Questions and answers regarding COVID-19

Questions regarding employees’ reduced employment ratio on the grounds of provisional clause XIII to Act No. 54/2006 on unemployment insurance.

1. Application process, basic conditions and duration

How do I apply for unemployment benefits due to reduced employment ratio

Applications for unemployment benefits due to reduced employment ratio are lodged in ‘My Pages’ (Mínar síður) for jobseekers. 

 

What are the conditions for being able to receive payments due to reduced employment ratio?

The employee’s employment ratio must be reduced by at least 20 Percentage point, and the employee must continue to work in a minimum 25% employment ratio.

Is there a minimum of how much the employment ratio must be reduced to be entitled to unemployment benefits?

The employment ratio must be reduced by at least 20 Percentage point.

Do I need to be in a full-time position to be entitled to reduced employment ratio?

No, it is not a condition that the employee is in 100% employment. The employment ratio must be reduced by at least 20 Percentage point, and may not be reduced to below 25%

I am employed in a part-time position and my employment ratio will be reduced. Am I entitled to unemployment benefits

Yes, providing that your employment ratio is at least 20 percentage point and will continue to be in a 25% employment ratio.

For how long can I receive unemployment benefits in reduced employment ratio?

Authorisations in the legislation um unemployment insurance due to reduced employment ratio are valid from the 15th of march until the 1st of June 2020.

 

I have been studying alongside employment, am I entitled to unemployment benefits?

Yes, students are entitled to unemployment benefits according to the provisional clause if their employment ratio has been reduced and other conditions are fulfilled

Does the employer have to submit a confirmation of reduced employment ratio

Yes, the employer does this via ‘My Pages’ (Mínar síður) for employers in a specific application format. Work is underway on preparing the appropriate forms and will be accessible shortly.

If I am an employee and received payments due to reduced employment ratio, do I lose my entitlement to unemployment benefits?

No, payments on these grounds of temporary authorisations do not affect your entitlement to unemployment benefits in the future.

Can reduced employment ratio in some circumstances be decided solely by the employer?

No, then employee must always agree to reduced employment ratio and retains all entitlements according to collective agreements.

I have a temporary work permit, am I entitled to payments opposite reduced employment ratio?

Yes, those who have temporary work permits may be entitled to payments in the recourse. 

I need to travel abroad for work, am I entitled to payments opposite reduced employment ratio?

Yes, residing abroad does not disqualify you from receiving payments opposite reduced employment ratio. 

If I am returning to work after parental leave and my employment ratio is immediately reduced, am I entitled to these benefits?

Yes, to find out your average wage, we use the parental leave amount which you were paid for the last three months. 

Does the employer need to make a new temporary employment contract with the employee?

An agreement must be made with the employee regarding reduced employment ratio. The Directorate of Labour encourages such agreements to be made in writing. The Directorate of Labour may request a copy of the agreement if deemed necessary.  

I have been completely without wages for the last three months and was due to begin working on the 1st of April in a full-time position. Am I entitled to unemployment benefits opposite reduced employment ratio?

No, probably not as the reference period used to calculate the unemployment benefit amount is unavailable. 

Do I as an employee need to have worked for the same employer for a certain amount of time to be entitled to benefits in reduced employment ratio?

No, the calculation is based upon your average wages for the last three months before your employment ratio was reduced. All wages which have been subjected to social insurance tax are taken into consideration. 

What is the entitlement of an individual who has no previous work history, and has only been working for their current employer for 1-2 months before their employment ratio was reduced?

Upon calculation of the individual’s average wages, the wages earned in the previous three months before the employment ratio was reduced are taken into account 

Is the employer’s confirmation submitted via My pages (Mínar síður) satisfactory, or does a copy of the agreement between myself and employer have to be included?

The employers confirmation via Mínar síður is satisfactory. The Directorate of Labour may request a copy of the agreement, but it is not necessary to submit a copy with the application. 

I am on sick leave; can my employment ratio be reduced and can I be paid unemployment benefits?

You are not entitled to unemployment benefits opposite reduced employment ratio if you are on sick leave. 

My employment was terminated, and I am on notice period. Can my employer withdraw my termination and make an agreement on reduced employment ratio instead?

Yes, employers may withdraw terminations and make an agreement with the employee on reduced employment ratio instead, although only with approval from the employee.  

 

2. Payment amounts

How much are the benefits that I receive in reduced employment ratio?

It is not possible to provide one general answer as the amount is determined by several factors, including by how much your employment ratio has been reduced, what your wages were, and the wages that you will continue to receive.

Payments to individuals who are reduced from 100% employment to 50% will be 50% of 456.404 kr., or 228.202 kr. as well as an 11,5% pension fund contribution. This in on the condition that wages form the employer and unemployment benefit payments together may not exceed a higher amount than 700.000 kr. per month and shall not be a higher amount than 90% of the employee’s average gross wages.

If the average gross wage is lower than 400.000 kr. per month for full-time employment, the benefits are not depleted.

The individual’s gross wage may not increase from having their employment ratio reduced.

 Example I: An employee in 100% employment is paid 400.000 kr. per month, but his employer decides to reduce his employment ratio by 75% due to operational hardship. This employee applies for 75% unemployment benefits form The Directorate of Labour and the employer pays 25% of the wages. 100.000. kr. is therefore paid from the employer and 300.000. kr. from The Directorate of Labour. His wages and unemployment benefits will together amount to the same wages that he would have received before his employment ratio was reduced, or 400.000 kr. per month.

 Example II: An employee in 100% employment is paid 600.000 kr. per month, but his employer decides to reduce his employment ratio to 50% due to operational hardship. This employee applies for 50% unemployment benefits from The Directorate of Labour. He is therefore paid 300.000 kr. from his employer and 228.000 from The Directorate of Labour. His wages and unemployment benefits will together amount to 528.000 kr. per month, or 84% of his gross income.

 Example III: An employee in 100% employment is paid 900.000 per month, but his employer decides to reduce his employment ratio to 60% due to operational hardship. This employee applies for 40% unemployment benefits from The Directorate of Labour. He is therefore paid 540.000 kr. from his employer and 160.000 kr. from The Directorate of Labour. His wages and unemployment benefits will together amount to 700.000 per month or almost 80% of his gross income.

Example IV: An employee in 50% employment is paid 250.000 kr. per month, but his employer decides to reduce his employment ratio by half due to operational hardship. This employee applies for 25% unemployment benefits from The Directorate of Labour. He is therefore paid 125.000 kr. from his employer and 114.000 kr. from The Directorate of Labour. As a result, the employee’s gross wages decrease, but not due the benefit depletion. He receives the full 25% of maximum wage-indexed unemployment benefits as his wages are lower than 400.000 kr.

 

What is the maximum possible unemployment benefit amount I can be paid?

If your employment ratio is decreased by 75%, you could be entitled to up to 342.303 kr. in unemployment benefits.

Will I receive the same gross wages per month if my employment ratio is reduced?

This will depend on your wages today. Wages up to 400.000 kr. per month before tax are fully guaranteed. Wages higher than this are guaranteed up to 90%, but never a higher amount than 700.000 kr.

3. Employers

I am an employer and need to confirm the reduced employment ratio of my employees due to recession. How do I do that?

You log into ‘My Pages’ (Mínar síður) for employers and fill out a confirmation of reduced employment ratio. 

Do I have to log into ‘My Pages’ (Mínar síður) for employers to confirm reduced employment ratio for my employees?

Yes, and please be informed that you are required have electronic ID (rafræn skilríki) or an Ice-key (Íslykill) registered to the company’s ID number (kennitala) or to the company’s representative to be able to access ‘My Pages’ (Mínar síður) for employers.

One of my employees has been employed with a grant from The Directorate of Labour. Am I permitted to reduce his employment ratio?

Yes, employees and employers who have both signed a contract for an employment grant from The Directorate of Labour are permitted to come to an agreement regarding reduced employment ratio. The amount of the employment grant will be depleted in accordance with the reduced employment ratio, and the employee is paid unemployment benefits opposite the proportion of the reduced employment ratio.

Will there be any surveillance of the companies who use the recourse?

The Directorate of Labour is permitted to request information and documentation from employers regarding recession of their operations, such as reduction in products or decrease in services.

 

Are employers permitted to dismiss employees and use the 25% rule in the notice period?

No, the recourse is intended to maintain employment relationships between employers and employees and therefore does not apply to individuals who are on termination notice period. 

 

How do I calculate the employee’s monthly wages for the confirmation of reduced employment ratio in My pages (Mínar síður)?

The employee’s total monthly wages shall be calculated based on the reduced employment ratio. That is, the amount that would be paid for working for the entire month in the reduced employment ratio. Example: Jón is employed in a 100% position for which he is paid 100.000 kr.per month. His employment ration is reduced to 25%, for which he is paid 25.000 kr. per month. The amount of registered intended wages is therefore 25.000 kr. 

My employees’ wages vary from month-to-month due to shift supplements and other factors which need to be taken into consideration upon calculation. What do I do?

The Directorate of Labour requires information regarding your employee’s wages will receive for the work intended to perform after the employment ratio has been reduced. Therefore, information of the intended wages which most correctly reflects the wages that the employee will be paid must be submitted. 

4. Company bankruptcy

If the company I work for becomes bankrupt following reduced employment ratio, does my entitlement with the Wage Guarantee Fund decrease?

No, in instances when the employee’s employment ratio has been reduced at the request of the employer due to recession in operations, the employee’s wages will at the calculation of claims, be based on the amount before the employment ratio was reduced

What happens if the company I work for becomes bankrupt?

You will retain all entitlements to payments from The Wage Guarantee Fund (Ábyrgðarsjóður launa) in accordance with the previous employment ratio before the employment ratio was reduced. 

5. Questions regarding recession in operations of self-employed individuals, on the grounds of provisional clause XIII to Act No. 54/2006 on unemployment insurance.

 

What should I do if I am self-employed and must reduce operations?

Self-employed individuals are not required to cease operations, but rather notify Iceland Revenue and Customs (Skatturinn) of substantial reduction of operations. They are only required to submit RSK form No. 5.02 to Skatturinn, who will send a confirmation regarding this to The Directorate of Labour.

Am I required to report to any projects I work on while receiving unemployment benefits?

Yes, self-employed individuals are required to report all projects they work on via ‘My Pages’ (Mínar síður) 

Var efnið hjálplegt?

Þakka þér fyrir þitt álit.
Það væri gagnlegt að vita meira um hvað þér finnst.

Hvað er helst að?

Hunang Hunang logo

Þessi vefur notar vefkökur (e. cookies).

Sjá nánar í persónuverndarstefnu Vinnumálastofnunar.