Today Statistics Iceland publishes figures on hourly labour cost as well as the Labour cost index. This marks the first time Statistics Iceland publishes on its website the Labour cost index produced with an updated methodology. The index is the Icelandic component of the European Labour cost index which has previously only been published on Eurostat‘s website. The index will be published quarterly, parallel to the Total wage index, and the figures go back to 2008. The index is based on quarterly changes in hourly labour cost by economic activity.
Between the years 2020 and 2023 the annual average of the Labour cost index increased by 26.2%. The annual average of the index increased by 8.0% between 2022 and 2023. In comparison the annual average also increased by 8.0% between 2021 and 2022 and by 8.2% between 2020 and 2021. The tempo of the increase of the Labour cost index has thus been very constant in the last three years.
Hourly labour cost in 2023
The hourly labour cost in Iceland was estimated to be 7,490 ISK in 2023, highest at 10,410 ISK in Financial and insurance activities and lowest at 5,560 ISK in Accomodation and food service activities.
Share of non-wage cost close to 21%
Labour cost refers not only to paid wages but also the non-wage cost of employment, e.g. employers social contributions as well as employment related taxes.
The share of non-wage cost of total labour cost was 20.7% in 2023 and remains unchanged from the previous year. Since 2018 the share has been almost stagnant, ranging between 20.4% and 20.7%.
However, a comparison of different economic activites shows a difference. The share of non-wage cost was estimated lowest at 18.8% in Real estate activites and 18.9% in Accommodation and food services. It was estimated highest at 23.1% in the activity of Human health and social work and 22.7% in Education activities.
About the Labour cost index and hourly labour cost
The Icelandic Labour cost index is the Icelandic component of the European Labour cost index and it is produced according to Regulation No 450/2003 of the European Parliament and of the Council. The Labour cost index covers everyone who gets paid wages by an employer with 10 or more employees, except those who fall within the economic activites of Agriculture and fishing (A), Activities of households as employers (T) and Activities of extra-terrestrial organisations and bodies (U). The base (100) of the index is the average of 2020 and it is changed every four years in accordance with the methodology of the Labour cost index.
Hourly labour cost is based on the Labour cost survey (LCS) which is published every four years and is intended to be a timely indicatior of labour cost in the years the survey is not published. Figures on labour cost and its composition in Iceland are comparable to figures on labour cost in other European countries. Information on labour cost in European countries can be found on Eurostat‘s website.
Labour cost refers to the sum of all paid wages and cost paid by employers related to employment of staff. Hours worked are produced with an ensemble of statistical estimation methods based on Statistics Iceland‘s data, most notably the Icelandic Survey on wages, earnings and labour cost and pay-as-you-earn tax collection according to register data. Note that in some instances, for example among managers and professionals, fixed-wage contracts can be common. Thus, employees do not get paid overtime, and therefore their working hours might be underestimated. In other cases hours can be overestimated, e.g. when overtime hours are used instead of overpayments and the recorded hours are not worked.
Please note that the results are preliminary.