroe Islands without the long-term commitments associated with establishing a subsidiary.

5. Cost-Effectiveness: Using an EOR can be more cost-effective than setting up and maintaining a local entity, especially for companies with a small number of employees in the region.

6. Local Expertise: EORs provide valuable insights into the local business environment, labor market, and cultural nuances of the Faroe Islands.

7. Focus on Core Business: By outsourcing employment administration, companies can focus on their core business activities and strategic goals in the Faroe Islands market.

8. Employee Experience: EORs can ensure that employees receive locally competitive benefits and are paid accurately and on time, contributing to a positive employee experience.

By leveraging the services of an Employer of Record, companies can effectively navigate the unique challenges and opportunities presented by the Faroe Islands' business landscape, tapping into the archipelago's skilled workforce and growing economy while minimizing administrative burdens and compliance risks.

The Faroe Islands boast a vibrant employment landscape characterized by high labor force participation and a well-balanced gender representation. This small Nordic archipelago, with its unique blend of traditional industries and emerging sectors, offers a dynamic work environment that reflects its cultural values and natural surroundings.

Overview of Labor Laws

Faroese labor laws are designed to protect workers' rights while maintaining a flexible and productive workforce. Key aspects include:

• Working Hours: The standard workweek is 40 hours, with provisions for overtime pay.
• Annual Leave: Employees are entitled to a minimum of 25 days of paid vacation per year.
• Parental Leave: Both mothers and fathers are granted generous parental leave, promoting work-life balance.
• Collective Agreements: Many industries are governed by collective bargaining agreements, which set minimum standards for wages and working conditions.
• Occupational Health and Safety: Strict regulations ensure safe working environments across all sectors.

Cultural Considerations

When engaging with the Faroese workforce, it's essential to understand and respect the local culture:

• Work-Life Balance: Faroese people value their personal time and family commitments. Employers are expected to respect this balance.
• Egalitarian Approach: The workplace culture tends to be informal and non-hierarchical, with open communication encouraged.
• Environmental Consciousness: There's a strong connection to nature, which often influences workplace practices and employee expectations.
• Community Focus: Building strong relationships and contributing to the community are highly valued in Faroese society.

Challenges of Direct Hiring

While the Faroe Islands offer a skilled and motivated workforce, direct hiring can present several challenges:

1. Limited Pool of Candidates: With a small population, finding specialized skills can be difficult.

2. Language Barrier: While many Faroese speak English, some roles may require proficiency in Faroese or Danish.

3. Complex Regulations: Navigating local employment laws and tax regulations can be complicated for foreign companies.

4. Cultural Adaptation: International companies may need to adjust their management styles to align with Faroese work culture.

5. Seasonal Fluctuations: Some industries, particularly fishing and tourism, experience significant seasonal variations in workforce needs.

6. Remote Location: The islands' geographical isolation can make it challenging to attract international talent or conduct in-person interviews.

Understanding these aspects of the Faroese employment landscape is crucial for any company looking to establish a presence or hire in the Faroe Islands. By respecting local culture, adhering to labor laws, and addressing the challenges of direct hiring, businesses can successfully tap into this unique and capable workforce.

The Faroe Islands, an autonomous territory within the Kingdom of Denmark, has a unique payroll and tax system that both employers and employees need to understand. This system is designed to support the social welfare of the islands' residents while maintaining a competitive business environment. Let's delve into the intricacies of payroll and taxes in the Faroe Islands, exploring the responsibilities of both employers and employees.

In the Faroe Islands, the tax system is progressive, meaning that higher earners pay a larger percentage of their income in taxes. The system also includes various social security contributions and pension schemes that both employers and employees contribute to. These contributions help fund the islands' comprehensive social welfare programs, including healthcare, education, and retirement benefits.

Employer Contributions

Employers in the Faroe Islands have several financial obligations when it comes to payroll and taxes:

Social Security Contributions

One of the primary responsibilities of employers is to contribute to the Employers' Social Contribution (ALS). This contribution typically amounts to 4% of an employee's gross salary. This fund helps support various social welfare programs in the Faroe Islands.

Labor Market Supplementary Pension Fund (ATP)

In certain industries, employers may be required to contribute to the Labor Market Supplementary Pension Fund, known as ATP. The contribution rates for this fund can vary, but they are usually a fixed sum per employee. It's important to note that the ATP scheme is not universal across all industries, so employers should check if it applies to their specific sector.

Industry Variation

It's crucial for employers to understand that contribution rates and mandatory supplementary pension schemes can differ depending on the industry and collective bargaining agreements. To ensure compliance, employers should consult with the Faroe Islands Social Security Institution (Fíggjarmálastovan) or a local tax professional for precise information about their obligations.

Employee Contributions

Employees in the Faroe Islands also have their share of tax and social security responsibilities:

Income Tax

The Faroese income tax system is progressive, with different tax brackets:

1. Bottom Tax (Kommunuskattur): This ranges from 16% to 22%, depending on the municipality.
2. Middle Tax (Miðskattur): This is applied in tiers:
   • 0% on income up to approximately 84,000 DKK
   • 15% on income between 84,000 DKK and 633,000 DKK
   • 22% on income exceeding 633,000 DKK
3. Top Tax (Toppskattur): An additional 16% is applied to annual income exceeding approximately 1.2 million DKK

Social Security Contributions

Employees are required to contribute to the Employees' Social Contribution (ALS). As of 2023, this typically amounts to 0.71% of the employee's gross salary, which is withheld from their wages.

Labor Market Supplementary Pension Fund (ATP)

Like employers, employees may also be required to contribute to the ATP scheme, depending on their industry. The contribution rates can vary but are usually a fixed sum.

It's important to note that employers are responsible for withholding both income tax and social security contributions from their employees' salaries. This system ensures that employees' tax obligations are met consistently throughout the year.

Understanding the payroll and tax system in the Faroe Islands is crucial for both employers and employees. While this overview provides a general understanding, it's always advisable to consult with local tax authorities or professionals for the most up-to-date and specific information, as rates and regulations may change over time.

The Faroe Islands offer a comprehensive set of employee benefits, ensuring a balanced work-life experience for its workforce. These benefits, both mandatory and optional, play a crucial role in attracting and retaining talent in this unique Nordic archipelago. As an Employer of Record (EOR), Rivermate expertly manages these benefits, ensuring compliance with local laws while providing valuable support to both employers and employees. By handling the complexities of benefit administration, an EOR allows companies to focus on their core business activities while maintaining a satisfied and productive workforce in the Faroe Islands.

Mandatory Benefits

Faroese law mandates several benefits for employees, which include:

• Annual Leave: A minimum of 16 working days of paid leave after one year of service, increasing to 18 days after five years with the same company
• Public Holidays: Paid leave for all national public holidays, typically 10-12 days annually
• Sick Leave: Up to six months per year, with varying pay rates:
  • First month: Full salary
  • Second and third months: 50% of regular salary
  • Remaining three months: Unpaid
• Maternity Leave: 120 days of paid leave (30 prenatal and 90 postnatal days)
• Probationary Period: Up to three months, allowing for easier termination of employment
• Overtime Pay: At least 1.5 times the regular salary rate
• Notice Period: Required for both employers and employees before terminating employment
• Severance Pay: Provided in cases of redundancy or termination without cause
• Social Security: Employer contributions for benefits like pensions and unemployment insurance

Optional Benefits

To enhance their appeal to potential employees, many employers in the Faroe Islands offer additional benefits such as:

• Pension Plans: Private plans to supplement the public pension scheme
• Health Insurance: Coverage for a portion of medical expenses
• Life Insurance: Financial security for the employee's family
• Childcare Assistance: Vouchers or subsidies to help with childcare costs
• Transportation Allowances: Help with commuting expenses
• Flexible Working Arrangements: Options like flextime, compressed workweeks, or remote work
• Training and Development: Investment in professional growth through courses, conferences, or tuition reimbursement
• Gym Memberships: Subsidized or on-site fitness facilities
• Employee Discounts: On company products or services, or through partnerships with other businesses

By offering a mix of these mandatory and optional benefits, employers in the Faroe Islands can create an attractive and competitive compensation package for their workforce. As an EOR, Rivermate ensures that all benefits are properly managed and administered, maintaining compliance with local regulations while supporting the needs of both employers and employees.

The process of termination and offboarding in the Faroe Islands is a delicate matter that requires careful consideration and adherence to local employment laws. While the specifics may vary depending on collective bargaining agreements, there are general guidelines that employers should follow to ensure a smooth and legally compliant process.

In the Faroe Islands, employers must have a valid reason for terminating an employee's contract. These reasons can range from employee-related issues such as poor performance or misconduct to business-related factors like restructuring or economic necessity. It's crucial for employers to document these reasons thoroughly to protect themselves from potential legal challenges.

Notice Requirements

When it comes to providing notice, the duration depends on several factors:

• For hourly workers employed for at least 6 months, a minimum of 7 working days' notice is required.
• For salaried employees, notice periods typically range from 1 to 6 months, depending on their length of service.
• Employees on monthly wages may have their notice periods specified in collective bargaining agreements.

Severance Pay

It's important to note that severance pay is not generally mandated by law in the Faroe Islands. However, some collective bargaining agreements may include provisions for severance pay under specific circumstances. Employers should review any applicable agreements to ensure compliance.

Offboarding Process

To ensure a smooth offboarding process, consider the following steps:

1. Communicate the decision clearly and professionally to the employee.
2. Provide the required notice period or payment in lieu of notice if applicable.
3. Collect company property, including keys, equipment, and access cards.
4. Revoke access to company systems and data.
5. Conduct an exit interview to gather feedback and ensure all loose ends are tied up.
6. Process final pay, including any accrued vacation time or other benefits.
7. Provide necessary documentation, such as a reference letter if requested.

By following these guidelines and staying informed about any specific requirements in collective bargaining agreements, employers can navigate the termination and offboarding process in the Faroe Islands with confidence and compliance.

The Faroe Islands, an autonomous territory within the Kingdom of Denmark, offers unique opportunities for foreign workers. However, navigating the visa and work permit requirements can be complex. Here's a concise overview of what you need to know:

Visa Requirements

Foreign workers from non-Nordic countries generally need a visa to enter the Faroe Islands. The type of visa required depends on the length and purpose of your stay:

• Short-term stays (up to 90 days): Schengen visa rules apply
• Long-term stays (over 90 days): National visa (D-visa) is required

Work Permit Requirements

To work in the Faroe Islands, most foreign nationals need a work permit. The process involves:

1. Securing a job offer from a Faroese employer
2. Applying for a work permit through the Faroese Immigration Office
3. Obtaining a residence permit (if staying longer than 90 days)

Exceptions

• Nordic citizens (Denmark, Finland, Iceland, Norway, Sweden) don't need a visa or work permit
• EU/EEA citizens can work for up to 6 months without a permit but must register with local authorities

Important Considerations

• Work permits are typically tied to a specific job and employer
• The application process can take several weeks to months
• Employers often assist with the application process

Renewal and Extensions

Work permits are usually issued for a specific period and can be renewed if employment continues. The renewal process should be initiated well before the current permit expires.

Understanding these requirements is crucial for a smooth transition to working in the Faroe Islands. As regulations can change, it's always best to consult with the Faroese Immigration Office or a qualified immigration specialist for the most up-to-date information.