Salary Payment in General

The most important obligation of the employer is the payment of salaries. The employee must be paid a salary of the right amount and at the right times. The starting point is that salary is paid for work undertaken but at times the employer may also be required to pay the employee a salary although performance of the work for some reason has been prevented. For further information see [Prevention from Performing Work].

The employer must comply with the minimum conditions in respect of salaries set out in the collective bargaining agreement applicable to the employer or a generally binding collective bargaining agreement. The employer must also treat employees equally.

The employer and employee are in general free to agree among themselves the basis for determining the salary, with the exception that provisions in collective bargaining agreements must be complied with. The salary is usually determined on the basis of the time the employee has worked (salary based on time) or the employee’s performance (performance pay). Salaries based on time are e.g. hourly and monthly salaries whereas performance pays include contract rates and performance based salaries. In addition, the employee may receive e.g. a merit pay which is usually determined by reference to the company’s profits or the employee’s personal performance.

If there is no agreement in respect of the salary and no applicable collective bargaining agreement, the employer must pay the employee a standard and reasonable salary. A standard and reasonable salary is not defined in legislation. If the type of employment in question is mentioned in a collective bargaining agreement, the rate of pay agreed thereupon may be of significant importance when considering the ordinarily and reasonability of the salary. If there is an unreasonable salary term in the employment contract it can be adjustedaccording to the provision of the Employment Contacts Act.