Parental leave

After a new child is born or enters the home, parents who are students are entitled to a monthly allowance of ISK 184,119. Parents who are unemployed or employed part-time (less than 25%) are entitled to a monthly allowance of ISK 80,341.

How Long Will You Receive a Parental Allowance?

Beginning January 1, 2020, the parents of children who are born, adopted under a non-family adoption or taken into permanent foster care are entitled to a parental allowance for six months, although the way the allowance is paid out varies:

• 4 months (each parent receives this allowance separately), and

• 2 months (both parents receive this allowance jointly and can divide it as they see fit)

To be eligible for a parental allowance, a parent must have had their legal domicile registered in Iceland for the 12 consecutive months before the date the child was born or came into the home.

If a parent has had their legal domicile in Iceland for some period of time in the months leading up to the child's birth or entering the home, then periods of residence in other EEA states may count towards the 12-month requirement for legal domicile. But in those cases, no more than a month may have passed after the end of social insurance coverage in another EEA state. 

Students: Eligibility Requirements

To be eligible for a parental allowance, parents must have been full-time students for at least six months out of the last 12 months before the child was born, adopted under a non-family adoption or taken into permanent foster care. Likewise, the parents must demonstrate satisfactory achievement in their studies during the period to be eligible for a parental allowance

Full-Time Student Requirement

• Full-time students are engaged in 75-100% studies without interruptions for at least six months of the last 12 months before the child was born or entered the home

• You must submit proof of enrollment and satisfactory achievement in your studies from your school

• It is sufficient to demonstrate that studies are being pursued instead of satisfactory achievement in the semester that the child is born or enters the home.

Exemptions from Full-Time Student Requirement

Parents may still receive a parental allowance if they don't meet the full-time student requirement in the following cases:

• a parent has been employed in the Icelandic job market for at least six consecutive months before beginning their studies

• a parent has completed at least one semester of studies and then been employed in the Icelandic job market without interruptions. In this case it is required that the combined period of studies and employment be at least six months without interruptions

• A parent has less than 75% of their studies remaining to complete their declared degree

Beginning & Dividing Period of Parental Allowance

Payment of the parental allowance begins as soon as the first weekday of the month after the month the child is born.

A parent may decide to postpone payment, but the right to receive a parental allowance ends when the child reaches the age of 24 months.

In cases of non-family adoption or taking a child into permanent foster care the following apply:

• Payment of the parental allowance begins as soon as the first weekday of the month after the child enters the home.

• The right to receive a parental allowance ends 24 months after the child enters the home. It is necessary that the child welfare committee or other qualified entity confirms the arrangements.

• When collecting a child abroad, payment of the parental allowance may begin on the date of departure from Iceland, as long as the relevant authorities or institution has confirmed that the adoption may go forward.

Parental Allowances for Single Parents

A single parent who has a child though assisted reproduction technology, or single parents who have adopted children or taken them into permanent foster care are entitled to parental allowances for twelve months.

Extended Allowances for Multiple Births/Children Entering the Home

Parents are entitled to an additional joint allowance for three months for:

• each child born beyond a singleton, including live births and stillbirths after 22 weeks of pregnancy.

• each child beyond one which is adopted under a non-family adoption or taken into permanent foster care.

Extended Allowances for Children with Severe Illness or Disability

Parents whose child has a severe illness or disability may be eligible to receive an additional joint allowance for up to seven months.

• Severe illness or disability entails a level a care that exceeds typical care for an infant. Minimum stay at a hospital is 7 days. This also applies when hospitalisation is directly after the child's birth.

Long-term complications from chicken pox, ear infections and other such conditions are not considered severe illnesses.

Required Supporting documentation:
Medical declaration for parental leave due to child's illness or disability

It is important that, in the declaration, the medical professional sets out clear reasoning for the exceptional care necessitated by the severe illness or disability and how long this level of care will be needed. It is also important to include the results of the medical examination.

Rights of Individuals Who Place Their Child for Adoption or in the Foster Care System

Rights to parental allowance end on the date that a child is placed for adoption or in the foster care system. Birth parents are, however, entitled to a joint paid parental allowance for a period of two months after a child is born.

Amounts & Payment Arrangements

Monthly parental allowance to a parent not participating in the labour market or working in an employment ratio less than 25% is:

• ISK 80,341 (for children born 1 January - 31 December 2020)

• ISK 83,233 (for children who are born, adopted or taken into permanent foster on 1 January 2021 or later).

• ISK 87,062 (for children who are born, adopted or taken into permanent foster care on 1 January 2022 or later).

Monthly parental allowance to a parent studying full time (75-100%) is:

• ISK 184,119 (for children born 1 January - 31 December 2020)

• ISK 190,747 (for children who are born, adopted or taken into permanent foster care on 1 January 2021 or later).

• ISK 199,522 (for children who are born, adopted or taken into permanent foster care on 1 January 2022 or later).

Parental allowances are paid in arrears, i.e., you are paid the first weekday of each month for the previous month.

The payment is subject to withholding taxes.

Impacts on Parental Allowance Due to Other Benefit Payments

The following rules apply to the recipients of parental allowances:

• Parents who receive unemployment benefits may not concurrently draw on their entitlement to parental allowance or paid or unpaid parental leave, according to the Unemployment Insurance Act, No. 54/2006.

• Parents who receive per diem accident compensation (according to the Act on Accident Insurance under the Social Insurance System of Iceland, No. 45/2015) per diem sickness benefits (according to the Act on Health Insurance No. 112/2008) or rehabilitation pensions (according to the Social Assistance Act, No. 99/2007) may not concurrently draw on their entitlement to parental allowance or paid parental leave.

• Parents who receive payments for the care of chronically ill or severely disabled children may not concurrently draw on their entitlement to parental allowance or paid parental leave.

• Parents who receive vacation pay or termination pay may not concurrently draw on their entitlement to parental allowance or paid parental leave during the period they receive the above payments, according to law.

• Payments from other states associated with the same birth, non-family adoption or taking of a child into permanent foster care for the same period are deducted from parental allowance payments or parental leave payments. When applying you must include documents that disclose any other entitlements, period of payment and amounts.