Use the Lexology Navigator tool to compare the answers in this article with those from other jurisdictions.

Recruitment

Advertising
What are the requirements relating to advertising positions?

In accordance with the Act on the Equal Status and Equal Rights of Women and Men (10/2008), advertisers cannot advertise or publish an ad for a vacant position indicating a preference for one sex over the other. This provision does not apply if the advertiser is promoting more equal representation of women and men within an occupational sector. The same will apply if there are valid reasons for advertising for a man or a woman only.

Ads that belittle or disrespect either sex and run contrary to gender equality in any way may not be published in the media or any other public forum.

Background checks
What can employers do with regard to background checks and inquiries in relation to the following:

(a) Criminal records?

Employers can ask applicants and employees to provide their criminal records or allow the employer to access their criminal records.

(b) Medical history?

Employers are generally prohibited from asking about the health of an applicant or employee, unless this is justified by an occupational requirement.

Employers can ask employees to provide a doctor's note for absences due to illness. 

(c) Drug screening?

Drug tests can be carried out in limited circumstances – for instance, where working under the influence of drugs or alcohol could give rise to health and safety considerations (eg, staff who drive or operate machinery), or seriously damage the employer's business.

Applicants and employees must consent to drug and alcohol testing. 

(d) Credit checks?

Credit reporting agency Creditinfo collects credit history and offers credit reports in Iceland. Only the individual, banks, other lending companies and attorneys in relation to debt collection can access information on his or her credit history through the agency. However, employers can obtain an employee’s credit rating with his or her consent.

(e) Immigration status?

Employers can obtain information on an employee’s immigration status with his or her consent.

(f) Social media?

Information on social media is considered public. Icelandic legislation does prohibit employers from looking up public information. 

(g) Other?

Employers may ask applicants or employees to provide proof of qualifications to drive specific vehicles (eg, forklifts or trucks), depending on the job and required duties.

In relation to the above background checks, it is important that all information that an applicant or employee is asked to provide is appropriate, relates to the job in question and does not discriminate or discourage people from applying for the job. There must be a justifiable reason for every check and why an applicant or employee is being asked to provide such information.

Wages and working time

Pay
Is there a national minimum wage and, if so, what is it?

Icelandic law and regulations on employment do not provide for an official national minimum wage, regardless of occupation. However, collective agreements between unions and employer associations (for certain professions) are generally binding, which means that they also apply to non-union members. Wages and other employment terms contained in collective agreements are considered the legal minimum terms for the occupational sectors to which they apply.

Are there restrictions on working hours?

According to the Act on Working Environment, Health and Safety in Workplaces (46/1980), the maximum working hours per week – including overtime – may not exceed 48 hours on average during each four-month period.

Working hours must be arranged to allow employees at least 11 consecutive hours of rest each day and at least one day off each week.

Hours and overtime
What are the requirements for meal and rest breaks?

Meal and coffee breaks are regulated by collective agreements. These agreements also govern the duration of breaks and whether they are paid.

The duration of meal breaks varies between different sectors of the labour market, ranging from 30 minutes to one hour. Lunch breaks are not counted towards working time and are therefore unpaid. Coffee breaks are paid as working time. 

Meal breaks and coffee breaks during overtime are considered working time and are paid according to the applicable overtime rate.

How should overtime be calculated?

Icelandic legislation outlines how overtime should be calculated.

Collective agreements include provisions on overtime wages. What constitutes overtime varies between collective agreements.

According to most collective agreements, overtime must be paid at an hourly rate that is equivalent to 1.0385% of the employee’s monthly wages for regular day work. Work on major holidays must be paid at an hourly rate that is equivalent to 1.375% of the employee’s monthly wages for regular day work.

What exemptions are there from overtime?

Employers and employees can agree that compensation for overtime work be provided in the form of additional compensatory leave.

Is there a minimum paid holiday entitlement?

The Holiday Allowance Act (30/1987) sets out minimum holiday entitlements and a holiday allowance; collective agreements contain further rights, based on factors such as length of service and age.

The act provides for a minimum of two working days of holiday for each month of employment during the past holiday allowance year (May 1 to April 30). Therefore, the minimum holiday for each year is 24 working days. Sundays and other public holidays are not count as holidays in this respect; nor are the first five Saturdays during holidays.

The minimum holiday allowance is 10.17% of total wages. 

What are the rules applicable to final pay and deductions from wages?

Final pay
Employees have the right to wages during their notice period. The duration of an employee’s notice period is defined by law, collective agreement or his or her employment contract.

Severance pay is not typically provided beyond the agreed salary during the notice period, unless otherwise agreed by the parties.

A worker who is deprived of his or her right to lawful notice of termination can claim damages, equal to his or her loss during the notice period. On the other hand, where the worker leaves without giving the required notice, the employer may have a right to claim damages. There are exceptions where no notice is required – for example, in case of gross misconduct by either party or dangerous or insufficient working conditions.

Deductions from wages
Employers can make deductions from wages in limited circumstances. According to law and as set out in collective agreements, employees must contribute 4% of all wages to a pension fund. Employers must withhold pension contributions from employees’ wages.

Employers must also withhold at the source trade union membership fees in accordance with the collective agreement.

Further, employers must deduct personal income tax and municipal income tax from employees’ wages every month and return the withholding tax to the local Inland Revenue Office.

Further deductions are permitted if the employee has expressly authorised them.

Employers cannot deduct from employee wages to repay moneys owed by them.

Record keeping
What payroll and payment records must be maintained?

According to the collective agreements, employees must receive pay statements when wages are paid, including a breakdown of the wage calculation. Further, all deductions must be itemised (ie, withholding tax).

Click here to view the full article.