Salaries and contract length may be negotiated in the interview or after a job offer is made. Icelandic labour law states that you should have a job contract not later than 2 months after the job starts. The contract should state your salary. There is always room to negotiate your pay. You are entitled to one interview with your employer every year to discuss pay.
The most common point of negotiation is over the monthly salary. If you have a job where you often work overtime, negotiating an hourly rate would be a good idea. Holiday pay and bonuses are fixed, so they do not have to be negotiated.