On this page you will find most frequently asked questions from VR members about holiday and holiday allowance.
We hope you will find the answer to your question here. If you do not, please don’t hesitate to contact us via telephone 510 1700 or email kjaramal@vr.is
Holiday and holiday allowance
-
Minimum annual leave governed by law is 24 weekdays in one holiday period, a total holiday pay of 10.17% of total wages.
As of May 1, 2024, there will be a vacation entitlement as follows (due to vacation taken during the vacation year starting on May 1, 2025):
- An employee who has worked for 6 months at the same company and has reached the age of 22, or for 6 months at the same company after graduating from secondary school, shall be entitled to 25 days of leave.
- After 5 years in the same profession, an employee must have 25 days of vacation.
- After 5 years in the same company or 10 years in the same profession, an employee must have 27 days of vacation.
- After 7 years with the same company, an employee must have 30 days of vacation.
- Acquired rights due to work in the same company are renewed after two years of work in a new company.
If your holiday rights exceeded 24 days at one company and you change jobs, you will regain those rights after two years at the new company. According to the collective wage agreement, you must prove your holiday rights with the former employer to receive the same with your new employer.
As of 1 May 2025, there will be a holiday entitlement which reads (due to leave taken in the holiday year commencing 1 May 2026):
- An employee who has worked for 6 months at the same company and has reached the age of 22 or for 6 months at the same company after graduating from secondary school must be entitled to 25 days of vacation (unchanged from 2024).
- After 5 years in the same profession, an employee must have 26 days of vacation.
- After 4 years in the same company or 10 years in the same profession, an employee must have 28 days of vacation.
- After 6 years with the same company, an employee must have 30 days of vacation.
- Earned rights due to work in the same company are renewed after two years of work in a new company (unchanged from 2024).
-
Holiday is always taken in consultation with your supervisor. The holiday shall be organized at least a month in advance. The employer shall try to comply with the employee’s requests as regards vacation time, to the extent possible given the nature of the operation, and the holiday shall be granted as one continuous period in between 2 May and 15 September, according to the Holiday Allowance Act.
If employees do not receive annual holiday when it is assumed by law, i.e. during the period from 2 May to 15 September each year, they shall receive a 25% extension of the part of holiday leave granted outside the aforementioned period or an increase in the equivalent payment.
-
The employee and the employer may reach an agreement to waive or reduce holiday and/or December bonuses, with corresponding periods of leave being granted instead, based on the wages of the individual worker. Such leave shall be granted in the form of whole or half working days.
Example: Monthly wage is ISK 550,000 for a full-time daytime work. Daily wage is therefore ISK 25,381 (ISK 550,000/21,67). December bonus for the year 2024 is ISK 106,000, more information here. The employee and employer may therefore agree that the employee receive 4 days of leave on full pay (ISK 25,381 x 4) along with a payment as the balance of the holiday bonus, i.e., ISK 4,476.
-
By agreement with your employer, you can use earned and accumulated leave during the notice period. This can only happen with a mutual agreement between employer and employee, with the main rule that holiday and notice period cannot fully coincide.
Holiday and notice period do not fully coincide because holiday time is added to the notice period when holiday is used during the notice period. -
Holiday allowance does not expire between years. An employee cannot move days of annual leave between years without consulting with their supervisor, who then pays out unused days from the previous holiday allowance year if transference of days to the new holiday allowance year is not authorized.
If parties agree on transferring days to the new holiday allowance year, we recommend having that agreement in writing.
-
The timing of holidays shall be a matter of agreement between the employer and employee. The employer shall try to respect the wishes of the employee regarding the use of holiday time. The employer has the final say when it comes to the use of holiday time. The employer shall notify the employee on the arrangement of holidays, at least a month before the holiday starts.
-
Daytime wages are calculated by dividing the monthly wage by 21.67, the average working weekdays in a month. Total weekdays in the year are 260 and divided by the number of months, 260 / 12 = 21.67.
-
Employees working part-time have the same rights as full-time ones; however, accumulation of holiday pay depends on employment proportion/wages during the accumulation period.
-
Agreed parental leave is counted as worked time for the purpose of calculating holiday leave entitlements, i.e. the right to take a holiday, but not for the calculation of holiday pay.
Statutory maternity/paternity leave is included in the calculation of working hours when accrued rights are calculated. For further information, please visit the website of the Maternity/Paternity Leave Fund, here.
Maternity/paternity and parental leave are subject to Act No. 144/2020 on the same subject.
When employees have worked with the same employer for more than a year before going on maternity/paternity leave, they are entitled to holiday bonus and December bonus during the statutory parental leave.
-
Employees who, at the request of their employers, do not receive annual holiday when it is assumed by law that holidays will normally be taken, i.e., during the period from 2 May to 15 September each year, shall receive a 25% extension of the part of holiday leave granted outside the aforementioned period or an increase in the equivalent payment.
No extension will be applied for holiday leave granted outside of aforementioned period at the request of the employee.
-
When an employee quits at one company and starts with another, they are entitled to holiday with the new employer as applicable, i.e. 24 or 25 days in a regular holiday period. The new employer must grant and make an agreement with the employee on holiday, and the holiday pay is possibly partly paid after accumulation at the new employer and in other respect at the settlement of accrued and accumulated holiday at the former employer.
If an employee has accumulated longer annual leave rights at the former employer, they will receive the rights again after two years at the new employer, provided that their rights were confirmed at the time of hire.
As of May 1, 2025, for vacations to be taken as of May 1, 2026, the vacation entitlement is 26 days and vacation pay is 11.11%
-
Holiday pay shall be added to all wages no matter what they are called. When an employee receives extra payments, e.g., bonuses, holiday pay shall be added to those payments.
However, holiday payments are not added to holiday or December bonuses nor payments that are specifically meant to cover paid-out costs of the employee, such as driving fees and per diem payments.
-
An employee is entitled to have sick days paid in lieu of holiday for as long as the employee cannot enjoy the holiday due to illness or accident or if injuries because of the accident last longer than 3 days, provided that the notification obligation is fulfilled.
The employee needs to notify the employer immediately on the first day that they cannot enjoy the holiday and specify the doctor from which they will obtain a medical certificate.
-
According to the Holiday Allowance Act, vacation time must be announced with at least one month’s notice. If the vacation time has been approved, the employer cannot unilaterally withdraw their approval.
-
When an employee who is not employed as the deputy of a superior temporarily takes over the functions of the superior, e.g., during holiday periods or illness, and such replacement periods last for one week or more, the subordinate shall be entitled to remuneration for deputizing in this way, taking into account the responsibility and workload undertaken. The parties shall agree on the remuneration before the deputising takes place.
-
The holiday period is, according to the Holiday Allowance Act, from 2 May to 15 September. Therefore, employers cannot force employees on holiday outside of the regular holiday period. It is a different situation with respect to employees that do shift work and have collected winter holidays. Winter holidays are only granted outside of the regular holiday period, i.e. during the period from 1 October to 1 May.
-
Employees accrue vacation time during paid sick days from their employer. Vacation pay is added to all salary, which means that you have the right to vacation pay for all paid salary, irrespective of whether the wages are due to work, sick-leave, or during notice period.
If sick-leave is not paid by the employer, but rather from a sickness fund, vacation time is not accrued for that time since vacation time is only accrued for wages that an employer pays.
-
Holiday under Article 1 of the Holiday Act No. 30/1987 shall be calculated on top of all wages. Employees are entitled to a minimum of 24 days of holiday each holiday year, or 10.17% holiday. Holiday depends on seniority or length of service in the occupation, but it is possible to agree specifically on increased holiday rights.
See more here about holiday rights.
Holiday can be calculated and paid in two ways:
- An employee accrues holiday time/days, and when they take holiday, they are paid by the company in accordance with their accrual. Accrued holiday time should appear on the payslip. If the employee leaves before the holiday hours are used, they are paid out on termination of employment.
- It is possible that an agreement has been made for holiday pay to be held at a specific bank. In that case, holiday is calculated at the end of each month and deposited into a special holiday account. The calculation of holiday pay shall then always appear on the payslip, showing the amount of holiday pay each month as well as how much is deducted from wages and deposited into the holiday account. The accumulation of holiday pay each holiday year in the holiday account shall also appear on the payslip. Holiday pay is then paid from the bank into the employee’s wage account before 15 May each year, and that amount covers the employee’s time off.
When holiday pay is deposited in a bank, the same rules apply regarding the taking of holiday, such as that the parties must agree on when the holiday is taken. When an employee is on unpaid leave but uses holiday pay that was paid into a bank for that period, that time counts as time in employment.
In some cases, holiday pay is paid out with wages, i.e. holiday pay is calculated on the payslip but not deducted for deposit into a holiday account. When this is done, employees have no holiday pay when they take holiday and are therefore often more hesitant to take holiday. This method is not in line with the objective of the Holiday Act, which is that people receive time off. We therefore advise our members to request that holiday pay be paid into a bank in such cases.
A part-time employee has the same right, but the accrual of holiday pay depends on the employment ratio/wages during the accrual period.
-
When an employee resigns from an employer, accrued holiday pay shall be paid according to Article 8 of the Act on Holiday Allowance No. 30/1987.
As stated above, the accrued holiday pay is two days for each month of service. This applies when holiday pay is deposited to a bank account or if the employee uses 24 days of holiday in one holiday period, which is always from 1 May to 30 April of each year. If the employee has only worked for 6 months with the employer, the accrued holiday pay shall be calculated in holiday hours (see information on how holiday hours are calculated below) and multiplied by hourly wages for daytime work at the end of employment if wages have changed during that time. If wages have remained unchanged during these 6 months, the sum of paid wages shall be multiplied by 10.17% (based on minimum annual holiday entitlement).
Example:
Employee has a monthly wage of ISK 500,000. Accounting for 2 days for each month of service, the employee has 12 days of holiday after 6 months, multiplied by wages per day of ISK 23,073 (500,000 divided by 21.67, the divisor for daily pay). The daily pay is then multiplied by 12 = ISK 276,876. Sum of ISK 500,000 for 6 months is ISK 3,000,000. That amount multiplied by 10.17% holiday comes to ISK 305,100. This shows that if employee does not use any holiday time, the holiday pay is too little if it is only based on accumulated holiday time. -
A person’s wages for shop work in May are ISK 450,000 for daytime work and ISK 50,000 for overtime for each month worked. Their total wages are ISK 500,000. Their holiday pay for that month will be 10.17% of ISK 500,000, i.e., ISK 50,850.
The holiday pay is changed to holiday hours by dividing it by the current daytime pay, which is ISK 2,679,53 (450,000/167.94). Holiday hours for May come to a total of 18.97 hours (ISK 500,000 x 10.17% / 2,679,53).During the holiday period, this person could have accumulated 206.58 holiday hours in total (19.89 months x 18.97 hrs.). When taking a holiday the following summer, their wages have increased and the hourly pay is ISK 2,900 (monthly wages have increased by ISK 18,000, i.e. from 1 April according to agreement and are therefore calculated as ISK 368,000/167.94). Thus, this employee’s holiday allowance will be ISK 593,340 (204.6 hours of leave x ISK 2,900 per hour).