Your Rights as a Foreign Worker in Iceland

Every foreign worker in Iceland, regardless of nationality, is protected by the same labour laws and collective agreements that cover Icelandic workers. That protection is automatic. It applies from the first day of work, whether someone holds an EEA passport or a temporary work permit from outside the European Economic Area. Understanding these rights is essential for anyone starting a new job in an unfamiliar country, where language barriers and lack of local knowledge can make workers vulnerable.

This article covers the essentials: how wages are set, what a contract must include, how unions function, and what to do when something goes wrong.

How Wages Work in Iceland

Iceland has no government-set minimum wage. Instead, wages are determined through collective bargaining agreements negotiated between trade unions and employer associations. These agreements set minimum pay rates by sector, role, and experience level.

According to posting.is, the official Icelandic government resource for worker rights, a 22-year-old general worker in 2026 can expect minimum monthly gross pay in the range of ISK 484,000 to 498,000, depending on the sector. Cleaning and general construction sit around ISK 492,000, while restaurant and catering work starts at roughly ISK 486,000. Qualified tradesmen with a journeyman's diploma earn significantly more, with minimums around ISK 627,000. Office and retail workers covered by the VR union typically have higher starting rates than general labour. All of these figures are adjusted periodically under multi-year collective agreements, so workers should check with their union for the most current rates.

Collective agreements also establish rules for overtime pay, shift premiums, holiday bonuses, and other compensation. These are minimum terms. Employers can always offer more, but they can never offer less. Any clause in an employment contract that provides worse terms than the applicable collective agreement is considered invalid under Icelandic law.

The Employment Contract

Every worker in Iceland is entitled to a written employment contract. The contract should specify the job title, duties, working hours, wages, the applicable collective agreement, and the pension fund the worker will contribute to. Workers should receive their contract before starting work.

A written contract matters for several practical reasons. It defines what the employer has agreed to, and it provides a reference point if a dispute arises. Reports from worker advocacy groups in Iceland have documented that missing contracts are strongly linked to wage theft, sudden schedule changes, and other violations. If an employer avoids providing a written contract, that can be a warning sign.

What Every Worker Is Entitled To

Regardless of where someone comes from, the following rights apply to all workers in Iceland under law and collective agreements:

Working hours and rest. A standard full-time workweek is 40 hours. Workers must receive at least 11 consecutive hours of rest in every 24-hour period and at least one full day off per week. Overtime must be compensated at a premium rate.

Annual leave. Workers earn a minimum of 24 paid vacation days per year. Many collective agreements provide 25 to 30 days, increasing with tenure. Vacation pay is calculated as 10.17% of total wages and rises with years of service.

Sick leave. During the first year with a new employer, workers accrue two paid sick days per month. After one year of employment, they are entitled to two months of paid sick leave. After five years with the same employer, that increases to four months; after ten years, six months. Workers who change employers after five years retain a minimum entitlement of two months at their new workplace.

Parental leave. Each parent is entitled to six months of paid leave, with an additional six weeks that can be split between them. Payments come from the Parental Leave Fund at 80% of average salary, up to a cap.

Holiday bonuses. Workers receive a holiday bonus (orlofsuppbot) paid in June and a December bonus (desemberuppbot) paid in December, provided they meet minimum employment thresholds.

Pension contributions. The worker contributes a minimum of 4% of wages, and the employer must contribute at least 8%, often 11.5%. For EEA citizens, pension rights remain in the Icelandic system and can be claimed at retirement age. Non-EEA workers may apply for a refund of their contributions when they leave Iceland.

Equal treatment. Icelandic law prohibits discrimination based on gender, race, nationality, sexual orientation, religion, or disability. Iceland requires equal pay for equal work and was the first country to make gender-based pay differences explicitly illegal.

Rules Specific to EEA/EFTA Citizens

Citizens of EEA and EFTA countries (including all EU member states, Norway, Liechtenstein, and Switzerland) do not need a work permit in Iceland. They can begin working immediately upon arrival.

However, anyone staying longer than three months must register with Registers Iceland (Thjodskra) and obtain a national identification number (kennitala). This number is necessary for employment, banking, healthcare, and most public services.

EEA citizens have full freedom to change employers at any time without notifying immigration authorities or obtaining new permits.

Rules Specific to Non-EEA Workers

Workers from countries outside the EEA and EFTA face a more regulated process. Key points include:

Work permits are employer-specific. A work permit is tied to a specific employer and a specific role. Changing jobs requires a new work permit application, and the new permit must be granted before the worker can start in the new position. Starting work without a valid permit can result in fines or imprisonment for both the worker and the employer.

The employer must apply. The employer is responsible for submitting the work permit application to the Directorate of Immigration, which forwards it to the Directorate of Labour.

Union approval is required. Before a work permit is issued, the relevant trade union must confirm that the salary and conditions in the employment contract meet the standards of the applicable collective agreement.

Permit duration and family rights. Expert work permits are valid for up to four years. Foreign nationals who complete university studies in Iceland can renew their residence permit for up to three years after graduation to search for work. Spouses and children of workers holding expert permits can work in Iceland without a separate work permit.

Tax discount for foreign experts. Workers who qualify as foreign experts are taxed on only 75% of their income for the first three years. This must be applied for through the Icelandic Centre for Research within three months of starting work.

Trade Unions: How They Work and Why They Matter

Union membership in Iceland exceeds 80% of the workforce. The collective bargaining system is the primary mechanism through which wages and rights are enforced in Iceland. Collective agreements negotiated by unions are legally binding for all workers in a given sector and geographic area, whether or not the individual worker is a union member.

Union fees are typically 0.7% to 1% of salary and are deducted automatically. In return, workers gain access to legal assistance, education grants, sick pay funds, vocational rehabilitation, subsidized vacation houses, and gym reimbursements, among other benefits.

Some of the largest unions in Iceland include:

Efling covers general workers in the Reykjavik capital area across hospitality, healthcare, construction, manufacturing, food service, and more. Website: efling.is

VR covers retail, office, and service workers. It is the largest single union in Iceland with roughly 40,000 members. Website: vr.is

Sameyki covers public sector and general workers in various municipalities. Website: sameyki.is

The umbrella organization for most private-sector unions is ASI (Alþýðusamband Íslands), the Icelandic Confederation of Labour. Website: asi.is

Workers can identify the correct union for their role by checking their employment contract, asking colleagues in similar positions, or contacting ASI directly.

What to Do If Something Goes Wrong

If wages are incorrect, a contract is missing, overtime is unpaid, or working conditions violate the collective agreement, workers have several options:

1. Contact your trade union. This should be the first step. Unions employ legal staff who handle disputes with employers on behalf of members. Their consultations are confidential. Even workers who are not full members are still covered by the collective agreement and can seek guidance.

2. Contact the Multicultural Information Centre (MCC). The MCC is part of the Directorate of Labour and provides free, confidential counselling for immigrants in English, Polish, Ukrainian, Spanish, Arabic, Russian, and several other languages. Website: mcc.is

3. Get free legal advice. The Icelandic Human Rights Centre offers free legal counselling for immigrants at its office in Reykjavik. Interpreters are available at no charge. Website: humanrights.is

4. File a complaint with the Directorate of Labour. The Directorate handles complaints about employment terms, wages, and labour law compliance. It also supervises temporary work agencies and monitors for social dumping. Website: vinnumalastofnun.is

5. Contact the Administration of Occupational Safety and Health. For workplace safety concerns, hazardous conditions, or health risks on the job. Website: vinnueftirlit.is

6. Report discrimination. The Equality Centre (Jafnrettisstofa) handles complaints about gender discrimination and equal pay violations. For broader discrimination complaints, the Icelandic Human Rights Centre can advise on next steps.

Workers should keep copies of their employment contract, all payslips, records of hours worked, and any written communication with their employer. This documentation is essential if a dispute reaches formal proceedings.

Key Resources