Starting January, companies in Iceland are required to demonstrate that they pay male and female employees fairly — without gender discrimination. Failing to do so can result in daily fines.

The law, which was passed last year and went into effect this month, is believed to be the first of its kind in the world and covers both the private and public sectors.

Some headlines have claimed that the new law makes it illegal to pay men more than women. That is not exactly what happened. In Iceland — as in many countries — it was already illegal to pay men and women differently on the basis of their gender. (And, to be clear, it was and is legal to pay a man more than a woman, or vice versa, provided there is a valid reason.)

As the Icelandic Women’s Rights Association notes, equal pay for equal work has been mandated by Icelandic laws since 1961.

What is remarkable about the new law in Iceland is how it enforces equal pay standards. It does not rely on an employee to prove she was discriminated against. Instead, the burden is on companies to prove that their pay practices are fair.

Iceland has the best track record on gender equality in the world, according to the World Economic Forum.

Iceland’s new law applies to companies with 25 employees or more. Every three years, the companies will need to confirm that they are paying men and women equally for jobs of equal value.

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