Minimum Wage in Iceland: Rates, Trends & Compliance

What Is the Minimum Wage in Iceland?

Iceland does not have a statutory minimum wage law. Instead, minimum wages are determined through collective bargaining agreements between trade unions and employers. These agreements cover most workers across various sectors.

As of January 1, 2025, the starting minimum wage for full-time employees covered by these agreements is approximately ISK 454,977 per month. This represents a 3.5% increase from the previous year and is part of a four-year contract signed in early 2024. The contract stipulates annual increases of ISK 23,750 (about 3.5%) in 2025, 2026, and 2027.

Additionally, on April 1, 2025, a wage scale supplement of 0.58% was activated across all collective agreements. This adjustment compensates for inflation and ensures that wage purchasing power remains stable.

Beyond base wages, collective agreements in Iceland often include:

• December Bonus: ISK 110,000 for 2025
• Holiday Bonus: ISK 60,000 for the holiday year starting May 1, 2025
• Overtime Pay: Calculated at 80% above the standard hourly rate
• Shift Allowances: Additional pay for night shifts and weekends, ranging from 33% to 90% above standard rates

Minimum Wage in Iceland Based on Region

Since Iceland does not have a regional variation for minimum wage, the national figures mentioned above generally apply across the country.

Average vs Reasonable vs Typical Minimum Wages

Average Minimum Wage: The average minimum wage across sectors covered by CBAs is approximately ISK 454,977 per month. This figure reflects the general wage floor set by collective agreements.

Reasonable Minimum Wage: A reasonable minimum wage is one that allows employees to maintain a basic standard of living. In Iceland, the average minimum wage of ISK 454,977 per month is considered sufficient for most workers, especially when adjusted for the relatively high cost of living.

Typical Minimum Wage: The typical wage for workers in low-income jobs or those covered by collective bargaining agreements falls within a range of ISK 440,000 - ISK 756,000.

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These wages are supported by Iceland's high standard of living and social safety nets, which contribute to a general focus on fairness and equity in wages across industries.

How Does Minimum Wage Apply to Different Workers In Iceland?

In Iceland, most workers are covered by collective bargaining agreements, so the minimum wage typically applies uniformly across different types of workers. Below, we provide a breakdown for specific categories of workers:

Full-Time Employee Wages

Full-time employees in Iceland are generally entitled to wages that meet or exceed the minimum wage. For 2025, the starting minimum wage for full-time employees is approximately ISK 454,977 per month. Industry-specific adjustments may occur, particularly in sectors like construction or hospitality.

Part-Time Employee Wages

Part-time employees are also subject to the same minimum wage rules as full-time employees. However, part-time workers are typically paid on a pro-rata basis, meaning they receive the same hourly rate as full-time workers, but their overall salary will reflect the reduced number of hours worked.

Interns and Trainees

Interns and trainees in Iceland are usually entitled to a wage under the same collective agreements that govern other workers. In some cases, internships may be unpaid, particularly for those that are part of a university program. However, paid internships are common in sectors like tourism, business, and technology.

Expats

Expatriates working in Iceland are subject to the same minimum wage laws as Icelandic employees, as long as they are working under a contract governed by Icelandic labor law. In practice, wages for expatriates are typically negotiated individually and may exceed the standard minimum wage, depending on the role and industry.

Minimum Wage for Top Paying Roles In Iceland?

   
• Doctors: Doctors in Iceland earn significantly more than the minimum wage. The salary can range from ISK 700,000 to ISK 1,200,000 per month, depending on experience and specialty.
   
• Engineers: Engineers typically earn between ISK 600,000 and ISK 900,000 per month, again varying by industry and seniority.
   
• Executives: Executives and senior managers can expect to earn ISK 1,000,000 per month or more, with higher salaries common in multinational companies or larger industries.

Factors Influencing Minimum Wage in Iceland

Industry-Specific Variations

Iceland's minimum wage is largely influenced by collective agreements within industries. Sectors like hospitality and tourism may see slightly lower starting wages, while technical and professional industries often see wages above the national minimum.

Economic Conditions

Economic conditions such as inflation, employment rates, and Iceland's GDP growth influence the bargaining power of trade unions, which in turn impacts the minimum wage rates negotiated each year. Iceland's relatively stable economy contributes to steady wage growth, even without a national minimum wage law.

Government Policies and Legislation

While there is no statutory minimum wage in Iceland, government policies on labor rights, collective bargaining, and social benefits play a crucial role in shaping wage levels. The government also ensures fair treatment of workers through regulatory bodies overseeing labor conditions.

Tax Implications of Minimum Wage

In Iceland, income tax is progressive, meaning the more an individual earns, the higher the percentage of tax they will pay. For minimum wage earners, tax rates are lower, and social benefits such as healthcare and pension contributions are significant parts of the worker's total compensation. Payroll taxes for employers also include contributions to social security and pension systems.

Minimum Wage History and Trends in Iceland

Over the past few decades, Iceland's collective bargaining agreements have successfully pushed for consistent wage increases that match or exceed inflation. This trend is likely to continue, especially as the cost of living remains high, particularly in Reykjavik, the capital city. Future projections indicate that the national minimum wage may continue to rise gradually, as collective bargaining agreements reflect Iceland's growing economy and need for fairer wages in lower-income sectors.

As of January 1, 2025, the minimum wage for full-time employees covered by collective agreements is approximately ISK 489,940 per month. This figure reflects the general wage floor set by collective agreements for full-time employees. Additionally, on April 1, 2025, a wage scale supplement of 0.58% was activated across all collective agreements. This adjustment compensates for inflation and ensures that wage purchasing power remains stable. Beyond base wages, collective agreements in Iceland often include additional benefits such as December and holiday bonuses, overtime pay, and shift allowances.

While Iceland lacks a statutory minimum wage, the collective bargaining system ensures that workers receive fair compensation. In 2025, the average minimum monthly wage for full-time employees covered by these agreements is approximately ISK 454,977, with additional benefits and regular wage adjustments to maintain purchasing power.

How To Stay Compliant When Hiring in Iceland With Playroll

Expanding your business internationally is exciting, but it comes with the challenge of understanding complex legal and payroll requirements. One of the hurdles is ensuring you comply with local minimum wage laws. Playroll makes this process easier by acting as your trusted Employer of Record:

 
• Scale Your Global Team: Legally hire and onboard employees in 180+ regions, ensuring full compliance with local labor laws, tax regulations, and statutory benefits.
 
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• Guaranteed Legal Compliance: Our comprehensive compliance checks and expertly crafted contracts guarantee your agreements meet local legal standards, including minimum wage laws, tax regulations, and benefits. This way, you can focus on growing your business without worrying about compliance risks.