Employee benefitsin Iceland

Eligible members of VR (the union for commercial and office workers), can apply for fertility treatment, artificial insemination or adoption support of up to ISK 250,000 per member. Several applications can be made until the overall maximum is reached. Membership contributions must have been paid continuously for six months before treatment starts or the adoption service is paid. Receipts support the claim, and fund payments are generally taxable. This is a specific union-fund benefit, rather than a universal employer-funded fertility package.

The collective agreement negotiated by VR (the union for commercial and office workers) requires employer accident insurance covering death and permanent or temporary disability from workplace accidents and normal journeys between home and work. Employer-directed domestic and international travel is included. After a workplace accident, the employer pays transport home or to hospital and reimburses medical expenses not paid by social security. Work accidents must be reported to the authorities and the employer’s insurer.

Employees aged 16–70 contribute at least 4% of total wages to a pension fund, and the employer contributes at least 11.5%, giving a minimum total of 15.5%. The fund provides lifelong retirement income and disability and survivor protection. The relevant collective agreement can determine the fund; membership does not always allow a free choice of provider.

Employees can elect additional private pension savings of 2% or 4% of wages. The employer adds a 2% contribution under the applicable arrangement. These savings are separate from the compulsory occupational pension and are inheritable; withdrawal is generally available from age 60 and is subject to income tax. The employee chooses a savings agreement and investment strategy.

For employees covered by the collective agreement negotiated by VR (the union for commercial and office workers), the scale applying to holidays from May 2026 provides 25 days and 10.64% holiday pay after six months with the employer and age 22, or six months after completing secondary education; 26 days and 11.11% after five years in the occupation; 28 days and 12.07% after four years with the employer or ten years in the occupation; and 30 days and 13.04% after six years with the employer. The parties can negotiate intermediate entitlements of 27 days at 11.59% or 29 days at 12.55%. The agreement governs counting and recognition of service.

The minimum annual holiday entitlement is 24 working days with holiday pay of 10.17% of total wages. Annual leave is counted in working days under the applicable holiday rules and work pattern. Holiday pay replaces income during leave and is distinct from the separate fixed summer holiday bonus.

Employees covered by the collective agreement negotiated by VR (the union for commercial and office workers) accrue two paid sick days per month in their first year. After one year with the employer, paid sickness entitlement is two months in each 12-month period; after five years it is four months, and after ten years six months. The employee must report sickness, and the employer pays for a requested medical certificate. A worker changing jobs after earning four- or six-month protection retains at least two months’ protection with the new employer.

Under the collective agreement negotiated by VR (the union for commercial and office workers), a parent unable to arrange alternative care for a sick child under 13 accrues two days of paid care leave per month during the first six months of employment. After six months, entitlement is 12 days in each 12-month period. Daytime wages and applicable 40% shift or after-hours supplements continue. The same protection covers a child under 16 whose illness requires at least one day in hospital; it is not restricted to hospital stays for younger children.

Each eligible parent has six months of paid birth-related leave and may transfer six weeks to the other parent. A parent can begin up to one month before the expected birth; the birth parent must take the first two weeks after delivery. Leave must be used before the child turns 24 months. Benefit eligibility normally requires six continuous months of Icelandic work at 25% or more, including qualifying self-employment. The public parental-leave fund normally pays 80% of reference earnings, capped at ISK 900,000 monthly for children born in 2026.

After six consecutive months with the employer, each parent has a separate, non-transferable right to four months of unpaid parental leave to care for a child before age eight. The employee gives written notice at least six weeks before the planned start, specifying dates and structure. This leave does not attract payments from the public parental-leave fund.

The six-month independent paid-leave right also covers the other parent and qualifying adoption or permanent foster care of a child under eight. Each parent may transfer six weeks. Parents can divide leave or take a reduced rate by agreement, and the public benefit depends on their own qualifying earnings and work history. For birth-related leave, entitlement must be used within 24 months. These rights are distinct from the separate unpaid parental-care leave.

Employees covered by the collective agreement negotiated by VR (the union for commercial and office workers) normally keep fixed regular pay when a public holiday falls on a day they would otherwise work. Work on a holiday attracts additional compensation under the applicable evening, weekend, overtime or major-holiday category. Christmas Eve and New Year’s Eve are major holidays from noon. Easter Sunday and Pentecost Sunday are holiday dates, so a list of 16 dates does not mean 16 extra weekday absences.

The collective agreement negotiated by VR (the union for commercial and office workers) provides a full December bonus of ISK 114,000 in 2026 and ISK 118,000 in 2027, payable by 15 December. It is prorated for working percentage and service. Eligibility covers employees with 12 continuous weeks for the employer in the previous 12 months or employees working in the first week of December. A full year is 45 worked weeks excluding holiday, equivalent to 1,653.75 office hours or 1,743.75 retail hours. The bonus includes holiday pay and accrued entitlement is settled when employment ends before payment. It is a fixed agreed bonus, rather than a universal extra month of salary.

The collective agreement negotiated by VR (the union for commercial and office workers) provides a full summer holiday bonus of ISK 62,000 in 2026 and ISK 64,000 in 2027, payable on 1 June. It is prorated for working percentage and service in the holiday year, 1 May–30 April. Eligibility covers employees with 12 continuous weeks in the preceding 12 months at 30 April, or employees working in the first week of May. A full year for this purpose is 45 worked weeks excluding holiday. The fixed bonus includes its holiday-pay element and accrued entitlement is settled on termination.

Under the remote-work agreement for VR (the union for commercial and office workers), the employer normally supplies and maintains necessary equipment unless the employee uses personal equipment. The parties settle equipment, warranty and cost arrangements before remote work starts, including compensation for using personal equipment. The employer covers direct work costs, particularly electronic communication, and provides technical support. These are work expenses under the applicable arrangement, separate from a discretionary home-office cash allowance.

Remote work is agreed voluntarily in writing. Under the framework applying to VR (the union for commercial and office workers), remote employees keep comparable pay, training, career opportunities and union rights; refusal of a new remote arrangement does not itself justify dismissal. The parties agree availability and work organisation while protecting privacy and contact with colleagues. The framework establishes how an arrangement works; it does not automatically grant homeworking to every employee.

Eligible members of VR (the union for commercial and office workers), can apply to the Vocational Training Fund for commercial and office employees for study, job-related courses, recognition of prior learning, leisure courses and travel linked to work-related study or conferences. This is a union-related fund entitlement with its own application rules, rather than an automatic personal learning allowance paid by every employer.

Iceland does not set one national minimum wage. The applicable collective agreement sets minimum pay by occupation, education and seniority, and an individual contract cannot provide less favourable terms. Negotiated pay above those scales is separate from the minimum. Wage scales change over time, so a salary for one occupation is not a national minimum.

For adult employees covered by the general working-time rules, total work including overtime must normally average no more than 48 hours a week over four months. Collective agreements can use a six-month reference period, or up to 12 months for objectively justified arrangements. Employees normally receive 11 continuous hours of rest in each 24-hour period and a weekly day off adjoining that rest. Authorised exceptions require their own conditions and compensatory rest. Senior managers or other workers who determine their own hours and certain transport or public-safety roles fall outside these general rules.

For employees under the collective agreement negotiated by VR (the union for commercial and office workers) with the Confederation of Icelandic Enterprise, the hourly overtime rate is 1.0385% of fixed monthly wages. After-hours and night work have separate pay categories. The parties can agree equivalent time off, with the pay difference paid at the next payroll or converted into leave; unused entitlement is settled before 1 May or when employment ends. For office roles, one overtime hour converts to 1.654 daytime hours, while the retail conversion is 1.744. The percentage uses monthly salary, not the hourly wage.

For office and sales staff under the collective agreement negotiated by VR (the union for commercial and office workers) with the Confederation of Icelandic Enterprise, active work is 35.5 hours per week, or 36.75 hours when coffee breaks are taken. Retail active work is 35.83 hours, or 38.75 hours with coffee breaks. Normal office daytime runs Monday–Friday, 09:00–17:00. Monthly daytime thresholds are 159.27 office hours and 167.94 retail hours. These occupation-specific terms replace a blanket assumption that every employee works a 40-hour week.

Under the collective agreement negotiated by VR (the union for commercial and office workers), indefinite contracts carry one week’s notice in the first three months, one month in months four to six, and three months after six months’ employment. After ten continuous years with the employer, employer notice rises to four months at age 55, five at 60 and six at 63; the employee can still resign with three months. Month-based notice runs from the month end. Final pay includes earned holiday pay and prorated bonuses. Employees can request an interview about dismissal within four days, with the meeting within four days of the request; dismissal protections still apply.

The general employer social security payroll tax is 6.35% in 2026. It is an employer charge separate from occupational pension contributions, holiday pay and collective-agreement funds. The taxable payroll base and any special industry or international social-security rules must be applied before calculating the employer’s total employment cost.

In 2026 monthly employment income withholding uses rates of 31.49% on the first ISK 498,122, 37.99% on the portion from ISK 498,123 to ISK 1,398,450, and 46.29% above ISK 1,398,450. The personal tax credit is ISK 72,492 per month or ISK 869,898 for the year. These are withholding figures; residency, available credits and municipal assessment affect an individual’s final liability.

Collective agreements are negotiated wage and working-condition rules for an occupation and geographic area. Their minimum terms bind employers and employees in that scope even when neither belongs to the organisations that signed the agreement. International employers must identify the applicable agreement before setting salary, leave, hours, pension and fund contributions.