In Iceland, labor law stipulates a minimum notice period for both employers and employees when terminating an indefinite employment contract. The specific duration of the notice period is contingent on the employee's tenure and, in some instances, their age.

Notice Periods Based on Tenure

According to Icelandic Act No. 40/1978 on Contracts of Employment, the minimum notice periods by tenure are as follows:

• For 0-3 months of employment (trial period), the notice period is 1 week.
• For 3-6 months of employment, the notice period is 1 month, with termination occurring at the turn of the month.
• For more than 6 months of employment, the notice period is 3 months, with termination occurring at the turn of the month.

It's important to note that the notice period applies to both employer-initiated and employee-initiated terminations.

Extended Notice Periods for Long-Term Employees

Employees who have been with the same company for ten consecutive years and reach a specific age are entitled to a longer notice period:

• For 10 years of employment and 55 years old, the notice period is 4 months, with termination at the end of the month.
• For 10 years of employment and 60 years old, the notice period is 5 months, with termination at the end of the month.
• For 10 years of employment and 63 years old, the notice period is 6 months, with termination at the end of the month.

Collective Bargaining Agreements

The minimum notice periods mentioned above can be superseded by provisions within a relevant collective bargaining agreement. These agreements, negotiated between unions and employer organizations, may stipulate different notice periods for specific industries or job categories. Therefore, it's advisable to consult the applicable collective agreement for any variations in notice period requirements.

Key Points

• Minimum notice periods in Iceland range from 1 week to 6 months, depending on tenure and age.
• Notice periods apply to both employer and employee-initiated terminations.
• Collective bargaining agreements may stipulate different notice periods for certain sectors.

In Iceland, there is no legal requirement for employers to provide severance pay. However, severance entitlements may exist based on collective bargaining agreements (CBAs) or individual employment contracts. CBAs are prevalent in Iceland and often determine terms beyond what is legally required.

Collective Bargaining Agreements

CBAs are common in Iceland and cover a significant portion of the workforce. It's important to examine the specific CBA applicable to the employment situation for severance provisions, if any. Severance packages within CBAs can vary, sometimes including elements such as severance payments (calculated based on salary and length of service), education or training assistance, outplacement support, and release from work duties for job seeking.

Individual Employment Contracts

While no statutory obligation exists, employers may choose to include severance clauses within individual employment contracts. These contractual terms will define the parameters of any severance pay obligation.

Legal Sources

The Icelandic Act on Employment Contracts No. 38/2006 outlines the basic requirements for employment contracts in Iceland. The Icelandic Act on Trade Unions and Industrial Disputes No. 80/1938 establishes the legal framework for unions and collective bargaining.

Important Considerations

It's crucial to consult with the relevant CBA or individual employment contract to determine specific severance entitlements. For matters involving CBAs, the employee's union representative can provide guidance on their interpretation.

In Iceland, both employers and employees can terminate employment contracts without stating a specific reason. However, there are legal safeguards and procedures to ensure fairness and protection of rights.

Grounds for Termination

While employers can terminate employment without giving a specific reason, certain terminations are considered unlawful:

• Discrimination: An employer cannot terminate an employee on the grounds of protected characteristics such as gender, sexual orientation, religion, disability etc.
• Retaliation: An employer cannot terminate in retaliation for an employee exercising their legal rights (filing a complaint, taking protected leave, etc.)
• Pregnancy and Parental Leave: Protections against termination for reasons related to pregnancy, childbirth, maternity leave, paternity leave, or parental leave are provided.

Termination Procedure

1. Written Notice: A termination must be provided in writing and in the same language as the employment contract.
2. Employee Interview Right: The employee has the right to request an interview outlining the reasons for termination and may even request these in writing.
3. Union Representation (if applicable): If the employee is covered by a collective bargaining agreement, they may request the presence of a union representative during the interview.

Special Protections

• Collective Redundancies: In cases of larger-scale layoffs, the employer must consult with employee representatives and notify the Directorate of Labour. Specific rules apply to these situations.