Retained benefit entitlement. 

The general rule is that an individual can retain already acquired unemployment insurance for up to 24 months from the date that they verifiably stopped working. 

The time that the insured works in the domestic labour market during the period is considered to be an accrual period, as applicable. 

  • When calculating the accrual period when it comes to retained unemployment insurance, the last 12 months that the insured has worked on the domestic labour market in the last 36 months from the commencement date of the unemployment benefit application shall be taken into consideration.  
  • If the insured does not apply for unemployment benefits within 24 months from the date on which they verifiably withdrew from the labour market, their right to retain their unemployment insurance expires. 
  • This does not apply to those who are paid unemployment benefits in other countries during the same period. 

Service of sentences  

Insured individuals who withdraw from the labour market in order to serve sentences in accordance with court judgements may retain accrued unemployment insurance entitlement until they complete the service of their sentence. 

 

  • When calculating the period of employment when it comes to retained unemployment insurance, the last 12 months from the time when the insured verifiably stopped working and the period of imprisonment began must be taken into account. 

 

  • If unemployment benefits are not applied for within six months from the date of which the sentence ended, the right to retain the unemployment insurance expires. 

 

  • A certificate from The Prison and Probation Administration shall accompany the application for unemployment benefits, stating, among other things, the period during which the sentence was served. 

 

  • This does not apply to those who receive unemployment benefits in other countries during the same period. 

 

Maternity / Paternity leave 

A person who is considered insured and takes maternity / paternity leave according to the Maternity/Paternity and Parental Leave Act can retain their accrued unemployment insurance for up to 24 months from the date on which they verifiably commenced their maternity / paternity leave. 

  • The time that the insured worked on the domestic labour market during the period is considered to be an accrual period. 

 

  • When calculating the accrual period when it comes to retained unemployment insurance, the last 12 months that the insured has worked on the domestic labour market in the last 36 months from the commencement date of the unemployment benefit application shall be taken into consideration, providing they fulfil the conditions of Act no. 54/2006 on Unemployment Insurance in other respects. 

 

  • If the insured does not apply for unemployment benefits within 24 months from the date on which they verifiably withdrew from the labour market, their right to retain their unemployment insurance expires. 

 

  • This does not apply to those who receive unemployment benefits in other countries during the same period. 

 

Unfit to work due to illness or accident. 

A person who is considered insured and withdraws from the labour market and is unable to work due to illness or an accident, can retain their accrued unemployment insurance while they are unable to work. 

 

  • When calculating the period of accrual when it comes to retained unemployment insurance, the last 24 months from the time when the insured verifiably stopped working and the unfit to work period began. 

 

  • If the unemployment benefits are not applied for within 12 months from the date of which the individual becomes fit to work again, their right to retain the unemployment insurance will expires. 

 

  • A certificate from a specialist doctor caring for the insured must accompany the application for unemployment benefits, stating, among other things, when he became unfit to work and when they became fit to work again. 

 

  • This does not apply to those who receive unemployment benefits in other countries during the same period. 

 

Employer bankruptcy 

 The Directorate of Labor is permitted pay an employee of a bankrupt company unemployment benefits for the time he is unemployed during their notice period while they await the final settlement of their wage claims according to law, provided they fulfil the conditions of the Unemployment Insurance Act. 

It is also a condition that the employee transfers to the Unemployment Insurance Fund the part of his wage claim against the Wage Guarantee Fund that is equal to the amount of the unemployment benefits he receives during this period. 

 

The following documents must be submitted, where applicable, when applying for unemployment benefits during the notice period:  

  • Employer's certificate or confirmation of working hours from a labour union if it is not possible to obtain an employer's certificate. 
  • Statement regarding the transfer of a wage claim to the Unemployment Insurance Fund. 
  • Confirmation from a trade union that a claim will be made within a legitimate notice period. 
  • Certificate of fitness to work in the case of reduced working capacity. 
  • Information regarding the percentage of employment requested and estimated income from part-time employment. 
  • Documentation regarding payments from pension fundsThe Social Insurance Administration (TR) and other parties. 
  • Documentation regarding capital gain. 
  • Confirmation from school regarding graduation, stating the applicant's study period. 
  • Confirmation from school regarding the applicant’s study ratio and their timetable. 
  • Information on the number of legal registration days at sea. 

An application for unemployment benefits also includes an application for participation in labour market measures. 

  • Payment is made from the date of which the notice period takes effect, and after the notice period, the applicant can receive general unemployment benefits. 
  • An employee of a bankrupt company can receive income-related unemployment benefits. 
  • It is important that the company's employees contact The Directorate of Labour's service centre as soon as possible when they resign. 

Wage Guarantee Fund 

The obligations of the Wage Guarantee fund extend to claims for wages, compensation for lost wages as a consequence of the cancellation of an employment agreement, vacation pay, compensation in respect of damage caused by a work-related accident and pension fund premiums against an insolvent employer who is resident and has been operating in Iceland. 

A requirement for the fund’s guarantee is that the claims have been recognised as privileged claims under the Insolvency Act. 

 

Further information about The Wage Guarantee Fund is available here. 

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