Severance pay in Iceland 2026: notice, severance and unemployment benefit
When a job ends in Iceland, the calculator above estimates the statutory severance pay, the notice period, the payment for unused leave and the unemployment benefit, with the tax on each part. Below you will find the rules in brief and examples for different lengths of service.
The rules in brief
- Notice: The law gives at least 1 month’s notice after 1 year of service, 2 months after 3 years and 3 months after 5 years, always to the end of a month; collective agreements set 1 week during the first 3 months and often longer notice for older workers with long service. There is no statutory severance pay.
- Unemployment benefit: With 12 months of work in the last 12 months the Directorate of Labour pays income-related benefit of 70% of your average pay for 3 months, at most ISK 605,159 a month, and then the basic benefit of ISK 383,870 a month; with 3 to 12 months of work you get a share. From 1 July 2026 benefits last at most 24 months (30 before).
Example: ISK 850,000 gross a month
| Years of service | Severance, net | Notice period |
|---|---|---|
| 1 | – | 1 month |
| 2 | – | 1 month |
| 3 | – | 2 months |
| 5 | – | 3 months |
| 10 | – | 3 months |
| 15 | – | 3 months |
| 20 | – | 3 months |
| 25 | – | 3 months |
There is no statutory severance pay in Iceland in this case, so the table shows the notice period only. Case: “Dismissed by the employer”, leaving on 31 December 2026, without unused leave. These are legal minimums; a contract or collective agreement may give more.
What you receive: an example
With 9.8 years of service and 10 days of unused leave, ending on 31 December 2026:
| Item | Gross (ISK) | Net (ISK) |
|---|---|---|
| Unused leave (5 days) | 196,154 | 114,337 |
| Total | 196,154 | 114,337 |
Unemployment benefit
In this example the unemployment benefit comes to about ISK 9,846,270 in total (ISK 595,000 a month for the first 3 months (70% of your average pay, at most ISK 605,159), then ISK 383,870, for up to 24 months in total). The conditions, such as the contributions you need, are listed in the rules above.
Frequently asked questions
How much severance do I get after 10 years in Iceland?
None by law in this case. The notice period is 3 months.
How long is the notice period?
In the example: 1 month after 1 year, 3 months after 5 years, 3 months after 10 years and 3 months after 20 years.
Do I get unemployment benefit?
In the example, about ISK 9,846,270 (ISK 595,000 a month for the first 3 months (70% of your average pay, at most ISK 605,159), then ISK 383,870, for up to 24 months in total). The conditions are listed in the rules above.
Are these amounts exact?
They are estimates of the legal minimum under the 2026 rules. Your contract, a collective agreement or a court decision can give more.
Rules and official sources: see “Rules applied (2026)” above. Last checked: October 2026. The amounts are estimates for information, not financial or legal advice.