Employment relationship
- A collective wage agreement in the relative line of work applies to the work relationship of parties immediately from the first day.
- The parties must conclude an employment contract within two months of the employee's employment. Such a contract must be in writing, see here.
- If a written employment contract is not made, as stated in the collective wage agreement, the collective wage agreement about the rights of the employee always applies.
- Acc. Par. 1 of Law no. 55/1980 on employed persons' terms of employment and compulsory insurance for pension rights, it is prohibited to conclude contracts which are lesser than applicable collective wage agreements at any given time.
- Commercial workers in Iceland are obligated to pay fees to the relevant union. Unions in Iceland are many and diverse and they are in accordance with line of work and country regions.
Wages, work hours and refreshment breaks
When people are employed for work it is done by an agreement between the employer and the wage earner. This agreement is referred to as an employment contract and their relationship an employment relationship.
Wages must be paid with money. In the Law on Payment for Work Contracts No. 28/1930 (in Icelandic only) it is stipulated that work contracts must be paid with valid money which currently equals payment into a wage account of the relevant employee, in a bank.
The legal provision was established to prevent employers from paying their employees wages with goods, clothing, use of housing or the like.
When wage packages are negotiated, i.e. monthly wages for work which is carried out at different times, both outside of traditional daytime work hours and within and if the work hours are longer than the defined 100% work hours according to the collective wage agreement, the employee has a right to an itemization of his wages in order for him to know what his daytime wages are.
When work is carried out on Saturdays and Sundays, payment must never be less than 4 hours of overtime, even if the worktime is less.
Shop workers
Every employee's daytime wages shall be found by dividing the number 167,94 into fixed monthly wages. NB this only applies in the case where monthly wages have been negotiated for work which is carried out in daytime.
Daytime: for shop workers, this is between 9:00 am and 6:00 pm all weekdays. A full job is defined as 167,94 hours per month or 38,75 hours per week which adds up to 7,75 hours per day.
Shop workers' hourly wages: After-hours must be paid until 12:00 o'clock midnight which is 0,8235% of monthly wages for daytime and 0,8824% during the period from 12:00 midnight until 7:00 am up to 167,94 hours per month.
Overtime rate: is all work carried out outside of daytime work beyond 167,94 hours per month. Hourly wage for overtime is 1,0385% of fixed monthly wages.
Major public holidays: is all work which is carried out on specified major public holidays according to the VR and SA Collective Wage Agreement Art. 2.3.2 (see extra holidays). Hourly wage for major public holidays is 1,375% of fixed monthly wages.
It is permissible to commence daytime work before 9 am, but never earlier than 7:00 am. Thus, daytime work commitments finish earlier in accordance with the commencement of work.
Lunch break is ½ hour to 1 hour per day and the employee has a right to a lunch break if work is carried out for 5 hours or more. The lunchbreak is during the period from 12:00 am to 2:00 pm and is not considered work time, this is unpaid time. The employee's supervisor determines how long the lunchbreak is, although it is possible in some cases negotiate this.
Coffee breaks are 35 minutes per day for full time work which is 7,75 hours per day and is taken in agreement with the supervisor. A coffee break is considered work time and therefore paid by the company. If work is carried out during the coffee break it must be paid additionally or the work time lessened by the time this amounts to. This needs to be negotiated specifically.
Supper break is between 7:00 and 8:00 pm and the employee has a right to this break if he works at least 4,5 hours or longer. The supper break is time paid and if this time is used for work, the part which is used to work must be paid as overtime.
Refreshment breaks during weekends are the same way as on week days in accordance with the Collective Wage Agreement.
Office workers
Every employee's daytime wages shall be found by dividing the number 159,27 into fixed monthly wages. NB this only applies in the cases where monthly wages have been negotiated for work which is carried out in daytime.
Daytime work: is for office workers between 9:00 am and 5:00 pm all week days. Full time work is 159,27 worked hours.
Office workers' hourly wages: during after-hours is until 12:00 midnight is 0,875% of monthly wages for daytime work and 0,9375% during the period from 12:00 midnight until 7:00 am.
Overtime: is all work carried out outside of traditional daytime work beyond 159,27 hours per month. Hourly rate for overtime is 1,0385% of fixed hourly wages.
Major public holiday: is all work carried out on specified major public holidays according to the VR and SA Collective Wage Agreement Art. 2.3.2 (see extra holidays). Hourly wage for major public holidays is 1,375% of fixed monthly wages.
It is permissible to commence daytime work before 9:00 am, but never earlier than 7:00 am. Thus, daytime work commitments finish earlier in accordance with the commencement of work.
Lunch break is ½ hour to 1 hour per day and the employee has a right to a lunch break if work is carried out for 5 hours or more. The lunchbreak is during the period from 12:00 am to 2:00 pm and is not considered work time, this is unpaid time. The employee's supervisor determines how long the lunchbreak is, although it is possible in some cases negotiate this.
Coffee breaks are 15 minutes per day for full time work which is 7,35 hours per day and is taken in agreement with the supervisor. A coffee break is considered work time and therefore paid by the company. If work is carried out during the coffee break it must be paid additionally or the work time lessened by the time this amounts to. This needs to be negotiated specifically.
Supper break is between 7:00 and 8:00 pm and the employee has a right to this break if he works at least 4,5 hours or longer. The supper break is time paid and if this time is used for work, the part which is used to work must be paid as overtime
Refreshment breaks during weekends are the same way as on week days according to the Collective Wage Agreement.
Holiday
- Holiday cannot be paid out with monthly wages.
- Holiday must be paid to all wage earners. Art. 1 of Law on Holiday no. 30/1987 states that all those who work in the service of others for wages have a right to holiday and holiday pay.
- Accumulation of holidays is during the period of May 1st to April 30th every year.
- Minimum holiday is 24 week days. Holiday pay is then 10,17% of total wages.
- Holiday payments are in two different ways, i.e. on one hand, the employee receives holiday pay when he goes on leave, on the other hand the employee receives the holiday pay into a specific holiday account which is then deposited into the employee’s wage account at the beginning of May each year. This deposit from the holiday account is then the employee’s wages when he goes on holiday.
- After 5 years in the same line of work, the holiday is 25 week days. Holiday pay is then 10,64%
- After 5 years with the same employer it is 27 week days. Holiday pay is then 11,59% of total wages.
- After 10 years with the same employer, it is 30 week days. Holiday pay is then 13,04% of total wages.
- Holiday must be taken in liaison with the employer and taken during the time period of May 2nd to September 15th each year.
- If holiday is taken after September 15th by request of the employer, it is extended by 25%.
- A wage earner who has recently commenced work has a right to a leave although he doesn’t have a right to payments during the holiday from the current employer, acc. Art. 2 of the Law on Holiday. This is the right of an employer if he is coming from a different job.
- The time while the employee is away from work due to sickness or accidents is considered work time, including maternity leave, i.e. an employee is earning the right to holiday. If the employee has made full use of sickness- or accident rights, the time he is away from work is not considered a period of holiday earning. The same applies to unpaid leave. The time while an employee is on a constitutional holiday is also considered an earning period, as he is receiving holiday pay for this time, either at the end of the month or he receives the holiday pay from a holiday account at the beginning of May.
Notice period
- Notice period is mutual, i.e. the same right whether you resign from work or your employment is terminated by the employer.
- Termination of employment must be in writing in all cases.
- It is obligatory to work throughout the statutory notice period, unless otherwise negotiated. VR advises in all cases that what is negotiated is done in writing.
- For the first three months of employment, the notice period is one week.
- After three months of employment and within six months the notice period is one month, limited to end of month.
- After 6 month of employment, the notice period is three months, limited to end of month.
Illness rights
- The rights of wage earners to wage payments during absence due to diseases or accidents are an inseparable part of each and every one’s wage terms and it is not possible, in an employment contract, to negotiate oneself from regulations in this regard or forfeit them.
- It is very important that those wage earners who suffer accidents in their jobs, or on their way to or from work, do a thorough research on their rights in this regard and turn to VR specialists in the area of the Common Wage Agreement.
- In the first year, there are 2 sick days per month for each month worked.
- After 1 year on a job, the illness right is 2 months for every 12-month period.
- After 5 years on a job, the illness right is 4 months for every 12-month period.
- After 10 years on a job, the illness right is 6 months for every 12-month period.
- The illness right because of children is 2 days for every month worked, however days maximum for every 12-month period.
- In the case of work-accidents or work related diseases which take place in/due to work or due to transport to or from the work place, the employer pays wages for day time work for up to 3 months in addition to earned illness rights.
- The employee must report his illness to his supervisor at the first possible opportunity. The supervisor can determine whether the employee must turn in a confirmation, if this is requested, the employee must see a doctor to receive a confirmation of the illness.
NB in the case of a dispute, the Icelandic text in the valid Common Wage Agreement at each time always applies.
This information refers only to the collective agreement between VR og SA.
For further information about employees’ legal status, please contact the VR’s Common Wage Agreement specialists by telephone, by e-mail vr@vr.is or stop by during office opening hours between 8:30 am and 4:00 pm all week days.