Rights of the self-employed: what the contributions give you

Rights follow calculated remuneration

This is the core point: benefits and pension are calculated on the calculated remuneration you have declared and paid contributions on, not on the business's turnover. Someone who pays themselves the minimum to save tax also saves on their own rights. That is why Skatturinn sets a minimum by category, and why paying yourself a realistic salary is worth it.

Unemployment benefit

The self-employed are insured under the Unemployment Insurance Act No. 54/2006 if they have paid social security on calculated remuneration. The conditions include:

• the business has been stopped and a closure or pause notification sent to Skatturinn (RSK 5.04),
• withholding and social security filings are in order,
• the applicant is registered as a job seeker with the Directorate of Labour and available for work.

Entitlement is earned over the previous 36 months and the amount is based on calculated remuneration. Part-time self-employment earns a proportional right. Apply at vinnumalastofnun.is.

Parental leave

The Parental Leave Fund pays self-employed parents under Act No. 144/2020. The condition is six months of continuous participation in the domestic labour market before the birth. The payment is a share of average calculated remuneration over a reference period the fund defines, up to a cap set annually, with a minimum payment for low incomes. During leave you may not pay yourself calculated remuneration for the same period. Applications go through faedingarorlof.is using data from the withholding register.

Illness and accidents

• Sickness benefit from Icelandic Health Insurance is paid to those unable to work due to illness who have no salary in the meantime. The self-employed can apply; waiting periods and amounts are at sjukra.is.
• Accident insurance under the social insurance system covers accidents at work. The self-employed are covered through the social security paid on calculated remuneration.
• Union sickness funds pay sickness benefit to members. Several unions admit the self-employed; check yours.
• Private health and accident insurance can bridge the gap, especially in the first month.

Disability and old age

The pension fund you pay 15.5% into provides a disability pension if your capacity to work is reduced and a retirement pension from age 67, in proportion to contributions paid. On top comes the state pension from the Social Insurance Administration. Additional pension savings (2–4% + 2% match) build a personal account that is inheritable. See pension.

What the self-employed do not have

• Paid holiday from an employer. You take time off, but no one pays you for it; price your work with that in mind.
• Sick-pay rights under a collective agreement. The first sick days are at your own cost.
• Notice periods and pay during notice. Your client contracts decide.
• The Wage Guarantee Fund on an employer's bankruptcy, because you are the employer.

What you can do

1. Pay yourself calculated remuneration that reflects real income; the rights follow.
2. Pay social security and pension contributions on time; arrears can reduce entitlement.
3. Check whether your profession's union admits the self-employed.
4. Consider income protection insurance for the first weeks of illness.
5. If you stop or pause: notify Skatturinn immediately so unemployment entitlement activates.

In Payroll, Fustle shows where each month's social security and pension contributions go and keeps calculated remuneration visible so you can see the base of your rights.