Iceland Employment Contracts

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Iceland Contracts

A successful business largely depends on its employees. By creating working contracts that include the right terms and benefits there will be no misconception and the perfect work-life balance can be created. At Bradford Jacobs, this is our aim, and we support companies in over a hundred countries with creating compliant and balanced labor contracts.

Our team keeps track of Icelandic laws and regulations daily to be duly aware of updates that can be implemented in working contracts. By using our PEO and EOR service we can provide compliant labor contracts for employees in Iceland, including local benefits.

To support your plans, we made this guide including the basics of employment contracts in Iceland. After reading this guide you will know everything about the conditions, laws, and benefits to include in an Icelandic employment contract.

Employment Contracts in Iceland

Apart from specific terms, employees must be given their written contract or formal agreement within two months of starting work. Mandatory information required for all contracts includes identities and addresses of all parties, employment start date, place, and type of work, working hours, annual leave, notice periods, type of contract and any trial period.

Oral agreements are valid, but not advised. There is no legal requirement for contracts to be in Icelandic or any language, the terms should be in a language fully understood by all parties.

The main types of employment contracts are:

  • Open-ended, Permanent, Indefinite Employment Contracts: This is the normal type of contract that can be terminated, under the rule of law, without giving a reason. Employees are hired without time limits and the contract is terminated with a notice period, as stipulated by the law or collective agreement, in the same language as the contract.
  • Fixed-term Employment Contracts:  These are for a specific time period and cannot exceed a total of 24 months including renewals, except for managerial personnel where there is no time limit.
  • Temporary Work Agency Employment Contracts:  These are permitted, but the worker cannot be hired out to a company they had worked for directly in the previous six months.
  • Probationary or Trial Periods: These cannot exceed three months. As there is no provision under labor law for trial periods, these are governed by business practice or collective agreements.
  • Collective Bargaining Agreements (CBAs):  It is estimated that close to 90% of Icelandic workers are covered by collective agreements. Collective and trade union agreements add more detail to the employment terms of wage earners than basic legislation. Employer-employee negotiations that undercut collective agreements are invalid, although employees can negotiate for improved terms over the collective agreement.

The Confederation of Icelandic Employers negotiates on behalf of employers; the State Negotiating Committee confers with state employees, while the Municipal Wage Committee engages in talks with unions representing their members. The Icelandic Confederation of Labor is an umbrella organization for employees in the general labor market.