In 2017, companies and institutions with 25 or more employees were required to obtain equal pay certification by meeting the requirements of the equal pay standard ÍST 85:2012. The goal of the equal pay certification was to implement a systematic procedure that would ensure that employees receive equal pay and the same benefits for the same or equivalent work.
Over the past seven years, Attentus consultants have assisted over one hundred companies and institutions in implementing the equal pay standard. In these projects, we have seen that the equal pay certification has made a significant difference when it comes to attitudes towards equality and equal pay issues, as well as changes in companies’ procedures for determining wages. Every year, companies and institutions set ambitious goals when it comes to equality issues, and the wage gap is decreasing year by year. The equal pay certification has therefore proven its value in ensuring that the same wages and conditions are paid for the same or equally valuable work.
Despite this, I believe that the time has come to evaluate the success of the equal pay certification, as Article 11 of Act No. 150/2020 on Equal Status and Equal Rights of the Genders provides for such an assessment. There are many reasons for this, including the fact that many companies have demonstrated unexplained pay differences of less than +/- 2% year after year, and therefore it can be said that annual audits by certification bodies are unnecessary.
When reassessing the effectiveness of the equal pay certification, it would also be appropriate to consider the new EU directive on pay transparency (Directive 2023/970). There is much evidence that the requirements of the directive can replace the equal pay certification and that the Icelandic requirement for confirmation from a separate certification body will be unnecessary.
The directive emphasizes pay transparency and the publication of information about pay gaps. Requirements for employers under the directive will include:
- Employers with more than 100 employees will be required to conduct annual pay analyses and disclose gender pay gaps. If the gender pay gap is +/-5% or greater, employers will be required to work with employee representatives to conduct a more detailed analysis and develop a remediation plan.
- Applicants also have the right to information about starting salaries for advertised positions, and applicants may not be asked about salary requirements during job interviews.
- Employers must also disclose information on how decisions on pay increases are made and on how job classification is based, but the classification must be based on objective factors. However, the requirements of the Directive do not exclude employers from paying employees who perform comparable jobs differently, but this will always be done on the basis of objective, gender-neutral and impartial criteria, such as performance and specific competence.
- Employers cannot prohibit employees from disclosing their salaries, for example through confidentiality clauses in employment contracts.
- Salary analysis does not only include employees, but also contractors.
To a large extent, these are the same obligations as those found in the Equal Pay Standard, although there are also innovations, such as ensuring the applicant’s right to information about salary early in the recruitment process. However, as in the Equal Pay Certification, there is a requirement for salary analyses to be carried out and for the results to be published. The Equal Pay Certification already requires a uniform classification of jobs based on objective factors, and Icelandic law states that employees are always allowed to disclose their salary if they choose to do so. If the EU Directive were implemented in Iceland, the need for an external certification body would be unnecessary, and requirements for salary transparency would replace certification.
Due to the equal pay certification, Icelandic companies are in my opinion well positioned to meet the requirements of the EU directive. Most companies and institutions that the EU directive will cover in Iceland have already met the requirements of the directive to a large extent. In addition, the directive fits well with other rules that Icelandic companies are implementing these days, for example on sustainability information.
It is therefore time to reassess the need for equal pay certification, partly due to the introduction of the aforementioned EU directive on pay transparency.
