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Ministry of Welfare

New Icelandic law on Equal Pay Certification entered into force on January 1, 2018

Alþingi - myndVelferðarráðuneytið

A bill of law (amendments to the Gender Equality Act 10/2008 ) that was submitted by the Minister of Social Affairs and Equality and passed by the Parliament with vast majority on June 1, 2017 came into force on January 1, 2018. Companies and institutions employing 25 or more workers, on annual basis, will be required to obtain equal pay certification of their equal pay system and the implementation thereof. The purpose of this obligatory certification is to enforce the current legislation prohibiting discriminatory practices based on gender and requiring that women and men working for the same employer shall be paid equal wages and enjoy equal terms of employment for the same jobs or jobs of equal value.

The approved amendments entailed changes to article 19 on Equal Pay. 

Short summary:

  • The new legislation makes Iceland the first country in the world to require companies with 25 or more employees to obtain certification on the basis of requirements of a management standard to prove they offer equal pay for work of equal value regardless of gender. The certification requires companies with more than 25 employees to not only offer equal pay across the same job level, but also equal pay for work of the same value. The Equal Pay Standard, on which the certification requirements are based, does this by assessing a company's pay policies, classification of jobs according to equal value and wage analysis on the basis of the classification, as well as formalizing policies and processes related to pay decisions.
  • In view of the time that it will take to adopt equal pay management systems that meet the requirements of the standard, workplaces receive a grace period in which to acquire the certification. For this, different periods are allowed according to the size of the workplace (see further information below). 
  • Iceland is spearheading the move as part of its target to eradicate the country's gender gap by 2022, which would make it the first country in the world to achieve this.
  • Iceland's Equal Pay Standard ÍST 85 is the first to be deliberately developed according to international ISO standards, allowing it to be translated and adopted across the globe.
  • The Centre for Gender Equality will grant workplaces that acquired certification on the basis of the audits performed by accredited auditors the right to use a special equal pay symbol in recognition of this.
  • In cases where a workplace either has not acquired equal pay certification or has failed to renew it by the deadline, the organisations of the social partners will be able to report it to the Centre for Gender Equality. The centre can impose on the workplace a formal demand to rectify the situation by a certain deadline. Rectification measures can involve, for example, the provision of information and release of materials or the drawing up of a scheduled plan of action on how the workplace intends to meet the requirements of the Equal Pay Standard. If the workplace fails to act on instructions of this type, the Centre for Gender Equality is authorised to impose per diem fines.

What is the Equal Pay Standard?

  • The Equal Pay Standard is a management requirement standard, an administrative tool designed to establish and maintain gender equality in wages within a workplace. Equal pay certification under the standard is designed to confirm that when decisions on pay are taken, they are based only on relevant considerations.  
  • Equal pay certification therefore does not involve any requirement to the effect that individuals should receive exactly the same wages for the same work or for comparable work. It is still recognised that employers will be permitted to take into consideration individual factors, factors applying to groups and particular personal skills and abilities when deciding wages.
  • Nevertheless, it does make the inflexible demand that decisions on wages are based on relevant considerations, such as individuals' qualifications, experience, responsibilities or job performance, such things not involving gender discrimination of any type, direct or indirect.
  • The standard could also be used to eliminate discrimination based on other grounds such as ethnicity, sexuality and nationality.

Why was the Equal Pay Standard developed?

  • Even though Iceland has been ranked in the first place in international comparisons regarding gender equality, equality in practice has not been achieved in all areas in Icelandic society.
  • This applies not least to the domestic labour market, where many surveys and studies have revealed an entrenched gender pay gap, generally to women's disadvantage. Notwithstanding the clear intention of the legislature, ever since the first legislation on equal pay was passed in 1961, followed by the passing of the Gender Equality Act in 1976, undertakings by the Icelandic state under international conventions and numerous measures taken by the government to promote gender equality in the labour market, gender equality in terms of equal pay has yet to be achieved in Iceland.
  • It is therefore considered necessary to secure equal pay for equal work or work of equal value through equal pay certification based on legislation.
  • The advantages that will follow from the enactment of the legislation are seen as outweighing the argument that it will impose undue encumbrances on the companies and institutions involved. In addition, it cannot be maintained that enactment of the legislation will be disproportionate when measured against the lawful aims of the Gender Equality Act. 

What does the legislation entail?

  • The legislation allows for the prescription of an obligation on the part of companies and institutions that employ 25 or more workers to earn equal pay certification by accredited auditors, following an examination, stating that their equal pay management systems and the way they are implemented fulfil the requirements of the Equal Pay Standard (ÍST 85; see Article 1c of the standard).
  • Workplaces employing fewer than 25 workers will, of course, continue to be able to request equal pay certification on the basis of the standard as has been the case hitherto.  
  • The legislation took effect January 1st 2018. In view of the time that it will take to adopt equal pay management systems that meet the requirements of the standard, the workplaces receive a grace period in which to acquire the certification. For this, different periods are allowed according to the size of the workplace.  
  • Workplaces employing 250 or more workers are required to obtain equal pay certification by the end of 2018. Here it was assumed that workplaces of this size would have sufficient infrastructure in place to enable them to introduce equal pay management systems in line with the Equal Pay Standard, and consequently they would be in a position to obtain equal pay certification earlier than others. Workplaces employing 150-249 workers are required to obtain certification by the end of 2019, while those employing 90-149 workers are granted grace period until the end of 2020. Workplaces employing 25-89 workers are required to obtain certification by the end of 2021.
  • Without prejudice to the above-mentioned time frames, public institutions, funds and companies that are half-owned or more than half-owned by the state with an average of 25 employees, or more, on an annual basis, shall have acquired certification no later than 31 December 2019. The Icelandic government ministries, operating under the Icelandic Government Ministries Act, No. 115/2011, shall have acquired certification, no later than 31 December 2018.
  • The minister may, by means of a regulation, lengthen the grace period granted for companies or institutions to acquire certification or confirmation under the first paragraph by up to 12 months.
  • Thus, the aim is to adopt obligatory equal pay certification in stages over a period of four years, as to provide businesses with adequate leeway in which to meet the requirements laid down in the legislation. In this way, it was envisaged that the experience of the largest workplaces, which would be certified first, would be of use to smaller workplaces following in their wake.
  • As a means of further securing the aims of the legislation in the long term, companies and institutions are required to have their equal pay certification renewed every three years.
  • As stated in the Equal Pay Standard, before work on its implementation commences, senior management are to define the policy in force in their companies or institutions regarding wage equality, as they were already required to do under the Gender Equality Act.  They are also required to have a wage analysis carried out in the workplace. This consists of a systematic examination of employees' wages and terms with a view to establishing whether gender-based discrimination in wages is being practised.  It is required that the considerations on which wage decisions are made to be specified. The wage for each job is to be based on requirements applied equally for all jobs. On the basis of the comparison, jobs are ranked together as different or equal in terms of value for the purpose of deciding wages. No requirement is made to the effect that any one specific wage system is to be used for this purpose; instead, it is demanded that the system used does not involve discrimination on grounds of gender. In order to ensure that this is the case, it is demanded that regular wage analyses are to be carried out.
  • In conclusion, it should be mentioned that the standard requires that the equal pay policy of the company or institution in question is to be accessible and that it give sufficient information to make it possible to assess its effectiveness. 

How is compliance of companies and institutions ensured?

  • The organisations of the social partners are commissioned to monitor compliance of workplaces employing 25 or more workers with the law, namely that these workplaces acquire equal pay certification and that it is renewed every three years. It was envisaged that further provision will be made by means of regulations specifying how such monitoring is to be effected following consultation with the organisations of the social partners.
  • In cases where a workplace either has not acquired equal pay certification or has failed to renew it by the deadline, the organisations of the social partners will be able to report it to the Centre for Gender Equality. The centre can impose on the workplace a formal demand to rectify the situation by a certain deadline.
  • Rectification measures can involve, for example, the provision of information and release of materials or the drawing up of a scheduled plan of action on how the workplace intends to meet the requirements of the Equal Pay Standard. If the workplace fails to act on instructions of this type, the Centre for Gender Equality is authorised to impose per diem fines. Appeals can be referred to the Minister of Social Affairs and Equality against a decision to impose per diem fines.
  • The Minister of Social Affairs and Equality shall have assessments made every two years of the results of certifications and confirmation of the equal pay systems of companies and institutions under the legislation. 

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