Labor Code in Iceland

Known for its beautiful Northern Lights, Iceland is a small Nordic island nation known for its laws on freedom and equality for all citizens. In 2008, after having suffered a massive financial crisis, it became successful in increasing its GDP to $23 billion by 2017. Iceland is a country primarily supported by fisheries and manufacturing industries which allow for the harvesting and export of marine products and goods. Iceland also has a relatively complicated tax system where a large share of individual income goes to the government, including municipal authorities, in order to provide welfare and benefits to its citizens.

Rights of Employees
Employees in Iceland have to devote a standard time of 40-hours per week to work. Overtime work, however, is limited to 48-hours per week. The overtime pay rate per hour in Iceland is 1.0385% of the regular monthly wage. However, workers receiving salaries usually take additional time off work instead of receiving overtime pay.

Contract of Employment
Employees must provide workers a written contract of employment within two months of them starting work. The contract of employment needs to contain the basic terms of work, location, and wages. Even though employers are allowed to employ people on a trial basis, this period cannot last for more than three months.
In Iceland, workers rely on unions and collective bargaining to determine fair working conditions and wages. However, it is possible for an employer and employee to agree on the terms of employment collectively. The employee still holds the right to request further negotiation or compensation.

There is no minimum-wage law in Iceland. Instead, wages are governed by collective bargaining which allows agreements to be formed, applying to all qualified employees, regardless of union membership. Iceland has the most competitive salaries in all of Europe, with the average monthly salary at 310,000 ISK (around USD 3,100). When employees work for at least 12 weeks within 12 months for the same employer, they receive a December bonus. Employees who work for at least 12 weeks of the vacation year can claim a vacation bonus as well.

In Iceland, employees cannot be forced to work on holidays. However, employers can request their employees to do so in times of need. Every employee is paid on the first of each month and must receive a comprehensive slip in case of deductions or taxes that were applied.

Paid Leave
There are fifteen official public holidays in Iceland. In addition, employees can take an off of two days every month. The total holiday allowance is twenty-four days a year. Usually, employees take time off between May and September. However, the power of collective bargaining may allow them to take additional time off.
Employees are also given the right to take two full sick days every month during their first year of employment. After that, they are allowed to take a paid month off.

New mothers and fathers are paid 80 percent of their salaries by the Icelandic government and can each take three months of leave. Moreover, employees are given three additional months to split between themselves so that either parent can spend extra time with their kids. In total, new parents are given nine-months of leave while receiving 80 percent of their salaries.

To learn more about Iceland labor laws, click here.

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