An employment contract is a binding agreement between the employer and the employee specifying the agreed upon working conditions and compensation. The contract attributes rights and duties to each party.

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In Icelandic labour law, an employment contract can be either formal or informal, such as e-mail or text message, and can even be formed orally.

With or without a written employment contract, the relevant collective agreement within the trade union that pertains to the job in question applies.

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The Icelandic Confederation of Labour (ASÍ) recommends written contracts. Check also our website for what to look out for in a written contract.

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In Iceland, it is quite common that employees rent residental housing from their employer, especially in the countryside. The lease/rental agreement has to be separate from the employment contract and must include: amount of rent, description of the space, where and how the rent is paid, whether the rental agreement is temporary.

Common contract problems among foreign workers

No employment contract (even when requested), can lead to:

Wages changing

Working conditions changing (tasks, hours, etc)

Working illegally

Not paying union dues, pension fund or social insurance (without being aware of it)

No notice period

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There is a strong connection between no contract and wage-theft (being paid below minimum wage) in the testimonies. No contract also makes the workers’ case more difficult.

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Workers identified the lack of written contract as a red flag.

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