Foreign service providers who post workers temporarily in Iceland in connection with provision of service, are obligated to notify the directorate and provide certain information.
Act no 45/2007 applies to foreign service providers who post workers temporarily in Iceland in connection with provision of service. The aim of the act is to clarify requirements and tighten monitoring of the compliance to Icelandic collective agreements and other terms and conditions of service which apply to working facilities, health and safety. The act takes into account the provisions of the EEA Agreement and the EU Directives on trade in services and in addition to promoting competition on an equal footing between Icelandic and foreign undertakings, it is intended to discourage social dumping.
According to Article 7 of the Act, self-employed individuals who provide services here in Iceland for more than 10 working days in each 12-month period are required to provide The Directorate of Labour with certain information about their operations as well as access to documentation which the directorate may request to verify the registration or for monitoring purposes of the Act.
Act No. 45/2007 prescribes the duty of a foreign service provider or self-employed individual intending to operate in Iceland for total more than ten working days in each twelve-month period to register at the Directorate of Labour and provide certain information. The registration shall be made at least by first the day of operations.
Exemption from service companies’ obligation to provide information applies in cases involving services that consist of specialist assembly, installation, monitoring or repairs of equipment, which is not intended to take more than four weeks in each twelve-month period. In such cases the company is not required to register at the directorate.
If in doubt as to whether a service company should report to the Directorate of Labour, the directorate shall in all cases be contacted for guidance.
Furthermore, foreign service providers are required to submit:
The Directorate of Labour can request for further information if necessary.
Foreign service providers are obligated to submit copies of employment contracts of the posted workers to the Directorate of Labour. The Directorate reviews the employment contracts of the posted workers to ensure that their terms and conditions of service confirm to Icelandic collective agreements during the periods they are working in Iceland. If employment contract’s terms and conditions are more favourable, then they shall hold their validity.
If a foreign service provider decides to make new temporary contracts, which are valid only for the period their workers are posted in Iceland, then we recommend using the standard contract available here. Temporary contracts are generally made when the employee’s rights in their home country are inferior to those stipulated in Icelandic collective agreements.
The following information must be stipulated in the employment contracts:
When preparing employment contracts, it is important to observe the minimum wage requirement in Iceland for the appropriate occupation. Further information regarding terms and conditions of employment in Iceland is available her.
All wages shall be stipulated in Icelandic Krona (ISK). This is to prevent the amounts falling below the minimum wage requirement of the appropriate occupation due to currency exchange-rate fluctuations
When the Directorate of Labour has received a registration from a Foreign Service provider, the company will receive a confirmation of the registration. The foreign service provider is then obligated to deliver the confirmation to their client not later than two working days following the commencement of operations in Iceland. If the client does not receive such confirmation from the foreign service provider, they are obligated to notify the Directorate of Labour.
If a company provides a service in Iceland for a total of more than four weeks in any twelve months, it shall have a representative in Iceland. The representative may be one of the company’s workers who are temporarily posted in Iceland. It is not necessary to nominate a representative if fewer than six workers are normally working in Iceland under the company’s auspices. The company’s representative shall be responsible for providing the authorities with information according to Act No. 45/2007 and receive administrative decisions on behalf of the company.
While an foreign undertaking is operating in Iceland DoL will actively supervise wage-payments to employees to ensure that they are correct. This will entail the directorate requesting pay-slips and bank-transfer statements.
For the directorate to be able to determine if the correct wage-payments have been made, it is requested that the companies prepare pay-slips for each payment to every employee posted in Iceland. The Directorate of Labour has prepared a pay-slip template which companies are welcomed to use.
The Directorate of Labour will also visit the company’s work sites while operating in Iceland where information is gathered and representatives and employees are talked to.