Iceland is a Nordic country in Europe that is considered the world’s most peaceful nation. About 65% of the population lives in Reykjavík, and the country has a very diverse landscape of volcanoes and ice. Iceland part of the Mid-Atlantic Ridge that rises above sea level, and it has a central volcanic plateau that is almost constantly erupting. Iceland runs almost completely on renewable energy, and maintains a social welfare system that provides universal health care and post-secondary education for all of its citizens.
Pregnant employees are entitled to 6 months of paid maternity leave that can begin up to 1 month before the baby is due, and is paid at a rate of 80% of the regular salary. Fathers can receive 6 months of paternity leave, also paid at 80% of the regular salary. One month of parental leave can be transferred between partners and both of their leave entitlements can be exercised until the baby is 18 months old.
Parents can also take up to 13 weeks of leave to care for a child up to 8 years old. Adoptive parents can also exercise the same leave entitlements as natural birth parents, where each partner can take up to 6 months of paid leave off work.
Employees in Iceland can take paid sick leave depending on how long they have worked at their company. During the first year, employees are entitled to 2 days of sick leave per month, which then increases to 2 months of paid sick each year after the first year. The amount of leave increases each year and is capped at 6 months after 10 years at the company.
There are 16 public holidays in Iceland, and employees are entitled to a minimum of 24 days of paid time off per year. After 5 years at a company, employees are entitled to 27 days off per year, and after 10 years can receive 30 days off per year.
There is no national minimum wage under Icelandic law, but collective bargaining agreements determine wage rates as they see fit. The average minimum wage is ISK 351,000 per month for a full-time position.
Standard working hours in Iceland are 8 hours per day, 40 hours per week. Overtime pay is mandatory, and employees can work a maximum of 162.5 hours of overtime per month.
Employment contracts in Iceland can be terminated at will with prior notice. Employers don’t have to provide a specific reason for terminating an employee, but the employee has the right to demand the reason for which they were terminated, and are also entitled to an interview to discuss the end of their employment.
Both employers and employees in Iceland are required to provide notice before resignation or termination (unless specified in the employment contract). For employers, the termination notice period is 1 month per year of employment.
While there is no legally mandated severance pay in Iceland, unions can negotiate a severance payment for their members.
While a 13th month salary is not mandatory in Iceland, collective agreements provide for an employer-paid Christmas bonus payable in December, as well as a Holiday bonus between May and August.
★ 11.5% - Mandatory Pension Fund
★ 6.1% - Social Security
★ 1.55% - Union
★ 0.1% - Rehabilitation Fund
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Unlike full-time employees, contractors work on projects with multiple companies at a given time and are technically self-employed. Full-time employees are solely focused on their employer and usually receive benefits (such as health insurance, equity or stock options, and time off) as an additional form of compensation. While it can be cheaper to work with international contractors instead of paying benefits to a full-time employee, you run the risk of misclassification. It's recommended to work with an EOR for contractor onboarding and payments, so you can know that your international contractors are paid compliantly and on time.