All eligible parents have the right to certain family benefits in the case of childbirth or adoption. In order to support equality between men and women in the home and in the labour market and to ensure the welfare of children, both parents have equal rights to maternity/paternity benefits and leave. This law affords both men and women the reality of coordinating family life and work outside the home. The benefits are linked to the birth of the child and are to replace income during the leave. The law also provides for a 13-week parental leave during the child’s first 8 years. For students and those not active in the labour market it is possible to receive a grant.

Maternity/Paternity Leave (Fæðingarorlof)

This leave is for those parents working in the labour market, either full or part time and those who are self-employed. To be eligible for this fund:

• You must have been employed for at least 6 months before the day of the leave.
• Parents who have been working in other EEA countries shall be eligible if the parent has been employed in Iceland for at least one month during the last 6 months prior to the first day of leave.
• For new residents in Iceland the main condition for eligibility is that the parents have lived legally in Iceland for at least 6 months prior to the birth.
• Only those parents who have custody or joint custody are eligible for benefits. Non-custodial parents may receive the right to leave providing the custodial parent has agreed that the non-custodial parent is to have access to the child during the period of leave.
• The right to leave expires when the child is 18 months of age.
• You must notify your employer as soon as possible and fill out an application from the SSI.
• Application should be turned in at least 6 weeks previous to the expected birth date.

Each parent has an independent right to 3 months of leave. This means that the mother has the right to 3 months leave, and the father also has the right to 3 months leave. This is however not transferable. The mother may not take the whole 6 months herself if the father chooses not to take leave. It is possible however for the parents to divide the 3-month leave into shorter periods and even to arrange to take it in the form of reduced working hours. After the initial 3 months for the mother and 3 months for the father there is an additional 3 months that may be taken. These 3 months may be split between the parents or just one parent may take these 3 months, meaning that one parent may take up to 6 months leave.

To apply for leave an application from The Social Security Institute (Tryggingastofnun ríkisins) is filled out and given to the employer to sign. Then either the employee or the employer forwards the application to SSI for processing. This application should be submitted at least 6 weeks prior to the expected birth of the child. It is also expected that the employee tell their employer of the upcoming leave as soon as possible. The employer has the right to request proof of custody from the parent.

For full-time workers the monthly benefits during leave are 80% of the average wages during a 2 year consecutive period ending 2 months prior to the first day of the leave. The benefits are adjusted accordingly for part-time workers. There is however a cap on the lowest amount paid out. For those employed 25-49% the minimum is 70.543 krona. For those in 50-100% employment the minimum is 97.769 krona depending on how many hours a week you have been working.

The payments are paid monthly on the first day of each month. It is important to note that during this leave, employees still have the right to any staff benefits or privileges that they would have gained and have already earned. For instance vacation time and seniority are still gained during leave. Upon returning to work the employee shall enter into the same or a comparable position. It is not legal to terminate an employee that is on maternity/paternity leave.

Parental Grants (Fæðingarstyrkur)

Parents that are unemployed or are full-time students each have the independent right to a maternity/paternity grant for up to 3 months in connection with the birth of their child. This grant is not transferable. To be eligible for this grant:

• The applying parent must have been living in Iceland at the time of the birth and for 12 months prior to the birth of the child.
• Parents’ right to the grant is conditional on the fact that the applying parent has custody or joint custody of the child.
• The parents’ eligibility expires when the child is 18 months of age.
• You must be a full-time student, studying 75–100% continuously for a 6-month period during the last 12 months before the birth.
• You must be unemployed or working less than 25%.
• You must fill out an application at the SSI 3 weeks before the expected birth of the child.