Overpaid unemployment benefits, including overpaid benefits of the Reduced Employment Ratio Scheme, must be collected according to Article 39 of Act no. 54/2006 on Unemployment Insurance. 

Debt can arise due to various factors, but benefit recipients are notified of debt formation on each of their payslips and by a special notification on My pages or by sending a letter regarding the directorate’s decisions which may lead to debt formation. 

Debts due to overpaid unemployment benefits can, for example, arise due to any of the following factors: 

  • Income that the applicant receives alongside unemployment benefits, i.e., due to work, from pension funds, The Social Insurance Administration (TR)labour union sickness funds, etc., although maintaining the income threshold limit, which is 73,827 krper month. 
  • When unemployment benefits are calculated, the reduction in unemployment benefits due to income is calculated in accordance with the estimated income, e.g., in part-time employment. As information regarding actual income from the Iceland Revenue and Customs’ wage payer’s registry is not received until at least the following month, adjustments will always be retroactive. As a result, unemployment benefits may be reduced upon payment. 
  • Periods where the applicant did not meet the conditions for unemployment benefits e.g.due to self-employment, unreported work, overseas travel, serving a sentence, etc. 
  • Incompatible payments alongside unemployment benefits, i.e., sickness and accident benefits due to incapacity to work either fully or partially intended for subsistence, rehabilitation pension, maternity/paternity leave, payments to parents of chronically ill and severely disabled children which are not reimbursement of costs, payments for annual leave and retirement. 

Overpaid unemployment benefits are collected in the following manner:  

The applicant continues to be paid unemployment benefits:

  • The applicant is notified of The Directorate of Labor decision and of the amount of overpaid unemployment benefits via ‘My pages or by letter. 
  • Overpaid unemployment benefits are offset against the subsequent unemployment benefits of the same individual, amounting to 25% of the subsequent unemployment benefits each month. 

The applicant is not paid unemployment benefits:

  • If the applicant deregisters from the unemployment registry, the remaining debt due to overpaid unemployment benefits is collected in accordance with the following: 
  • The applicant is notified of the Directorate of Labour's decision and the amount of overpaid unemployment benefits with a 15% surcharge by sending a collection letter. 
  • The surcharge shall be waived, according to Article 39paragraph 2 of Act No. 54/2006, if the insured presents valid arguments in support of the view that they were not to blame for the shortcomings that led to The Directorate of Labour’s decision. 
  • If the applicant does not respond the Directorate of Labour's demand for payment, the matter is sent to the District Commissioner's Collection Centre in Blönduós for further collection. 

The decisions of The Directorate of Labouregarding the reclaiming of overpaid unemployment benefits are enforceable. Please note that an administrative appeal does not suspend the legal effect of collection, unless to the extent that enforcement is delayed until a ruling on welfare matters is available.


Debts can be paid to The Directorate of Labour by transferring the amount into the following bank account: 

Account No.: 0160-26-004404     ID number (kennitala): 440407-0640  

Please note that if the payment is not made from the debtor's account, the debtor's ID number (kennitala) must be included in the explanation. 

Payment distribution:

If payments are required to be distributed, it is possible to send the claim the Collection Centre in Blönduós (Innheimtumiðstöð á Blöndúósi). No additional costs will be added to the claim when it is sent to the Collection Centre in Blönduós. Please be informed that the debt will be automatically transferred in 30 days from the date of the collection letter or penalty decision for further processing. 

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