Employers Accused of Abusing Benefits Skip to content

Employers Accused of Abusing Benefits

Chairman of Framsýn – Húsavík Labor Union Office, Adalsteinn Árni Baldursson, said companies are abusing the unemployment insurance system, using benefits granted because of fewer working hours to subsidize labor cost.

A construction site in Iceland in 2008. The picture is unrelated to the story. Copyright: Icelandic Photo Agency.

Baldursson told Fréttabladid that executives of some companies had approached him, arguing that they have the right to take advantage of the unemployment insurance system this way. In such cases, Baldursson points out that such practice is illegal.

Baldursson said he also knows of other cases where the unemployment insurance system is being abused. “I know a few examples where companies lay off people and then send them immediately to apply for benefits because of impaired employment.”

“That is clearly a legal violation,” Baldursson stated, “Companies are obligated to pay employees the term of notice determined by their wage contracts.”

“The Directorate of Labor and the labor unions should not let such employers get away with this. If they don’t come to their senses they should be sued. Running a business comes with responsibility and they have to shoulder that responsibility,” Baldursson commented.

Wage earners are facing difficult times, Baldursson said. “People are forced to take on all sorts of cuts. It has taken an entire century to develop a rights system for laborers. We’ve been pushed decades back in that fight.”

Gissur Pétursson, head of the Directorate of Labor, said that in cases where wage earners agree working full time on lower wages while accepting unemployment benefits, they are also violating the law.

“They are simply defrauding benefits. It might happen that people will be asked to repay their unemployment benefits if such practice is proven,” Pétursson said.

Pétursson explained that an employer can never be alone in deciding to change an employee’s working hours. If an employee does not want to cut to his or her working hours, he or she should be laid off with the usual term of notice.

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