Pay Equity Iceland

Basic Summary

Iceland is a global leader in pay equity enforcement, being the first country to require employers to obtain Equal Pay Certification. The Equal Pay Standard mandates that companies and institutions with 25 or more employees must obtain and maintain certification demonstrating they pay equal wages for work of equal value, regardless of gender. Failure to comply results in daily fines.

Key Legislation

Act on Equal Status and Equal Rights of Women and Men (No. 10/2008)

The cornerstone of Iceland's gender equality framework, establishing the principle of equal pay for work of equal value and prohibiting discrimination in all aspects of employment.

Equal Pay Certification (Regulation No. 1030/2017)

Introduced in 2018, this groundbreaking requirement mandates:

Employer Thresholds: Companies with 25+ employees must obtain certification
Certification Cycle: Valid for 3 years, requires renewal
Job Evaluation: Must use recognized job evaluation methodology
Pay Gap Analysis: Statistical analysis proving no unjustified pay gaps
Third-Party Audit: Independent certified auditors must verify compliance
Public Disclosure: Certification status is publicly available

Equal Pay Standard (ÍST 85:2012)

Iceland developed a formal standard—ÍST 85:2012—that specifies the methodology for achieving equal pay certification:

Requirements

Equal Pay Policy: Written policy committing to equal pay
Job Classification System: Systematic job evaluation and classification
Pay Analysis: Statistical analysis of wage data by gender
Pay Criteria Documentation: Clear, objective, gender-neutral pay criteria
Corrective Actions: Plan to address any identified gaps
Monitoring: Ongoing monitoring and regular reviews

Job Evaluation Factors

The standard requires evaluation based on:

Knowledge and Skills: Education, training, experience
Responsibility: Decision-making authority, accountability, supervisory duties
Effort: Physical, mental, and emotional demands
Working Conditions: Environment, hazards, stress factors

Enforcement and Penalties

Centre for Gender Equality

The primary enforcement body monitoring compliance and investigating discrimination complaints.

Daily Fines

Companies failing to obtain or maintain certification face:

Daily fines of up to ISK 50,000 per day
Fines continue until certification is obtained
Public disclosure of non-compliance

Certification Bodies

Only accredited certification bodies approved by the Icelandic Accreditation can issue Equal Pay Certificates. Common certifiers include:

Creditinfo Lánstraust
AFS Vottun
Others approved under ISO 17021 accreditation

Certification Process

Step 1: Preparation (6-12 months)

Conduct internal pay equity audit
Develop or refine job classification system
Document pay policies and criteria
Identify and remediate any unjustified pay gaps

Step 2: Documentation

Compile employee data (anonymized where appropriate)
Prepare job evaluation documentation
Create pay analysis reports
Document pay-setting criteria and governance

Step 3: Third-Party Audit

Engage accredited certification body
Submit documentation for review
On-site audit and interviews
Statistical verification of pay equity

Step 4: Certification Decision

Certification body issues certificate (3-year validity)
Non-conformities must be addressed
Public registration of certification status

Step 5: Ongoing Compliance

Annual internal audits
Update analysis with new hires, promotions, pay changes
Renewal audit every 3 years

Statistical Methodology

Pay Gap Metrics

Employers must calculate:

Unadjusted pay gap: Overall mean and median pay difference by gender
Adjusted pay gap: Regression-based analysis controlling for legitimate factors

Acceptable Justifications

Pay differences must be based on objective, gender-neutral factors:

Job complexity and seniority level
Education and qualifications required for the role
Relevant work experience
Performance and productivity (measurable)
Market conditions for specific skills
Working conditions (shift work, hazardous environments)

Statistical Significance

Gaps of 5% or more trigger detailed investigation
Statistical tests must demonstrate no systematic gender bias
Sample sizes must be adequate for valid inference

Topics Covered

Iceland's legislation comprehensively addresses:

Pay Equity Certification ✅ (World-leading requirement)
Equal Pay Audits ✅ (Mandatory every 3 years)
Pay Gap Reporting ✅ (Public certification status)
Salary Range Standardization ✅ (Job evaluation system required)
Employer Thresholds ✅ (25+ employees)
Penalties & Enforcement ✅ (Daily fines)
Remediation Requirements ✅ (Must correct gaps for certification)
Protected Characteristics ✅ (Gender, but extendable to other categories)

Best Practices from Iceland

Proactive Compliance Model

Unlike complaint-driven systems, Iceland's model is proactive:

Employers must demonstrate compliance before discrimination occurs
Burden of proof is on employers to maintain certification
Regular recertification ensures ongoing compliance

Job Evaluation Systems

Most Icelandic employers use one of these systems:

Hay Group methodology
Korn Ferry system
Mercer job evaluation
Custom systems meeting ÍST 85 requirements

Transparency and Accountability

Certification status is publicly registered
Non-certified companies face reputational and financial consequences
Employees can verify their employer's compliance

Resources

Centre for Gender Equality (Jafnréttisstofa): https://www.jafnretti.is
ÍST 85:2012 Standard: Available from Icelandic Standards (Staðlaráð Íslands)
Act on Equal Status and Equal Rights: https://www.government.is
List of Accredited Certification Bodies: https://www.accreditation.is

Impact and Results

Since implementing mandatory certification in 2018:

Iceland consistently ranks #1 on the World Economic Forum's Global Gender Gap Index
Gender pay gap has narrowed significantly
Model has inspired similar initiatives in other countries
Strong employer buy-in and culture shift toward pay equity

Timeline for Compliance

Employer Size	Certification Deadline
250+ employees	January 1, 2018
150-249 employees	December 31, 2018
90-149 employees	December 31, 2019
25-89 employees	December 31, 2021

Recertification: Every 3 years from initial certification date

Disclaimer: This guide is for informational purposes only and does not constitute legal advice. Organizations should consult Icelandic employment law specialists and accredited certification bodies for compliance guidance.