Vacation Fund (Orlofssjóður) in Iceland (2026 Legal Guide) — Rules & Requirements
About this article
Sourced from Icelandic Acts of the Althingi, statutory instruments, and official guidance. Written in plain language for general understanding — this is educational content, not legal advice. Our editorial standards
What is this right?
The Annual Leave Act (Orlofslög nr. 30/1987) provides that every employee in Iceland accrues 10.17% of total wages as holiday pay. The holiday year runs from 1 May to 30 April. The minimum entitlement is 24 working days, but most collective agreements (CAs) raise this to 28-30 days.
Accrued holiday payments usually go into a vacation fund — generally run by the employee's trade union (the most common, since trade-union membership covers about 90% of Icelandic employees) or sometimes through the employer. The fund pays out the wages when the employee takes leave. Many trade unions also offer subsidised holiday-home rentals as an additional benefit.
When does it apply?
- You are an employee in Iceland — full-time, part-time or temporary.
- You are covered by the Annual Leave Act (most employees; some contractors are exempt).
- You are a member of a trade union that runs a vacation fund (usually — confirm with your shop steward or the trade union).
What should you do?
- Identify your vacation fund. Ask the trade union or check your payslip — most payslips show the monthly contribution into the fund.
- Confirm the monthly accrual. The employer must show 10.17% (or more under the CA) as a separate line on the payslip.
- Apply for leave with your employer in advance — usually 4 weeks; the collective agreement may specify more precisely.
- Claim the payment from the vacation fund when the leave begins. Most trade unions handle this electronically.
- If the accrual is incorrect or missing: report it to the Administration of Occupational Safety and Health or to your trade union. The Directorate of Labour (Vinnumálastofnun) handles broader labour-law matters.
What should you NOT do?
- Don't accept "included" holiday pay in your monthly wages — the Annual Leave Act requires a separate fund, not a pay rise.
- Don't lose unused leave before 30 April — unused leave lapses unless the collective agreement allows it to be carried over.
- Don't underestimate the role of trade unions — about 90% membership means most matters are resolved with union support rather than through litigation.
About Workers' Rights in Iceland
Work in Iceland is built on collective agreements — there is no statutory minimum wage. The Trade Unions and Labour Disputes Act (Lög nr. 80/1938) and the Act on Workers' Terms of Employment (Lög nr. 55/1980) make agreed pay scales binding on every employee and employer covered by the agreement. Workplace safety falls under Lög nr. 46/1980; parental leave under Lög nr. 95/2000 provides 12 months in total, of which 6 are reserved for each parent. Equal-pay certification is mandatory for companies with 25+ employees under Lög nr. 150/2020. Collective disputes go before the Labour Court (Félagsdómur); individual disputes before the district courts.
Common Questions
What is the vacation fund — annual leave and holiday pay in iceland right in Iceland?
The Annual Leave Act (Orlofslög nr. 30/1987) provides that every employee in Iceland accrues 10.17% of total wages as holiday pay. The holiday year runs from 1 May to 30 April. The minimum entitlement is 24 working days, but most collective agreements (CAs) raise this to 28-30 days.Accrued holiday payments usually go into a vacation fund — generally run by the employee's trade union (the most common, since trade-union membership covers about 90% of Icelandic employees) or sometimes through the employer. The fund pays out the wages when the employee takes leave. Many trade unions also offer...
When does it apply — vacation fund — annual leave and holiday pay in iceland?
You are an employee in Iceland — full-time, part-time or temporary.You are covered by the Annual Leave Act (most employees; some contractors are exempt).You are a member of a trade union that runs a vacation fund (usually — confirm with your shop steward or the trade union).
What should you do — vacation fund — annual leave and holiday pay in iceland?
Identify your vacation fund. Ask the trade union or check your payslip — most payslips show the monthly contribution into the fund.Confirm the monthly accrual. The employer must show 10.17% (or more under the CA) as a separate line on the payslip.Apply for leave with your employer in advance — usually 4 weeks; the collective agreement may specify more precisely.Claim the payment from the vacation fund when the leave begins. Most trade unions handle this electronically.If the accrual is incorrect or missing: report it to the Administration of Occupational Safety and Health or to your trade...
What should you NOT do — vacation fund — annual leave and holiday pay in iceland?
Don't accept "included" holiday pay in your monthly wages — the Annual Leave Act requires a separate fund, not a pay rise.Don't lose unused leave before 30 April — unused leave lapses unless the collective agreement allows it to be carried over.Don't underestimate the role of trade unions — about 90% membership means most matters are resolved with union support rather than through litigation.