Overtime pay in Iceland 2026: premiums, limits and tax
Overtime, night work and work on Sundays and public holidays in Iceland can earn a premium on top of your normal hourly pay, and the extra pay is taxed at your highest rate. The calculator above shows what you really keep. Below you will find the rules in brief, an example and answers to common questions.
The rules in brief
- Collective agreements and the Working Environment Act: The normal week is 40 hours (36 in many agreements since the shorter working week). Overtime is paid under the collective agreements, commonly at 1.0385% of monthly pay per hour (about 80% above the normal hourly rate). Working time including overtime may not exceed 48 hours a week on average, with at least 11 hours of rest a day.
Example: 8 hours of overtime a month
| Type | Rate | € / h gross (ISK) | € / h net (ISK) |
|---|---|---|---|
| Overtime | +80% | 8,827 | 5,145 |
| Night premium | +33% | 1,618 | 943 |
| Sunday / holiday premium | +45% | 2,207 | 1,286 |
With a normal hourly rate of ISK 4,904 (annual salary ÷ 52 ÷ weekly hours), 8 hours of overtime a month at +80% add ISK 70,615 gross, of which you keep ISK 41,161 net a month. You keep 58.3% of each taxed extra unit. Over a year that comes to ISK 493,935 (net · ISK 847,385 gross).
More than 80 overtime hours a year exceeds the legal limit in Spain.
Frequently asked questions
How much of my overtime pay do I keep in Iceland?
In the example, 58.3% of each extra unit of gross pay, i.e. ISK 41,161 net from 8 overtime hours a month. The share depends on your salary, because extra pay is taxed at your highest rate.
Is there a legal overtime premium in Iceland?
The example uses +80% for overtime. The exact rules, including night, Sunday and holiday premiums, are listed above.
How many overtime hours are allowed?
The calculator uses this limit: 48 h / week on average including overtime. See the rules above for averaging periods and exceptions.
Are these amounts exact?
They are estimates under the 2026 rules. Your contract or a collective agreement can set higher premiums or different limits.
Rules and official sources: see “Rules applied (2026)” above. Last checked: October 2026. The amounts are estimates for information, not financial or legal advice.