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What Is the Minimum Wage in Iceland?
Iceland does not have a statutory minimum wage set by law. Instead, minimum pay levels are established through collective bargaining agreements between trade unions and employers, which cover the vast majority of workers across sectors.
As of 1 January 2026, the typical starting minimum wage for full-time employees under these collective agreements is between ISK 513,000–515,000 per month, though exact minimums vary by industry, role, and agreement. This level reflects scheduled increases agreed under multi-year collective bargaining agreements concluded in 2024, which provide for annual wage increases through 2027.
In addition to base wage increases, collective agreements allow for inflation-linked adjustments when price growth exceeds certain thresholds, helping to protect real wages and maintain purchasing power.
Beyond base pay, Icelandic collective agreements commonly include additional compensation and benefits, such as:
- December (Christmas) Bonus: Typically around ISK 100,000+, depending on the agreement)
- Holiday Bonus: Paid during the leave year
- Overtime Pay: often calculated at 80% or more above the standard hourly rate
- Shift and Unsocial Hours Allowances: Premiums for evenings, nights, and weekends that can range broadly depending on the sector
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 collective bargaining agreements is between ISK 513,000–515,000 per month for full-time employees in 2026. This figure represents a commonly cited entry-level wage floor established through CBAs, though actual minimums vary by industry and job classification.
Reasonable Minimum Wage: A reasonable minimum wage is one that enables workers to meet basic living costs. In Iceland, a monthly wage of approximately ISK 513,000–515,000 per month is generally regarded as sufficient for many workers when combined with collectively agreed benefits such as bonuses, overtime premiums, and shift allowances, although the country’s high cost of living means affordability can vary significantly by location and household circumstances.
Typical Minimum Wage: The typical pay for workers in lower-income roles covered by collective agreements generally falls within a range of approximately ISK 440,000 to ISK 750,000 per month, depending on sector, seniority, working hours, and applicable allowances.
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 collectively agreed minimum pay levels, as Iceland does not have a statutory minimum wage set by law. As of 2026, the typical starting minimum wage for full-time employees covered by collective bargaining agreements is approximately SK 513,000–515,000 per month, though actual minimums vary by sector, role, and agreement.
Industry-specific adjustments are common, particularly in sectors such as construction, hospitality, and manufacturing, where additional allowances and overtime premiums often apply.
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 substantially more than collectively agreed minimum wages. In 2026, monthly salaries typically range from approximately ISK 750,000 to ISK 1,300,000+, depending on experience, specialty, working hours, and whether the role is in the public or private sector.
- Engineers: Engineers generally command strong salaries due to sustained demand across industries such as energy, construction, and technology. Typical monthly earnings in 2026 range from around ISK 650,000 to ISK 950,000, with senior and specialized roles often exceeding this range.
- Executives: Executives and senior managers earn well above average wage levels. In 2026, base monthly salaries commonly start at around ISK 1,000,000 and can rise significantly higher, particularly in multinational companies, financial services, and large industrial firms, often supplemented by bonuses and other incentives.
Factors Influencing Minimum Wage in Iceland
Minimum wage levels in Iceland are shaped by a combination of collective bargaining practices, economic conditions, and government policy rather than a single statutory rate. Because wages are negotiated at the sector level through collective agreements, pay floors can vary significantly across industries and over time.
Understanding the key factors that influence minimum wage outcomes in Iceland helps explain why wage levels remain relatively high and continue to adjust in response to economic and labor market developments.
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 several decades, Iceland’s system of collective bargaining has delivered steady and predictable wage growth, with negotiated increases generally matching or exceeding inflation. This approach has helped protect workers’ purchasing power, particularly as the cost of living remains high – most notably in Reykjavík and surrounding areas. The collective bargaining model is expected to continue driving gradual wage increases, especially in lower-income sectors where affordability pressures are most acute.
As of 1 January 2026, the typical starting minimum wage for full-time employees covered by collective bargaining agreements is around ISK 513,000–515,000 per month, reflecting the commonly applied wage floor across major agreements. Rather than a single national rate, minimum pay levels continue to be shaped by sector-specific agreements, seniority scales, and negotiated annual increases under multi-year contracts.
Collective agreements also include mechanisms to address inflationary pressures, allowing for price-linked or threshold-based adjustments when necessary to help preserve real wages. Beyond base pay, these agreements commonly provide additional compensation and benefits such as December and holiday bonuses, overtime premiums, and shift or unsocial-hours allowances, which can materially increase total earnings.
While Iceland does not have a statutory minimum wage set by law, its collective bargaining framework remains highly effective in ensuring fair compensation. In 2026, minimum wage outcomes continue to reflect a balance between economic conditions, cost-of-living considerations, and the strong negotiating role of trade unions, supporting relatively high wage floors by international standards.
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.
- Pay Your Team Accurately: Your global workforce is always paid on time, and we ensure continuous compliance with local minimum wage and tax laws.
- 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.
Disclaimer
THIS CONTENT IS FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSTITUTE LEGAL OR TAX ADVICE. You should always consult with and rely on your own legal and/or tax advisor(s). Playroll does not provide legal or tax advice. The information is general and not tailored to a specific company or workforce and does not reflect Playroll’s product delivery in any given jurisdiction. Playroll makes no representations or warranties concerning the accuracy, completeness, or timeliness of this information and shall have no liability arising out of or in connection with it, including any loss caused by use of, or reliance on, the information.
ABOUT THE AUTHOR
Milani Notshe
Milani is a seasoned research and content specialist at Playroll, a leading Employer Of Record (EOR) provider. Backed by a strong background in Politics, Philosophy and Economics, she specializes in identifying emerging compliance and global HR trends to keep employers up to date on the global employment landscape.
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