Public sector employees taking part in two large trials between 2015 and 2019 worked 35-36 hours per week, with no reduction in pay. Many participants had previously worked 40 hours a week.
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The trials run by Reykjavík City Council and the national government saw worker wellbeing "dramatically" increase across a range of indicators, from perceived stress and burnout, to health and work-life balance, according to researchers from think tank Autonomy and research organization the Association for Sustainable Democracy (Alda).
The trials involved 2,500 people - more than 1% of Iceland's working population - and were aimed at maintaining or increasing productivity while improving work-life balance. Researchers found that productivity and services stayed the same or improved across the majority of workplaces.
Autonomy and Alba, which advocate for a shorter working week, analyzed the data from the trials.
Following the trials, Icelandic trade unions negotiated reductions in working hours for tens of thousands of their members across the country.
Some 86% of Iceland's entire working population is now working shorter hours, or have gained the right to shorten their working hours, according to Autonomy and Alda.
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Will Stronge, director of research at Autonomy, said the public sector trial "was by all measures an overwhelming success."
"It shows that the public sector is ripe for being a pioneer of shorter working weeks - and lessons can be learned for other governments," he said.
Daiga Kamerade, associate professor of work and wellbeing at the UK's University of Salford, told CNN Business that while the trial was encouraging, studying public sector organizations that may have better working conditions than the private sector could have affected the results.
"Reducing the working week from 40 to 35-36 hours is a first step towards a shorter working week, we need similar large-scale trials that push this reduction further - for example, looking at a true four days working week of 32 hours or less," she said.
CNN Business has reached out to the Icelandic government and Reykjavík City Council for further comment.
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Kamerade said that in her own research, her team explored the motivations of working reduced hours, and found that working less is perceived as having more control and freedom in one's life, which can then increase wellbeing.
A growing number of small companies have already adopted a shorter working week - and now, bigger corporations are investigating the potential benefits of the change.
Unilever New Zealand announced in December that it would trial a four-day workweek at full pay, following a change in working habits caused by the Covid-19 pandemic.
Microsoft trialed a four-day workweek in Japan in 2019, and said productivity, measured by sales per employee, went up by almost 40% compared to the same period the previous year.