The retailer imposed a pay freeze this year. However, the Transport and General Workers Union (T&G) has secured a lump sum payment of£540 for drivers and£360 for warehouse workers at the company's distribution depot in Enfield, north London.
In addition, Wincanton - the contractor that employs the workers - has agreed to pay overtime rates of time and a quarter for Saturday shifts and time and a half on Sundays. Previously there was no extra pay if workers were asked to work at the weekends.
'This is a very good result for Iceland's customers, our members and, of course, the union,' said T&G senior regional industrial organiser Peter Kavanagh, who, together with the local union shop stewards, negotiated the deal with Wincanton.
'We're very pleased we didn't have to resort to strike action over the matter and that supplies will continue to flow to the local stores,' he added.