Collective bargaining is governed by Act No. 80/1938 which empowers trade unions to negotiate agreements with employers concerning wages and other terms of employment of their members.
Collective agreements are according to Act No. 55/1980 automatically binding for all workers and employers operating within its occupational and geographical area. It is not a condition for the applicability of a collective agreement that the workers concerned are members of the signatory trade union or that those who employ them are members of the negotiating partner on the employers side. This law affects both domestic and foreign undertakings operating on the Icelandic labour market.
Each national federation negotiates at least one general collective agreement with SA which applies to wages and other terms of employment. Additional agreements are negotiated by individual trade unions where local conditions are taken into account.