Maternity/Paternity Leave and Parental Leave
Directorate of Labour handles the services of the Maternity/Paternity Leave Fund, see more here.
In accordance with Icelandic law on parental leave, the employment relationship between the parties remains unchanged during parental leave. Employees are entitled to return to their jobs upon the completion of parental leave. Also, employees have protection against dismissal after the employer has been notified of their intention to take parental leave or while employees are on parental leave unless there are valid reasons for dismissal, for further information see limitations on dismissals.
Cf. Article 14 of the Act on Maternity/Paternity Leave and Parental Leave, parental leave shall count as working time for the purpose of assessing work-related rights, such as the right to holiday or the extension of the holiday period under wage agreements, wage increases due to seniority, sickness rights and notice period of termination of employment. According to Article 48 of the same Act, rights acquired by employees by the first day of parental leave shall remain unchanged until the end of the pending parental leave. At the end of the leave, these rights are valid, as shall any changes which may have been made on the basis of the law or wage agreements.
After one year in the employment of the same employer before the beginning of parental leave, any absence due to legally prescribed childbirth leave shall be counted as working time when calculating the December and holiday bonuses. The same applies in the case of individuals who, as a safety precaution, have to stop work during pregnancy, cf. the Regulations on measures to improve safety and health at work for women who are pregnant, have recently given birth, or are breast-feeding.