Your contract should be in writing and must be signed within two months of your employment commencing. Please check your employment contract to see your personal rights and which union and therefore collective wage agreement applies to you. Our aim is to give you an idea of what to expect from an office job in Iceland.
The details listed here are the minimum rights for office workers based on the collective agreement of VR and SA. This website also has information that is relevant if you are working in the service industry, in a shop, as a waiter, bartender, hotel employee or similar.
If you are working in construction, as a builder, plumber, electrician or similar in Iceland, you will find more information about your general rights on this site from the Directorate of Labour.
For further information on Icelandic Labour Law, refer to The Icelandic Confederation of Labour (ASÍ). On the sidebar on the left-hand side you can browse through the rules regarding contracts, wages, holidays, sickness, rest time, gender equality, maternal and paternal rights, health and safety and more.
The rights your union offers, as well as your pension fund premimum, are discussed in detail further below.
Office hours & lunch breaks
A normal workweek in an Icelandic office is from Monday to Friday, 8 hours per day. That is 37,5 hours per week + lunch (usually between half an hour and one hour, leading to a 40 hour workweek). Each day, you will also have a 15 minute coffee break. Most offices start work between 8 and 10 AM. It is illegal for employers to plan a workday that is longer than 13 hours.
You also have the right to minimum rest which is 11 hours of continuous rest per 24 hours, so if you are travelling for work and arrive home late in the evening, your workday the next morning starts 11 hours later, even if that is after the time you usually start work in the mornings.
You should always have Sundays off, usually you will also have Saturdays off.
All work after 8 hours per day is overtime unless your contract specifically includes overtime. If your contract specifies overtime, you can ask your employer to specify how many hours are included before overtime pay kicks in.
Overtime is calculated as 0,875% of your monthly salary per hour for the first 162,5 hours of overtime per month.
If you work more than that, the rate changes to 1,0385% of your monthly salary per hour of overtime worked. If your overtime is during nighttime, between midnight and 7 AM, the first 162,5 hours are calculated at the rate of 0,9375% of your monthly salary.
It is also possible to ask to take overtime as extra holiday days instead of pay, in which case one hour of overtime translates to one hour + forty minutes of holiday.
If you are called in to work on a Saturday or Sunday, you are entitled to four hours overtime pay for showing up, even if the task at hand only takes half an hour to complete.
For your first year with a new employer, you are entitled to two sick days of sick leave per month. After one year, you are entitled to two months away from work due to illness. Your employer has the right to demand a note from your doctor confirming your illness, to obtain one reach out to your local health centre (is: heilsugæsla).
After five years, you are entitled to four months and after ten years, six months. If you change employers after five years, you are still entitled to at least two months of sick leave with your new employer.
During the first six months at a new job, you are also entitled to two days for each month you have worked with your employer for children’s sick leave if your child is under the age of 13. After the first six months, children’s sick leave rights become 12 days per year.
In the case of a work-related accident, you have rights to occupational injury insurance from Icelandic Health Insurance.
While you work in Iceland, you accumulate paid holiday days. The minimum holiday you are entitled to per year is 24 weekdays of paid leave. Holiday pay is 10,17% of total wages.
After five years in the same line of work, it increases to 25 weekdays and is paid at 10,64% of total wages, after five years with the same employer it increases to 27 week days and is 11,59% of total wages and after ten years with the same employer it is 30 week days and 13,04% of total wages.
Public Holidays (is: Rauðir dagar)
There are 12 days of public holidays per year in Iceland, most are around Christmas and Easter. If you are asked to work on a public holiday, you will be paid 1,375% of your monthly salary for each hour worked on that day.
Christmas and holiday bonuses
Fixed Christmas bonuses are payable on December 1st, and holiday bonuses are payable in summer, between May 1st and August 15th. If you have only worked for part of the year, the bonus will be paid proportionally.
Termination of employment
Either the employee or the employer has the right to terminate the employment contract, notice must be given in writing and the resignation period commences at the start of the next month. The termination period usually lasts 3 months unless both parties agree to a different date. It is not necessary to state a reason to terminate employment but you can request a meeting to discuss your termination with your employer if you want. You are expected to continue your work during your resignation period unless you come to an alternative agreement with your employer.
Health and safety in the workplace
Employers must create a safe and healthy working environment.
If you are unsure whether your work environment complies with these standards, contact the Administration of Occupational Health in Iceland (AOSH, is: Vinnueftirlitið).
See also the Legislation on Health and Safety.
The exact amount that you will pay to your union depends on what union (stéttarfélag) is responsible for the applicable collective agreement that regulates your minimum rights but you can expect it to be around 0,7-1% of your salary. Your employer will also pay from his pocket directly to the various union welfare funds (including sickness-, holiday-, education- and rehabilitation funds) that will provide you with extra benefits under collective wage agreements.
A good indication for which union you pay union dues to is the union that other employees in the same or similar jobs to yours at the company are members of. In your contract of employment, your employer will stipulate which union is applicable for you. Check your contract so that you know what union you belong to.
You can choose whether you become a full member of that union (with voting rights and the right to stand for office). For some unions, you must apply to become a full member although this is only a formality for you will certainly be accepted as such.
On the website of your union, you may be able to find the average salary for your position. Your rights in the various welfare funds and often information about the gender pay gap in your profession.
In order to get a work permit in Iceland, the applicable union must have approved that your salary and benefits are according to the applicable collective agreement and that your contract of employment is fair and comparable to the local workforce in similar jobs.
You are entitled to various benefits as a union member and you should visit your union’s website to make sure you are aware which benefits you are entitled to. They may include a reimbursement for gym memberships up to a certain amount, a fund for your personal education or training related to your job, entitlements if you are unable to work because of illness and possibly renting summerhouses from the union.
For further information you can visit the English section of webpage for the Icelandic Confederation of Labour.
Pension Fund Premium
Mandatory pension fund payments
Your minimum contribution to a pension fund is 4% of your total wages. Your employer will pay a minimum contribution of 8% or more of your total wages, often 11,5%. The exact amounts will be stated on your pay slip. It will be paid to a pension fund decided by your collective wage agreement and/or special act or that you have chosen. The pension fund must be active in Iceland.
Additional pension savings (Viðbótarlífeyrissparnaður, séreignarsparnaður).
You are allowed to pay a higher contribution to your pension fund than 4%, max 8% (of which 4% is to the compulsory pension saving account and 2 or 4% to the additional pension saving account). If you do so, your employer is forced to contribute 2% extra to your additional pension savings. This is popular in Iceland where it is often explained as a salary raise. It has been possible in recent years to use this extra payment, the specified additional pension savings, to pay down housing loans faster and to utilize it when purchasing one’s first apartment. The main benefit being that the payment is made without deducting income tax first.
Income tax on Pensions
Your Icelandic pension can be paid out starting at an age between 60 and 70 depending on your pension fund. The usual pension-taking age in Iceland is 67. You pay income tax on Icelandic pensions, your personal tax credit can be used to lower the tax burden if you reside in Iceland. If you reside abroad, it will depend on your country of residence whether this income will be taxed in that country or in Iceland.
Leaving Iceland & Pensions
If you are a national of a country within the European Economic Area (EEA), your pension fund payments will remain in the Icelandic pension fund system and you have the same rights regarding them as Icelanders. You will need to apply for this pension when you reach the appropriate age (60 at the earliest) and have an active Icelandic bank account in order to receive the payments. They won’t be paid out automatically, you must apply. If you are a foreign national from a state outside of the EEA, EFTA and the Faroe Islands, you can apply to be refunded for these payments when you leave Iceland.
Here is a list of pension funds operating in Iceland, certain funds are related to specific industries or towns, others accept any members. Your employer can tell you which pension fund most employees at the company are members of. If you would like to compare pension funds, you cna do so at the Icelandic Pension Funds Association.