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Iceland
Iceland is a Nordic island country between the North Atlantic and Arctic Oceans, on the Mid-Atlantic Ridge between North America and Europe. It is linked culturally and politically with Europe and is the region`s one of the most sparsely populated countries in Europe.
POPULATION
390 000 inhabitants
CURRENCY
Icelandic króna (ISK)
GDP
$30–32 billion
MINIMUM MONTHLY WAGE:
No statutory minimum wage
TIME ZONE
UTC +0
Iceland has a market economy with relatively low taxes, compared to other OECD countries, as well as the highest trade union membership in the world. It maintains a Nordic social welfare system that provides universal health care and tertiary education for its citizens. Iceland ranks highly in international comparisons of national performance, such as quality of life, education, protection of civil liberties, government transparency, and economic freedom.
Hydro-power is the primary source of home and industrial electrical supply in Iceland.
Despite its small size, Iceland is remarkable at developing innovative solutions and creative output.
Combined with the Icelandic knack for ingenuity, many startups have flourished in Iceland, discovering unique solutions for meeting business needs globally.
There are two major types of employment contracts in Iceland:
- Labor agreement for an indefinite term. This type provides the best options and guarantees for the employee.
- Fixed-term agreement. The use of successive fixed-term
contracts are to be limited. The Law prohibits the extension or renewal of fixed term agreements in the case they last continuously for a period longer than two years, unless otherwise provided for in law. It is nonetheless allowed to renew fixed term contracts of managerial personnel which have been completed for a period of four years or longer, for the same period each time.
A new employment contract is deemed to replace a previous one if it is extended or if a new fixed-term contract is established between the same parties within three weeks from the completion of the previous agreement.
Collective agreements provide for the payment by employers of a fixed Christmas bonus payable in December and a Holiday bonus payable from 1 May to 15 August. Those who work part-time or only a part of the year receive these premiums proportionally.
A standard full-time workweek in Iceland is typically 37–40 hours, usually Monday through Friday, depending on the applicable collective agreement.
Employees are entitled to a minimum daily rest period of 11 consecutive hours within each 24-hour period. Employees are also entitled to a weekly rest period, which typically falls on a Sunday where possible.
Overtime work is compensated in accordance with collective agreements and is generally paid at a premium rate above the employee’s regular hourly wage.
Shift work arrangements are common in certain sectors, with additional compensation provided for evening, night, and weekend work, as defined by applicable collective agreements.
Employees in Iceland are entitled to paid annual leave under the Holiday Allowance Act. The minimum holiday allowance amounts to 10.17% of total wages earned during the previous holiday year.
Holiday allowance is accrued over time and typically paid or made available when the employee takes leave in the following holiday year. The accrued amount is usually reflected in the employee’s payslip.
Employees are generally entitled to a minimum of 24 days of paid annual leave, although additional entitlements may apply under collective agreements.
The main holiday period runs from 2 May to 15 September. Employers determine the timing of annual leave in consultation with employees, taking into account both employee preferences and business needs.
Employees must be informed of their holiday dates as early as possible and at least one month in advance, unless exceptional circumstances apply.
Employees in Iceland are entitled to sick leave based on their length of service, in accordance with applicable laws and collective agreements.
During the first year of employment, employees typically accrue sick leave at a rate of 2 days per month.
After one year of service, employees are generally entitled to 1 month of sick leave at full salary within a 12-month period.
With longer service, entitlements increase as follows:
- After 3 years: up to 1 month at full salary and 1 additional month at partial pay
- After 5 years: up to 1 month at full salary and 2 additional months at partial pay
Specific entitlements may vary depending on the applicable collective agreement.
In Iceland, both parents are entitled to parental leave in connection with the birth, adoption, or fostering of a child.
Each parent has an individual, non-transferable right to 3 months of leave, with additional shared leave available between parents under the parental leave system.
Parental leave rights apply regardless of whether individuals work in the private or public sector or are self-employed.
Additional benefits are typically mandated by the individual contract of employment. The generosity of benefits provided to an employee usually depends on their level of seniority. Common benefits for persons at a more senior level, are:
- additional paid holidays
- additional contributions to a private pension insurance
- private health insurance and life assurance policy
- contributions from the employer during parental leave (in addition to state benefit).
1 January — New Year’s Day
2 April — Maundy Thursday
3 April — Good Friday
5 April — Easter Sunday
6 April — Easter Monday
23 April — First Day of Summer
1 May — Labour Day
14 May — Ascension Day
24 May — Whit Sunday
25 May — Whit Monday
17 June — Independence Day
3 August — Commerce Day (first Monday of August)
24 December — Christmas Eve
25 December — Christmas Day
26 December — Boxing Day
31 December — New Year’s Eve
Nationals of the member states of the European Economic Area (EEA), European Free Trade Association (EFTA) and the Faroe Islands do not require a work permit in Iceland. Nationals from other countries outside the EEA, EFTA and the Faroe Islands require a work permit to work. Applications for work permits, including the necessary supporting documentation, must be submitted to the Directorate of Immigration (‘Útlendingastofnun’) which forwards the application to the Directorate of Labor (‘Vinnumálastofnun’). The conditions for the issuing of a residence permit for the relevant foreign national must be met.
A foreign national from a country outside the EEA or EFTA who plans to stay in Iceland for more than three months must have a valid residence permit. Foreign nationals from the EEA and EFTA states are not required to hold a special residence permit to stay in Iceland for a period exceeding three months (or up to six months if he or she is seeking employment). However, the individual must register with Registers Iceland and fulfil certain conditions under Article 89 of Act No. 80/2016 on
Foreigners. Citizens of the other Nordic countries (Denmark, Finland, Sweden and Norway) are allowed to stay in Iceland without a residence permit.
Work permits are valid for either one or two years, depending on the category of the employee.
Timeframe: The processing time can vary depending on the category of worker and method of application. Applicants should allow for at least three months.
All residents must have an Icelandic Identification Number. This number is not just for tax purposes, as it is also required to open a bank account or even take membership at a local gym. The Icelandic Identification Number is known locally as ‘Kennitala’ and will be issued automatically by the Directorate of Immigration as soon as an application for a work or residence permit is lodged.
The principal rule in Iceland is that employers and employees are equally authorized to cancel employment contracts without stating the reason for this. Employees are generally hired without time limits, in which instance the employment contract is canceled with a termination notice period as stated in the collective agreements.
The employment termination notice is mutual and such employment cancellations shall be in writing and in the same language as the employee’s employment contract. The employee has the right to an interview regarding the end of his employment and the reasons for the termination of his employment and can request them to be stated in writing.
A request for the interview shall be given within 96 hours of the employees’ knowledge of the contract’s termination. Should the employer fail to fulfil the said request the employee is entitled to another interview with the employer in the presence of his or her union steward or other representative of the union, should he or she request so.
The freedom of the employer to terminate the employment contract is in certain cases restricted by law.
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