Wage rate increase takes effect April 1

The wages and conditions committee of collective agreements in the general labor market has ruled that the wage increase will take effect from and including 1 April next year. This means that wage rates in the current collective agreements increase by 0.06% from that time.

The decision is based on the fact that the wage index in the general labor market increased beyond the tax increases of the benchmark tax in the second year of the stability agreement. According to the agreements, such a development leads to wage rates increasing automatically with a special wage increase.

The collective agreements that are valid for the years 2024 to 2028 contain special premise clauses related to the development of economic matters. They stipulate that the Salary and Premise Committee, which is appointed by representatives from ASÍ and the Confederation of Icelandic Enterprises, monitors the development of inflation, interest rates and other key indicators that may affect the objectives of the agreements.

The agreements were made with the aim of contributing to the moderation of inflation and the reduction of interest rates. Autumn 2023, when the preparation of wage agreements began, inflation was measured at 8%, but it moderated in the first year of the agreement and was measured at 4.2% in February 2025. The interest rate reduction process also started at that time. However, last year there has been a reversal and inflation has risen again.

According to the latest measurements, inflation is 5.2%, or 4.5% if housing costs are excluded. Price increases are measured on a broad basis and uncertainty about economic developments has increased.

The Salary and Conditions Committee will soon make a formal assessment of the premises of the collective agreements in September 2026. It will, among other things, consider whether inflation is within the limits that the agreements provide for. If inflation is measured above the specified threshold, there may be authority to terminate the agreements, unless the parties reach an agreement on responses to a breach of premises.

The committee has also discussed the so‑called productivity increase due to the year 2025. The conclusion is that the development of productivity during the collective agreement period does not provide an occasion for its payment this time.