Application for parental leave

General information on calculating maternity and paternity leave payments

The monthly payment to a parent is 80% of the average total wages over a certain period.

What period is used?

A 12-month period in the Icelandic labour market. 4 months is the minimum allowed to use for payment calculations.

General workers: Period is the 12 months that end six months before the month of birth of a child.

Example: The date of birth of a child is December 1, 2024. The calculation period is June 1, 2023 - May 31, 2024.

Self-employed: Period is the year before the birth year of the child, from January to December.

Example: The date of birth is 1 December 2024. The period that is used for calculation is 1 January 2023 - 31 December 2023.

Both a general worker and self-employed? If an worker is in a 50% or higher employment ratio, the reference period of the general worker is used. If an worker is in less than 50% employment ratio, the reference period for self-employed workers is considered.

Read more

What is considered participation in the labour market, see "Work".

Income

The amount a parent receives from the Maternity and Paternity Leave Fund is 80% of the total average income over the 12 month period used for calculations. Maximum payment during leave is 700.000 ISK.

General workers: Salaries from the Icelandic labour market are used for calculation.

Self-employed: Calculated remuneration is used. Full-time self-employment is based on the parent having paid monthly withholding tax and insurance premiums from the calculated remuneration, which is in accordance with Revenue and Customs‘ reference amount in the relevant profession. A self-employed individual must have at least 25% of that threshold amount.

In both cases, a requirement is that social security contributions on wages (Icelandic: tryggingagjald) has been paid for salaries and calculated remuneration.

Taxes and other payments

• All payments from the Parental Leave Fund are subject to income tax.

• All are required to pay a fixed amount into their pension fund.

• Parents can continue to pay into their private pension fund but the employer's contribution is not paid.

• Parents can continue to pay their union fee. Please note that union rights can be discontinued if fees are not paid over a certain period.

Personal tax credit

You can use personal tax credit to lower the income tax withdrawn from maternity and paternity leave payments.

Maximum payment

The maximum payment is ISK 700,000 per month. This means that no one can receive payments higher than this amount, no matter how high the salary was.

For children born in 2025, the maximum payment will be 800,000 ISK per month and 900,000 for children born in 2026.

Minimum payment

222,494 ISK per month for a parent working 50-100%.

160,538 ISK per month for a parent working for 25-49% of the time.

If the applicant is in less than 25% employment, they can apply for a maternity and paternity grant.

The amounts apply to parents of children born, adopted or fostered permanently in 2024.

Study or work outside Iceland

Parents who have been studying more than 10 ECTS and in less than 25% employment, or working abroad, may be entitled to have months excluded from payment calculation and in that way possibly increase payments during maternity and paternity leave.

It is recommended to contact the Directorate of Labour for guidance if such circumstances apply: faedingarorlof@vmst.is.