Parents may claim compensation for low parental leave payments

Parents who worked in another European Economic Area country before moving to Iceland may be entitled to compensation for underpaid parental leave benefits, mbl.is reports. Applications can now be submitted to the Directorate of Labour.

The announcement from the Ministry of Social Affairs and Housing and the Directorate follows a Supreme Court ruling on 23 September. The court ordered the Icelandic state to pay a woman more than 2.7 million krónur, plus default interest, after finding that EEA rules had been implemented incorrectly.

The woman had worked as a doctor in Denmark before moving to Iceland. Her foreign employment was not included when her payments from the Parental Leave Fund were calculated, so she received only the minimum amount.

Parents may qualify if they received payments from the fund between September 2022 and June 2025, worked in another EEA country during the 12-month period used to calculate their payments, and worked in Iceland for less than four months during that same period. All three conditions must be met.

Applicants can send a compensation claim to the Directorate of Labour, which will gather the necessary documents and refer the cases to the State Attorney. The State Attorney will decide whether compensation is payable on behalf of the Icelandic state.

Changes to Iceland’s parental leave legislation took effect on 1 July 2025. The application information cites a four-year limitation period as the reason claims may relate to payments made from September 2022.