Employees in the Faroe Islands are entitled to a range of mandatory benefits as outlined by Faroese law.

Paid Leave

Annual Leave: All employees are entitled to a minimum of 16 working days of paid annual leave after completing one year of service. This entitlement increases to a minimum of 18 days after five or more years of service with the same company.

Public Holidays: Employees are entitled to paid leave on all national public holidays. The exact number of public holidays can vary slightly from year to year, but typically falls around 10-12 days annually.

Sick Leave: Employees can take up to six months of sick leave per year. The first month is paid at full salary, the second and third months are paid at 50% of the regular salary, and the remaining three months are unpaid.

Maternity Leave: Pregnant employees receive a total of 120 days of paid maternity leave, consisting of 30 prenatal days and 90 postnatal days.

Paternity Leave: There is currently no mandated paternity leave in the Faroe Islands. However, some employers may offer it as part of their benefits package.

Special Leave: Employees may be entitled to additional paid leave for special circumstances such as marriage, a death in the family, or military service.

Other Mandatory Benefits

Probationary Period: The Labor Proclamation allows for a probationary period of up to three months, during which time termination of employment can occur with minimal notice.

Overtime Pay: Employees must be compensated for overtime work at a rate that is at least 1.5 times their regular salary rate.

Notice Period: Both employers and employees are required to provide a minimum notice period before terminating employment. The notice period varies depending on the length of service.

Severance Pay: In cases of redundancy or termination without cause, employees are entitled to severance pay. The amount of severance pay is calculated based on the employee's salary and length of service.

Social Security: Employers are required to contribute to their employees' social security, which provides benefits such as pensions and unemployment insurance.

Employers in the Faroe Islands often provide additional perks to attract and retain top talent. Here's a look at some commonly offered optional benefits:

Pension Plans

While a public pension scheme exists, some employers may offer private pension plans to supplement retirement income. These plans can offer various contribution options and investment opportunities.

Health Insurance

Health insurance is not mandatory but can be a valuable benefit, especially considering the cost of healthcare in the Faroe Islands. Employers may offer health insurance plans that cover a portion of medical expenses.

Life Insurance

Some employers may provide life insurance as a benefit, offering financial security to the employee's family in case of their death.

Childcare Assistance

Childcare can be expensive in the Faroe Islands. Employers may offer childcare vouchers or subsidies to help ease the financial burden for working parents.

Transportation Allowances

Employers may offer transportation allowances to help cover the cost of commuting to work, particularly if public transportation options are limited.

Flexible Working Arrangements

Some employers may offer flexible work arrangements such as flextime, compressed workweeks, or remote work opportunities to improve work-life balance for employees.

Training and Development

Employers may invest in their employees' professional development by offering training courses, conferences, or tuition reimbursement programs.

Gym Memberships

Employers may offer subsidized gym memberships or on-site fitness facilities to promote employee health and well-being.

Employee Discounts

Some employers may offer employee discounts on company products or services, or partner with other businesses to provide discounted access to goods and services.

In the Faroe Islands, there is no mandatory health insurance requirement for employees. Everyone with a registered residence in the Faroes is automatically covered by the National Health Insurance scheme, known as Heilsutrygd.

Universal Public Health Insurance

The Faroe Islands operate a single-payer healthcare system funded through taxes and contributions from residents. This means all residents, including employees, are entitled to coverage under the Heilsutrygd program.

Coverage

Heilsutrygd covers a wide range of medical services, including doctor visits, hospitalization, medication, and some dental care. However, there may be some out-of-pocket costs associated with certain services, such as co-payments for medication.

Employee Contributions

All residents over the age of 18 who are covered by Heilsutrygd are required to pay a monthly contribution. This contribution consists of a fixed amount and a percentage of taxable income.

Optional Private Health Insurance

While not mandatory, some individuals may choose to purchase private health insurance to supplement their public coverage. This can be particularly beneficial for those who want to reduce out-of-pocket costs or access additional services not covered by Heilsutrygd.

Private health insurance plans can vary depending on the provider and the level of coverage chosen. Potential benefits may include shorter wait times for specialist appointments or elective procedures, coverage for services not included in Heilsutrygd, such as dental care or alternative therapies, and private hospital rooms or other amenities.

The Faroe Islands offer a two-pronged approach to retirement planning, with a mandatory public scheme and the option for private plans.

Mandatory Work-Related Pension Scheme

All individuals up to the Faroese state pension age (currently 67) with full tax liability in the Faroes are required by law to contribute to a work-related pension scheme. This typically applies to employees but may also extend to self-employed individuals. The work-related pension scheme is overseen by the Faroese authorities. Contributions are made via salary deductions, with the current combined rate being 15%, split between employers and employees (increasing by 1% each year until 2029). The work-related pension scheme provides a monthly benefit upon reaching state pension age. The amount is determined by the total contributions made throughout an employee's working life. Up to 15% of the accumulated capital can be accessed as a lump sum payment upon reaching retirement age. Depending on the specific plan design, survivor benefits may be offered to spouses or dependents of the deceased employee.

Optional Private Pension Plans

Private pension plans are not mandatory in the Faroe Islands, but some employers may offer them as a voluntary benefit. These plans can be set up by individual companies or through group plans offered by insurance or financial institutions. They vary in terms of contribution options, investment strategies, and potential fees. Benefits can include a lump sum payment or a monthly pension upon retirement. Some plans may offer additional benefits like disability coverage or life insurance.

Choosing a Retirement Plan

The mandatory work-related pension scheme provides a foundation for retirement income security. However, the payout amount may vary depending on contribution levels and overall career earnings. Private pension plans offer the potential for a higher retirement income or additional benefits. Employees considering this option should carefully review the details of the plan, including contribution requirements, investment options, fees, and potential tax implications.

Additional Considerations

The cost of living in the Faroe Islands can be high, so a comfortable retirement may require additional planning and saving beyond the work-related pension scheme. Consulting with a financial advisor familiar with the Faroese pension landscape can be beneficial for employees planning for their future.