Unemployment insurance in Iceland

This article contains information on unemployment and what conditions you will have to fulfil to be entitled to unemployment benefits.

In what situation can I claim?

If you are a wage earner in Iceland or a self-employed individual, and lose your job, you may be entitled to unemployment benefits.(atvinnuleysisbætur).

In order to be entitled to unemployment benefits, you must register with the Directorate of Labour and fulfil the following conditions:

Be unemployed
Reside in Iceland (domiciled)
Actively seek employment
Be able to work
Be ready to undertake unskilled work
Have authorisation to undertake work here in Iceland without limitations
Have been employed in at least a 25% position for 3 months in the past 12 months before applying for unemployment benefits
Reached the age of 18 but not yet the age of 70.

What am I entitled to and how can I claim?

Wage earners and self-employed individuals may be entitled to the basic unemployment benefits for the first half-month (10 working days) after they lose their job
After having been paid basic benefits for the first two weeks after losing their work, wage earners and self-employed individuals may be entitled to income-linked unemployment benefits for up to three months
If you have been employed in a 100% position for 12 months, you may be entitled to 100% unemployment benefits
If you have been employed in a 100% position for 6 months, you may be entitled to 50% unemployment benefits
If you have been employed in a 75% position for 8 months, you may be entitled to 67% unemployment benefits
If you have been employed in a 50% position for 10 months, you may be entitled to 50% unemployment benefits
The income-linked benefits of self-employed individuals can be up to 70% of their average income during the preceding income year in which the individual became unemployed

Extra payment for children:
Persons receiving unemployment benefits who have children under the age of 18 to provide for may be entitled to an additional 4% of undiminished basic benefits for each child.

How much and how long?

Despite the income linkage, there is a certain maximum in the amount of monthly payments of unemployment benefits
After three months of unemployment, the income-linked benefits are cancelled, and only basic benefits are paid thereafter. The monthly amount of basic benefits is determined annually
Unemployment benefits are paid for a maximum of thirty months. If the person accepting unemployment benefits is temporarily employed, the period is extended in accordance with the period of employment
When a total of three years on unemployment benefits has passed, 24 months must elapse before you are again entitled to unemployment benefits. During these 24 months, you must be employed for at least 6 months to earn your right to unemployment benefits again
A person who resigns, or who is responsible for the termination of their employment, may have to undergo a waiting period for unemployment benefits for a certain amount of time after having applied for unemployment benefits. The same applies to those who discontinue their studies without valid reason
If you have been engaged in part-time work, you may be entitled to proportional unemployment benefits in accordance thereto
Applications for unemployment benefits can be submitted to the service offices of the Directorate of Labour all over Iceland or online here. Unemployment benefits are paid on a monthly basis.

Jargon busters

A wage earner or employee is a person who is hired to work for someone else, enters into an employment contract and is paid a wage by the person who hired him.

A self-employed individual is a person who works for himself and must pay, on a monthly basis, or in another regular manner according to the rules of the Directorate of Internal Revenue, withholding tax on calculated remuneration and a social insurance contribution.

Work capability A person who is healthy enough to work either part-time or full-time is capable of working. A person who, due to his/her health, cannot work, either full-time or part-time, is unable to work, either partially or wholly. A person who is wholly unable to work does not fulfil the conditions for the payment of unemployment benefits. Physicians are responsible for assessing work capability.

Forms you may need to fill in

Forms from the Directorate of Labour

Know your rights

The following websites provide information on your rights.

Who do you need to contact?

Directorate of Labour / Eures in Iceland
Grensásvegur 9 (see map)
108 Reykjavík
Tel: 515 4800
E-mail: postur@vmst.is
https://island.is/s/vinnumalastofnun

This page was last updated in 2024.

Unemployment insurance in Europe →
Unemployment Insurance in Iceland

Key points of EU Unemployment Insurance coordination

Transferring periods of work and insurance between EEA countries As an EU citizen you can transfer acquired rights from Unemployment Insurance when moving between EU/EEA contries. In this way it may be easier to become entitled to unemployment benefit in the country you move to.
In the vast majority of the Member states the aggregation rule become fully applicable as soon as you starts to work in the country. However in Denmark, Belgium and Finland you must work some period there before you can use the aggregation rule.
You need a PD U1 document in the country you leave or if the involved countries use electronically exhange (EESSI) there will be issued a SED U002. The countries who issues the highest number of PD U1 documents are Germany, Austria, Switzerland and the Netherlands. The countries who receives most PD U1 documents are Lithuania and Italy.
Transferring unemployment benefits Under certain conditions you can go to another EU country to look for work and continue to receive your unemployment benefits from the country where you became unemployed. The period you can export your unemployment benefits varies from 3 to 6 months in the different Member states.
You have to apply for a PD U2 document in the country you leave, or if you haven't done that the institution in the receiving country must request a SED U008 from the competent institution in your last country.
The countries who issues the highest number of PD U2 documents are Germany, Switzerland, the Netherlands and Denmark. Poland is the country who receives by far most PD U2 documents.
Unemployment benefits coverage According to OECD the net replacement of income after 2 months of unemployment, for a single person without children whose previous in-work earnings were 67% of the average wage varies from 33 percent (Ireland) to 91 percent (Belgium). Read more here..

Having residence in another EU country than where you work? According to EU social security coordination rules you must only be insured against unemployment in one country at a time. As a generel rule this country is where you work.
In Member states who have compulsory insurance, you will automatically be covered when you start working there.
However you may be insured by your country of residence if you are posted to a EU/EEA country or work in two or more EU/EEA countries at a time. In these situations you can not your self decide where to have unemployment Insurance, but you (or your employer) must apply for a PD A1 document which states in which country you are covered by social security, including Unemployment Insurance. Special rule also apply for cross-border workers ("frontier workers").
Third-country Nationals working in EU/EEANON-EEA citizens are covered by Unemployment Insurance in the EU countries who have compulsory Unemployment Insurance. In countries with voluntary Unemployment Insurance (Denmark, Sweden and Finland) third-country nationals can become member of an Unemployment Insurance Fund.
In the most countries Third-country nationals can also use the EU Coordination rules when moving within EU/EEA (however not in Denmark, Iceland, Liechtenstein, Norway and Switzerland).
Third-country nationals in short-tem working relations often faces problems with actually get Unemployment benefits, even though they have contributed to the system. This is due to the fact that one normally need a residence permit which allow one to take any job, and also because of a qualifying period in most countries between 6-12 months.

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