University of Iceland

Employment, pension & taxes

Most workers are entitled to a written employment contract detailing the terms of their employment. Generally, you should not accept employment without a written contract as this puts you at risk regarding your rights as an employee.

A written employment contract should contain:
–    The employee‘s name and ID number,
–    position/job title,
–    information on where the work is to be conducted and employee‘s main tasks and responsibilities,
–    information on wages/salary, pension fund and union membership,
–    the period of employment and work hours,
–    termination clauses.  

Most wage earners are members of a relevant trade union. Unions represent wage earners in collective wage agreement negotiations and protect their interests. Collective wage agreements are agreements between unions and employers and concern the wages and employment terms of workers. It is important to note that employers and employees may not agree to lower wages or worse employment terms than those guaranteed in the collective wage agreements.
–    Most University employees and doctorate students are members of the Union of University Teachers (Félag háskólakennara).

All wage earners should receive a payslip (launaseðill) with their wages that details the amount paid as well as deductions such as taxes, pension fund premiums and union membership fees. It is important to review your payslip to make sure that your employer has made the correct deductions and that you are paying your taxes and other dues in accordance with the law and the employment terms.

Nowadays, payslips are usually sent electronically to workers‘ online bank account. Wages are nearly always paid directly into a bank account. For information on how to open an account, click here.


By law, all persons employed in Iceland must pay a premium to pension fund. This premium is usually 4% of wages, complemented by another 8% paid by the employer. Public servants, including employees of the University of Iceland, are obliged by law to pay their pension premium to the Pension Fund for State Employees.

Citizens of countries outside the EU/EEA can apply to have their pension premium refunded if/when they choose to return to their home country.


All persons employed in Iceland must pay income tax on their wages. The tax percentage varies according to amount you earn. For more information on tax liability and tax rates, click here.

Your employer deducts income tax from your salary, but you are entitled to withhold a fixed amount each month (your personal tax credit).

Public holidays

The following days are public holidays. Most offices are closed on these days and employees of the University may take these days off work without any reduction in pay.

–    January 1st, New Year's Day
–    Maundy Thursday (the last Thursday before Easter)
–    Good Friday
–    Easter Sunday
–    Easter Monday (the day following Easter Sunday)
–    First Day of Summer (usually the third Thursday in April, and seldom very warm at all)
–    May 1st, Labour Day
–    Ascension Day
–    Whitsunday (Whitsuntide)
–    Whit Monday/ Pentecost Monday (the day following Whitsunday)
–    June 17th, National/Independence Day
–    Bank Holiday (first Monday in August)
–    December 24th, Christmas Eve (from noon)
–    December 25th, Christmas Day
–    December 26th, Boxing Day
–    December 31st, New Year's Eve (from noon)


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