Iceland: New Law Will Require Employers to Demonstrate Salary Equality

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By Marcus Hoy

New legislation effective Jan. 1, 2018, will place an obligation on Icelandic employers to demonstrate that all their employees receive equal pay for work deemed “of equal value.” Detailed in a March 8 government statement, the proposed amendments to the Gender Equality Act (10/2008) mean that companies will be required to obtain official certification demonstrating that their salary and HR policies adhere to a so-called “Equal Pay Standard.” According to the statement, the new rules will make Iceland the first nation in the world to require companies to prove they offer equal pay regardless of gender, ethnicity, sexuality or nationality.

Based on equality principles developed by the International Organization for Standardization, the new rules will affect all companies with 25 employees or more. Companies will be required to classify jobs according to their perceived value and adopt formal salary policies based on that classification.

According to information provided to Bloomberg BNA by the Ministry of Social Affairs and Equality, mandatory measures are needed because voluntary mechanisms have not proved adequate to sufficiently narrow the pay gap—men, for example, still earn on average 15 percent more than women. The government's stated aim is to eradicate salary inequality completely by 2022. Full details of the planned amendment are not yet available, the ministry said, but a draft law is expected to be published shortly. While the law is due to take effect Jan. 1, 2018, the requirements will become mandatory for companies “over the next few years,” the ministry said.

Salary Discrepancy

Under the new rules, public auditors will analyze companies' salary scales, and any salary discrepancy of over 5 percent will have to be explained or corrected. The auditors' findings will be made public, and failure to achieve certification could potentially leave companies open to legal action from employees who believe they have been victims of salary discrimination.

In a March 14 statement provided to Bloomberg BNA, Hordur Vilborg, project manager at the employers' group Business Iceland, said that his organization supported equal pay principles but opposed the mandatory certification scheme in its current format

“In 2012, an equal pay management standard was published after joint work led by the social partners [employers and employees] and the Ministries of Welfare and Finance,” Vilborg said. “Like other management standards, it was intended to be voluntary.”

“Business Iceland has invested a lot in the standard and we support its goals wholeheartedly,” Vilborg said, “but we cannot accept that it is to be made mandatory for all companies with 25 employees or more. It will be very costly for our small companies. The regulation burden will increase and we have no evidence yet that the equal pay standard will reduce the gender pay gap. In our opinion, the government should introduce the standard in public institutions first.”

“There is some consultation going on and the law could be changed in some way but it is unlikely at this point,” Vilborg concluded.

Karl Petur Jonsson, a political advisor at the Ministry of Welfare, told Bloomberg BNA March 15 that the Icelandic government was seeking to persuade other nations to adopt similar regimes. Equality and Social Affairs Minister Thorsteinn Viglundsson Jonsson had recently spoken on the issue with EU Commissioner for Justice, Consumers and Gender Equality Vera Jourova, Karl Petur Jonsson said.

To contact the reporter on this story: Marcus Hoy in Copenhagen at correspondents@bna.com

To contact the editor responsible for this story: Rick Vollmar at rvollmar@bna.com

The government statement is available in English

here.

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