Parents acquire the right to payments during parental leave if they have worked on the domestic labor market for a continuous period of 6 months before the date of birth of a child. The employment ratio for each month must be at least 25%.
Evaluation of employment ratio
86–172 hours worked in a month is equivalent to 50–100%.
43–85 hours worked in a month equals 25–49%.
If the parent is not in the same job capacity in a 6 consecutive month period prior to the date of birth, the average employment ratio for the period shall be used.
Effect of benefits, per diem and holiday pay during the period
The following payments during the period shall be applied in equal measurement to wages and salaries:
Unemployment benefits
Payments from the Maternity/Paternity Leave Fund for another child
Health and accident benefits
Payments from an union sickness fund
Compensation by an insurance company for temporary loss of employment
Income-related payments under Chapter III of the Act on Payments to Parents of Chronically Ill or Severely Disabled Children
The employment ratio is then based on the same ratio as the payments were based on.
Estimation of the employment ratio of self-employed, day-care workers, and spouses of farmers
Self-employed individuals are those who work for their own operations, irrespective of their legal form, and regularly pay the insurance tax as determined by the tax authorities. Full-time self-employed individuals are obliged to pay monthly withholding tax on the calculated remuneration, which is equal to the threshold amount of the Directorate of Internal Revenue in the relevant profession.
Childcare in the home corresponds to one-quarter of full-time work for each child, or 43 hours of work per month, in accordance with the Regulation on Childcare at Home.
The spouse of a farmer on an agricultural holding receives an assessed level of work effort of at least 50% of the farmer's job proportion when the spouse is neither formally registered as a member of the farm nor works outside the farm.
What applies as work on the domestic labor market?
The Maternity and Parental Leave Act (ffl.) states a number of cases that are also considered to be participating on the domestic labor market:
In Article 22, paragraph 2 ffl. it is stated that participation in the domestic labor market is furthermore to be regarded as:
a. holiday or leave under the law, collective agreement, or employment contract even if part or all of the employment is unpaid (only applies to employees),
b. the time during which the parent receives unemployment benefits, is on hold for such benefits or would have been entitled to it had the parent registered without work under the applicable Unemployment Insurance Act.
c. the time during which the parent receives daily allowance due to sickness or accident, is on the waiting list for per diem benefits or would have been entitled to them had the parent applied to the Health Insurance Administration under the Health Insurance Act and the Social Security Accident Insurance Act, or receives payments from the Trade Union Sickness Fund, provided the parent has left paid employment for health reasons;
d. the time during which the parent receives compensation from an insurance company in lieu of wages due to temporary loss of employment due to an accident,
e. the time during which a parent receives income-related payments under Chapter III of the Act on Payments to Parents of Chronically Ill or Severely Disabled Children or would have been entitled to such payments had the parent applied to the Social Insurance Administration.
In paragraph 2, Article 22 of the status of parents who come from the EEA area is discussed, i.a.:
When a parent has been employed on the domestic labor market for at least the last month of the vesting period, the Directorate of Labour shall, to the extent necessary, take into account the periods of employment as an employee or self-employed individual in another Member State to the Agreement on the European Economic Area, the Nordic Conventions on Social Security, the European Free Trade Association (EFTA) institutional agreement or the agreement between the government of Iceland on the one hand and the government of Denmark and the Home Rule of the Faroe Islands on the other, during the vesting period, provided that the work of the parent has conferred rights on the parent under the law of that state on maternity leave. The condition for this is that the parent must have started working on the domestic labor market within ten working days of leaving the labor market in another state within the European Economic Area, in another Nordic state, in another EFTA state, or in the Faroe Islands. The parent shall attach the required certificates for acquired periods of employment and periods of insurance in another state in accordance with the provisions of the Conventions to the application for payments from the Maternity/Paternity Leave Fund.
It varies between countries whether the insurance institution in question in Iceland issues such a certificate to the parent or whether the parent has to go to the Icelandic Health Insurance to obtain such a certificate. If a parent has to go to Icelandic Health Insurance, the parent must submit a form to Icelandic Health Insurance, which in turn sends an S040 certificate to the insurance institution in question in the EEA Member State which responds with an S041 certificate which is also the certificate that must be received by the Maternity/Paternity Leave Fund.
To confirm when the parent began working in Iceland, a contract of employment or confirmation from the tax authorities shall be returned that the parent registered his/her activities with them in accordance with the law.
Service provider
Directorate of Labor