Unemployed? There’s A Benefit For That

The Grapevine’s ongoing guide to getting shit done

Jobs, am I right? In the last installment of this series we took a look at how to leave a job — whether you’re let go or you resign — and what to expect in terms of notice periods. But once that part is understood, it inevitably comes the time to consider what comes next. If you don’t have another job lined up to transition into without a gap between paycheques, what can you do to make sure your bills are paid and your body is fed?

That’s where the Directorate of Labour comes in. It is the government body in charge of receiving and processing applications for unemployment benefits, and then paying out benefits to job seekers on a monthly basis. “Job seekers” is a key term here — receiving unemployment benefits is not a sweet government-funded vacation or rest period. Recipients of unemployment benefits are responsible for actively looking for work and to prove they’re doing so to the Directorate of Labour.

This effectively means that by receiving unemployment benefits, a job seeker is agreeing to take any paid work offered to them, take a job anywhere in the country, participate in labour market measures available, and to provide the Directorate of Labour with the necessary information to increase the likelihood of obtaining a suitable job. That’s not to say a job seeker living in Reykjavík will be forced to sell their home, uproot their family and move to Neskaupstaður if a job opportunity presents itself. Being able to demonstrate that you’ve been actively seeking employment should tick the directorate’s boxes — literally, you’ll have to tick a box confirming you’ve been looking for a job around the 25th of each month in order to keep your benefits active.

Wait, but who’s eligible?

We’re getting ahead of ourselves talking about looking for jobs — we haven’t even applied for benefits yet! In order to apply for unemployment benefits, one must be between the ages of 18 and 70, and have been working in Iceland at a minimum 25% employment rate for the past 12 months. The directorate typically considers an applicant’s 12 prior months of employment and income when calculating benefits, but they can look as far back as 36 months.

Those transitioning from another benefit — parental leave, for example — into unemployment benefits will have the 12 months prior to their current leave taken into consideration.

What about someone who has only just arrived in Iceland? If they’ve been working in another EEA country, then getting a U1 certificate could establish entitlement to collecting benefits in Iceland while seeking employment locally.

Self-employed individuals and contractors are also eligible for benefits, provided that said individual has been paying monthly income tax on their calculated salary to Skatturinn. Self-employed folks will also have to close their self-employment registration with the tax office to confirm they’re not doing any work.

In addition to being within the correct age range and having been active on the labour market, applicants must have their legal domicile registered in Iceland, and be generally willing to do any work.

I just got fired, time to apply!

Hold your horses there, cowboy. As we established in our previous Do Shit article, there’s a notice period to take into consideration. A job seeker cannot apply for unemployment benefits earlier than 14 days before becoming unemployed — and you’re not “unemployed” until your notice period runs out and any vacation days being paid out from your previous employer are accounted for.

So, if you were to have been served your termination notice on January 30, 2025, and have a three-month notice period, plus 22 days of accrued vacation time, you should be sending in your application for unemployment benefits between May 15 and June 1.

The Directorate of Labour notes that “It takes 4–6 weeks to process an application. If supporting documents are missing, the processing time may be extended.” It’s also good to know that benefits are not paid retroactively, so it’s on you to apply at the right time to ensure you’re not left without income or benefits.

What if I quit?

I get it. Sometimes the prospect of no job is better than staying in a shitty situation. But if you quit, you should have a letter of explanation ready to submit along with your application. The directorate also notes that you should expect your application to experience some delays. This process can be sped up if you’ve been discussing your working situation with your union ahead of resigning — then you’ll also want to get supporting docs from your union to submit with your application for unemployment benefits.

How much will I receive?

The directorate notes that “the first two weeks, basic unemployment benefits are paid. Then the income-linked benefits take over for the next three months, for those who are entitled to it.”

“Basic” benefits are as follows:

364.895 kr. per month based on 100% right to benefits.

273.671 kr. per month based on 75% right to benefits.

182.447 kr. per month based on 50% right to benefits.

91.223 kr. per month based on 25% right to benefits.

“Woah, woah, woah!” you’re shouting at the page? “But I was earning 1.2 million kr. per month before being let go! That’s too little!” Those “income-linked” benefits will kick in for three months, paying out a maximum of 575.246 kr. per month. It’s not in the millions, but it’s something — and perhaps motivation to be serious about finding something new.

The end beginning

Don’t let your employment status get you down. Get your benefits set up and look at your job search as an opportunity to try something new or different and potentially more interesting or exciting. The Directorate of Labour offers study grants for job seekers, so maybe you can use this period of time to gain some new skills to take into your next chapter.

Happy job hunting!

Follow the Grapevine’s Do Shit series to collect tips and tricks for navigating life and bureaucracy in Iceland.

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