Negotiators Sign Collective Agreement Skip to content
Efling chairperson Sólveig Anna Jónsdóttir.
Photo: Efling chairperson Sólveig Anna Jónsdóttir.

Negotiators Sign Collective Agreement

Unions and the Icelandic Confederation of Enterprise (SA) signed a collective agreement yesterday valid until November 1, 2022, RÚV reports. Following months of tense negotiations and several strikes, a contract which applies to more than 100,000 members of 30 different unions has been agreed upon.

Minimum wage raised ISK 90,000

Four minimum wage hikes over the contract period will raise the gross monthly minimum wages by ISK 90,000 ($754/€673), though the net raise amounts to around ISK 68,000 ($570/€508). Minimum monthly wage as of April 1 will be ISK 317,000 ($2,658/€2,371) and rise to ISK 368,000 ($3,087/€2,752) by the beginning of 2022. All union members will also receive a one-time ISK 26,000 ($218/€194) payment in May of this year.

The wage hikes in the collective agreement are flat-rate hikes rather than percentage-based. This means the lowest wages will proportionally increase the most of all income brackets. The collective agreement also makes provisions for further wage hikes dependent on companies’ performance and economic growth, a clause which the Icelandic Confederation of Labour (ASÍ) calls a landmark in collective agreement negotiation.

Shortened working hours

According to VR Union’s website, the contract also opens the possibility for shortened working hours, between 45 minutes and two hours per week, with the goal of making the labour market more family-friendly. Each workplace is to determine how the change will be implemented – with possibilities including shortening each workday to providing more vacation days.

Government introduces “standard of living” measures

Following the signing of the collective agreement, the government presented an extensive package of measures, the so-called “standard of living contract,” intended to improve terms of employment further than terms of the collective agreement alone. The measures in the contract are particularly targeted toward improving the standing of low earners and young families and are said to amount to an ISK 80 billion ($672m/€599m) investment.

The government contract outlines steps toward the elimination of indexation. Indexed annuity loans will be limited to 25 years maximum starting in 2020. The measures also include tax reductions and increased child benefits, which are expected to yield significant gains for low-earning households, particularly those with children.

The new collective agreement and government contract are said to create a foundation for interest rate cuts, which is believed to be one of the most impactful changes for Icelandic households, leading to more disposable income and lower debt.

Negotiators react

VR Union Chairperson Ragnar Þór Ingólfsson says he’s content with the collective agreement, saying it includes plenty of measures for the most disadvantaged groups. Ragnar says the contract takes genuine steps toward lowering interest rates and housing costs.

“This has been very difficult,” stated Efling Union Chairperson Sólveig Anna Jónsdóttir, “We fought until the very end.” Though she was satisfied with flat-rate wage hikes, Sólveig Anna said she would have liked to see more tax cuts for low earners. She referred to the agreement as a “ceasefire” between employers and workers, saying ASÍ would return twice as strong to the next negotiations.

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