Holidays and holiday allowance

During a posted worker´s work period in Iceland he is entitled to, at least, 24 paid vacation days after he has worked a whole vacation year, from 1 May to 30 April.

Posted workers have the right to holidays and a holiday allowance, according to the rules contained in the Holiday Allowance Act No. 30/1987. The Act sets minimum rights in this field but collective agreements provide for further rights depending on various factors such as length of service and age.

Differentiation must be made between the vacation days the employee earns with his/her work in the labor market, on the one hand, and the vacation pay every employer pays in addition to the wages for work, on the other hand.

Vacation days

An employee who has worked a full vacation year, from 1 May to 30 April, has the right to a minimum of 24 vacation days. It makes no difference whether the employee has changed employers during the period. Those who have worked a shorter period of time have the right to a proportional number of vacation days, in which instance the focus is on the employee earning two vacation days for every worked month.

When the employee takes his/her vacation, Saturdays, Sundays and holidays are not counted as vacation days.

Vacation pay

Through his/her work with the employer, the employee earns the right to pay during vacation. The vacation pay is stated on the payslip of the employee. The minimum vacation pay is 10.17% of all wages. This corresponds to pay for 24 days.

Wages during vacation are paid by different means:

  • The employer withholds the vacation pay and pays it when the employee goes on vacation in the next vacation year. Upon every payment of wages, the employer divides the vacation pay by the employee’s regular day-work hourly pay, thus calculating how many day-work hours the vacation pay amounts to. The employee accumulates such hours throughout the vacation year. When the employee goes on vacation in the following vacation year, the total number of these hours is calculated and multiplied by the day-work hourly pay in effect at such time. The amount thus found is paid to the employee less taxes and other charges.
  • The vacation pay (less taxes and other charges) is deposited into a vacation account, which is a special bank account in the name of the employee. The employee may withdraw his/her balance for the past vacation year after 15 May every year.
  • Employees earning fixed monthly wages for day work maintain their pay when they go on vacation. Vacation pay on overtime, bonus payments or other extra payments are deposited into the vacation account.  

Note that the minimum terms stated in collective agreements and in Icelandic law only apply if the employee does not enjoy more favorable vacations and vacation pay according to his employment contract with the relevant undertaking, or a collective agreement or legislation in the state in which he normally works.

Additional vacation

The collective agreements stipulate additional vacation, i.e. more vacation days and higher vacation pay than the minimum vacation. Employees may, on the basis of their employment term with the relevant employer or in the relevant field of work, earn entitlement for 25–30 vacation days. In such an instance, the vacation pay is from 10,64% to 13,04%. Rules regarding additional vacation is to be found in collective agreements.

Decision and notification

The employer decides in consultation with the employees, when vacation is to be taken. He shall meet their requests for vacation time to the extent possible in respect of the operation. When the employer has completed checking the wishes of the employees, he/she shall announce, as soon as possible and at the latest one month before the beginning of vacation, when the vacation shall begin unless special circumstances prevent this.

Do you have questions? Then please contact:

Icelandic Confederation of Labour (ASÍ)
Tel: +354 535 5600

Business Iceland (SA)
Tel: +354 591 0000

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