Have you heard of giggers? How about portfolio workers or freelance workers? These are all terms that we use when we talk about those persons working independently or as contractors, and this is a diverse group. For some, this is a good option, but it's worth bearing in mind that this group does not have the same work rights as those that salaried employees have.
Those who work independently are their own employers and thus both have to find their own work projects and collect remuneration for their work themselves. This applies to all those who work in this way, whether they are called giggers or contractors. They are work sellers, not wage earners. Those who benefit from the services of these giggers are those who purchase these services from them. Those who sell their services/work as self-employed therefore need to calculate and know what remuneration they are willing to request. It is therefore a good rule to consider what the person would feel were accepteble wages as an employee.
Those who are self-employed have to add various fees to that amount to get the same as if they were employed as traditional employees. In addition, there are many rights that are taken for granted today and self-employed people have to take care of themselves. A breakdown of these points to keep in mind is presented below. But what most of them have in common is that they have been achieved on behalf of workers through decades of struggle by workers' unions such as VR.
Rapid technological changes and innovation in the labour market have increased the number of jobs available to freelancers, but there are many things to keep in mind when starting to work as a freelancer or as a "gigger", which is usually nothing more than being self-employed which, as mentioned above, is contractor work.
Care should be taken to ensure that it is not fake contractor work
The tax authorities have defined the term contractor, being those who undertake to do a certain work for a predetermined price for the work purchaser. They work at their own risk. Definition of wage earner/employee according to the tax authority is then those who are employed by an employer where they work under his control and at his responsibility in return for payment of wages.
The boundaries are not always clear between who are employees and who are contractors. The Tax Commissioner can decide on a dispute about whether the person concerned is a contractor or an employee.
These are hired to work for an employer where work is done under his control and under his responsibility in return for payment of wages.
Undertakes to do a certain job for a pre-determined price for the job buyer. The contractor works at his own risk.
Fake contractor work
- Is the work done for one or more people?
- Who provides facilities, tools, materials?
- Is the person obliged to do the work him/herself personally?
- Who guarantees the success of a project?
- Who is responsible for damages?
- Who has the right to manage ie. where, how and when work will be done?
- Is payment based on results or is payment based on a unit of time?
Those who work independently have to calculate remuneration for their work. The easiest way to break it down is if it's a job/gig that takes a month and if a person would be satisfied with, for example, 600,000 ISK. salary if it was a traditional salary agreement, then the following fees and insurance payments must be added to this amount:
- Insurance fee in 2022 is 6.35%, which is divided into insurance fee, employment insurance fee, Wage Guarantee Fund fee and market fee.
- Statutory pension fund payment 11.5%
- Personal pension savings fund 2% or 4%
- Vocational rehabilitation fund 0.10%
- VR membership fee 1.55%
- Vacation fee 10.17% as a minimum, which is added based on the minimum vacation entitlement which is 24 vacation days per annum. If based on 30 days of vacation entitlement, 13.04% vacation fee must be added on top of the amount, more information on vacation rights and vacation pay.
Insurance due to illness, would have to be calculated into the fee and could be estimated at a minimum of around 15%.
- December and vacation pay, based on the year 2023, this is ISK 13,250. for the month, which would then be about 2.2% for someone on ISK 600,000. monthly salary.
Various national holidays that the self-employed do not get paid for must also be included in the payment, but there are on average 12 such days a year that fall on weekdays, which can be from one day up to 4 days a month so 4.62% which is calculated per day.
Based on the above amounts and percentages, there is at least an additional 55% that must be added to the payment for the self-employed in order to be almost on an equal footing with employees. Also, note that driving costs, accounting costs, billing and costs for equipment and tools are not taken into account. In addition, rent, electricity costs, internet access and other fixed costs that a self-employed person has to cover in order to do the work would have to be factored in. In some cases, the self-employed can e.g. rent a facility with more self-employed people and then have to calculate that rent into the remuneration. It is also worth mentioning that the self-employed must calculate the unpaid waiting time in between jobs.
It is impossible to make this list exhaustive, but these points are hopefully illustrative of the points that should be kept in mind.
VAT must be added in cases where the sale of goods or services is over ISK 2,000,000. in each 12-month period, if the sales are below that amount, those parties are exempt from the obligation to register in the VAT register and may not issue invoices with VAT.
Products and services are subject to either 11% or 24% VAT, see more here.