Iceland’s Equal Pay Law Sets New World Standard

Iceland has always been praised as a country with great equality between men and women. It also recently became the world’s first nation to make it mandatory for companies and institutions with more than 25 employees to prove that they pay men and women equally for the same job.

The new Equal Pay Certification law took effect in Iceland at the beginning of this year. Although Iceland first passed legislation on equal pay as early as 1961, the gender pay gap persisted. In 2015, women earned 14-20% less than men, according to Statistics Iceland. With the new law in effect, the Icelandic government hopes to close the gap entirely by 2022.

Eliminating gender bias

The bill was initially introduced by Þorsteinn Víglundsson, who served as the Minister of Social Affairs and Equality in 2017. He was also the Managing Director of SA–Business Iceland from 2013 to 2016.

“The Equal Pay Law will help companies and institutions eliminate whatever gender-based bias there may be in pay”

“The Equal Pay Law will help companies and institutions eliminate whatever gender-based bias there may be in pay, and it also helps them identify indirect work selection, like why women are not taking on certain jobs rather than others,” he says. “There’s increase in employee satisfaction after implementing the standard because people have more confidence in how the company rewards or decides on pay. ”

Implementation

The new law requires companies and institutions with 25 or more employees annually to obtain an Equal Pay Certification from the Centre for Gender Equality. In order to obtain certification, companies and institutions need to implement an equal pay management system following guidelines in the Equal Pay Standard.

“If a workplace does not obtain certification by the deadline, it will receive a fine”

An accredited auditor will conduct an audit, and if the company or institution fulfils the requirements, it will receive a certification that must be renewed every three years.

Companies and institutions with more than 250 employees are required to obtain certification by the end of this year, because they have more resources and infrastructure to implement the standard. Depending on the size, smaller companies have more time. If a workplace does not obtain certification by the deadline, it will receive a fine of up to 50,000 ISK (around €397) per day.

Years in the making

Before Þorsteinn introduced the Equal Pay Standard to the parliament, it was a voluntary measure that primarily large companies used as part of their marketing strategy. “The overall concept had been in preparation for a long time,” says Þorsteinn. “It started back in 2008 as a voluntary initiative initiated by the social partners. The trade unions proposed that we should develop some kind of equal pay mechanism, which quickly developed into the methodology of an international management standard. And that was in development between 2008 and 2012.”

“The concept started back in 2008 as a voluntary initiative initiated by the social partners”

Hannes G. Sigurðsson, Deputy Director General at SA–Business Iceland, was one of the people who helped draft the Equal Pay Standard. “We looked at the model of other international standards like environmental standards, management standards and quality standards,” Hannes explains. “We used that framework to develop the Equal Pay Standard.”

After the standard was completed in 2012, the first pilot project began a year later. “Companies and institutions were trying out the methodology of the standard, and how simple or complicated it would be to implement,” Þorsteinn comments. “That was an ongoing project between 2013 and 2016.”

Work of equal value

The new Equal Pay Law addresses pay discrepancies between women and men who are doing work of equal value. One of the main tasks Icelandic companies and institutions face is to define which jobs are of equal value. “You can imagine how difficult it is for the largest corporations or institutions, like the National Hospital, which is the biggest employer in Iceland,” says Hannes.

“The law will help companies and institutions focus on gender and change their approaches.”

In other words, the law doesn’t target pay differences between men and women who have jobs of different value. Þorsteinn says that during the pilot phase, the Directorate of Customs found that 80% of the office workers were women, while 80% of the customs officials were men. If a customs official’s work value is higher than an office worker’s value, it means that customs officials are paid more. In this case, women are still paid less than men, because most of them are office workers at the Directorate of Customs.

Even though the law doesn’t tackle this problem directly, it will help companies and institutions focus on gender and change their approaches. “We have to look at the reason why women aren’t applying for customs official jobs,” Þorsteinn says. “They identified that shifts were long—12-hour shifts for customs officials—and that is something that women, more so than men, do not like. For example, due to family. So, they have been looking at the possibility of changing the shift system to 8-hour shifts, or offer more flexible shifts to attract more women.”

Critique of the new law

Halldóra Mogensen is an MP from the Pirate Party and the chair of the Welfare Committee. She had a few concerns when the law was being discussed in the Parliament. “One of the main worries we had was that the Equal Pay Standard is copyrighted,” says Halldóra. “We didn’t even know what rules companies have to follow when we were passing this law.”

“If you want to bring about change, sometimes you just have to force it.”

The Equal Pay Standard is owned by Staðlaráð Íslands, an independent association that publishes Icelandic standards. “This company charges 10.000 ISK to look at the rules. You’re not allowed to copy it or post it anywhere. It’s not a transparent document,” Halldóra continues. “They should have negotiated with the company and had this as a public document before putting through this law.”

Hannes from SA–Business Iceland thinks that the standard is an extra burden for companies and it should be kept voluntary. “If you impose such a way of working and thinking upon thousands of companies, you’re changing the way they behave on a daily basis,” he says.

Þorsteinn, however, has a different perspective. “If you want to bring about change, sometimes you just have to force it,” he argues. “It doesn’t happen entirely just on a voluntary basis.”

The road ahead

Iceland has set a new standard for the world in gender equality at the workplace. “It is a matter of justice, and a matter of basic human rights,” Þorsteinn says.

“It’s a step in the right direction, but the battle isn’t over.”

The government hopes to close the gender pay gap by 2022, but Halldóra thinks that there’s still more that needs to be done. “It’s a step in the right direction, but the battle isn’t over,” she says. “You’re still gonna have a lot of women in society who get paid a lot less than men, not because they’re working the same jobs, but because women choose different jobs than men do, and the jobs they choose are undervalued.” For example, some of these jobs are nurses, teachers, cleaners, etc.

“Why is raising our children to become healthy, happy and informed individuals not the most important job in our society?” Halldóra questions. As for how to tackle the root of the problem, the answer is still unknown. “That’s not a problem that can be solved with one policy, which is why no one’s doing it,” Halldóra finishes. “Part of the solution is rethinking our economic system, how we value these different jobs and why we value them in this way.”