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Labour Market and Collective Wage Agreements

The labour market is comprised of employers and employees, who enter into employment and receive a salary for their work. The rules of conduct in the labour market are established in acts of law and collective wage agreements that provide for the mutual obligations of employers and employees.

The labour market

The labour market is divided into the general sector and the public sector. The general sector consists of the operation of privately owned companies and public limited companies, while the public sector consists of companies and institutions owned by the state and local authorities.

Different laws and regulations apply to the general and the public sector.

Issues relating to the labour market are administered by the Ministry of Social Affairs.

Collective wage agreements

Collective wage agreements are established within the legal framework applicable to the labour market, and provide in more detail for the employment terms of wage earners than the legislation does.

Wage earners work in accordance with the collective wage agreements that unions and employers have established for the business activity in question.

Employers and employees may not negotiate for lower wages or worse employment terms than those provided for in the collective wage agreements. Such negotiated agreements are invalid.

Employees may negotiate for better employment terms than the minimum terms provided for in collective wage agreements.

Unions represent wage earners in collective wage agreement negotiations and protect their interests as regards employers and the authorities.

The Confederation of Icelandic Employers negotiates on behalf of employers in collective wage agreements in the general labour market.

The State Negotiating Committee negotiates with state employees on behalf of the Minister of Finance and Economic Affairs, while the Municipal Wage Committee negotiates with unions representing its employees.

If the unions and the parties with which they negotiate do not reach an agreement in collective wage agreement negotiations, the dispute may be referred to the State Mediator, whose role is to mediate in labour disputes.

Parties to the labour market

Umbrella associations of employees, on the one hand, and employers, on the other, are generally referred to as parties to the labour market.

Icelandic Confederation of Labour is an umbrella association for employees on the general labour market.

Confederation of Icelandic Employers is an umbrella association for employers on the general labour market.

Umbrella associations for employees in the public sector are:

  • Association of Academics,

  • Federation of State and Municipal Employees and

  • The Icelandic Teacher´s Union.

Issues relating to public-sector employees are generally administered by the Minister of Finance

Laws and regulations