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Entering the Job Market

Starting a new job is a big step, whether it's your first time or a new workplace.

Table of contents

Different Types of Employment

Your rights and obligations as a worker are determined by the type of employment arrangement you have. A wage-earner is the most typical kind of employment, but if you work as an independent contractor, the obligations your employer has towards you are drastically different. You can be self-employed on your own national ID number or you can register a separate national ID number for your business activities.

You can be hired full-time or in different part-time capacities, and you can also be hired as a temporary employee.

Three Things to Consider When Starting a New Job

When you start a new job, make sure you receive a written employment contract that establishes the terms of your employment and your wages.

In Iceland, you also choose which labor union you will join, which ensures a a set of basic terms in effect for each union. The Confederation of Icelandic Enterprises has negotiated with the various unions regarding whatever basic terms will automatically apply to you and your employer (as a member of the confederation). These terms are detailed in the collective labor agreement for each union.

Once you've taken care of your contract and union, you will need to select a pension fund and whether you will contribute to . Note that along with you contribution, your employer will also make a contribution to both your pension fund and your optional supplemental pension savings (if you choose to use it).

Paying Income Tax

Income tax on a wage earner's income is typically withheld and paid to the tax authorities by the employer. The employer also typically withholds and pays employee union dues as well as the employee and employer contributions to the employee's pension fund and supplemental pension savings (if any). All of these withholdings and payments must be detailed on the employee's monthly pay stub.

Any corrections that need to be made to the amount withheld can be taken care of with the tax authorities when the wage earner files their tax return.

How to Pay into a Pension Fund

Payments into your pension fund are made up of your contribution as a wage earner, which is at least 4% of your wages, and an 8% contribution from your wage payer. Wage earners can also choose to pay into supplemental pension savings, and if they do, their wage payer will make an additional contribution into the pension savings.

In some cases, a wage earner's pension fund is determined by their labor union and the collective labor agreement negotiated on their behalf. In other cases, you can choose whichever open pension fund you'd like from the list of pension funds operating in Iceland.

Note that your labor union membership might be determined by your trade or profession with respect to education and specialized training.

Your Rights as Wage Earner

In Iceland wage earners enjoy a certain set of rights laid out in legislation and regulation. These legally established rights include areas like workplace conditions, health and safety standards, working hours, vacation time (summer vacation), protections pregnant people and people who have recently given birth, measures to prevent harassment, abuse and violence in the workplace, protections for wage earners' personal information, equality in the workplace and provisions for termination of employment.

The lowest possible wages are stipulated in the collective labor agreements negotiated by management and organized labor. They also include basic terms for sick leave, working hours, vacation and provisions for hiring and termination.

In many cases these rights overlap between legislation, which ensure a set of basic rights, and the rights ensured by collective labor agreements. In addition, there are various special regulations that apply to specific groups of workers, like workers at financial institutions and fishermen.

Nánari More information about the rights of wage earners.

Termination of Employment

If your employer terminates your employment, you will not begin working out your notice until the beginning of the following month. The length of your notice (i.e., how long you are obligated to continue working after being terminated) is determined by the collective labor agreement that applies to your employment (i.e., the labor union you belong to). In the majority of cases, the term of your notice grows longer quickly over your first year at a job.

While working out your notice, you have the right to your full wages and benefits for the duration of the notice. Likewise, your employer has the right to demand your full participation at work during the course of your notice, unless you have commenced working at a new workplace. Typically, employee and employer come to an agreement regarding when the employee will stop working, but employees are advised to confer with their labor union and consider their search for a new job.

More information on the termination of employment.