Bogus Contracting – a Practice That Lowers Wages and Weakens Rights
24. November 2025Would you like to earn less?
Bogus contracting is becoming increasingly common in the Icelandic labour market. It occurs when individuals are labelled as independent contractors even though they are, in practice, employees. This is not innovation or flexibility — it is a method for employers to transfer costs, risk and responsibility onto workers with the weakest bargaining power.
In a standard employment relationship, workers enjoy rights guaranteed through collective agreements — sick leave, holiday pay, safety protections, bonuses, and predictable terms. Genuine contractors, on the other hand, operate independently and bear full financial and operational responsibility. When workers are misclassified as contractors — bogus contractors — they lose these essential rights.
In an article by Karen Ósk Nielsen Björnsdóttir, published on Vinnan.is, she shows that net earnings for a bogus contractor can fall to about 1,450 ISK per hour, which amounts to only 55% of minimum daytime wages and 31% of minimum overtime wages, once the individual has covered all costs that an employer would normally pay.
Bogus contracting also appears on digital platforms, where companies control all aspects of the work — tasks, rules, performance, and pay — yet disclaim responsibility by classifying workers as “independent”.
These practices undermine workers’ rights, reduce protections, lower incomes and distort fair business competition.
We must reject the trend of employers avoiding their obligations by treating workers as contractors when they are, in reality, employees. Bogus contracting is a step backwards — not the future of work.
Source: Vinnan