WAGE TOTAL (HEILDARLAUN) – This refers to your total wages over the defined period before any deductions have been made.

VACATION PAY (ORLOF) – Vacation pay payments are made in different manners, but it is preferable that these payments be made in the form of wages when you go on holiday. The minimum amount is 10.17% in addition to your base salary.

PENSION FUND (LÍFEYRISSJÓÐUR) – 4% of your wages is deducted and paid into your pension fund and your employer adds 6% of your wage total to the pension fund. The pension fund payments ensure that old age pensioners and those who are permanently disabled receive an income. Most pension funds repay these premiums to those foreign citizens who leave the country.

ADDITIONAL PRIVATE PENSION SAVINGS – Those who wish can have an extra 1-4% deducted from their wages into a pension fund. If this is done, the employer contributes 1–2%. If no additional pension savings are deducted from your wages, the employer will nevertheless contribute an additional 1%.

TRADE UNION FEES (FÉLAGSGJALD) – 1% of your wages is deducted for the trade union. Even if you are paying these fees that does not mean that you are a member of the trade union. You need to register. This is very important since only those who are full members can take advantage of the services provided by the trade unions, such as legal assistance, language course discounts, assistance with filling in the tax return and much more.

TAXES – The income tax rate is 38.54% of the wage total.

PERSONAL DISCOUNT (PERSÓNUAFSLÁTTUR) – The personal discount is kr. 27,496, which is deducted from the calculated income tax. If your spouse does not use all of his or her personal discount, then you have the right to use up to 100% of his/her personal discount.