Iceland a step closer to equal pay

In the past year 20 major companies in Iceland have been awarded certificates showing they giver their male and female employees equal pay for equal work, and many more companies will follow. That’s what Thorsteinn Víglundsson hopes for and believes. He is the Director General for the Confederation of Icelandic Employers (SA).  

“There is still a pay gap between men and women, and the new standard can become a powerful tool to achieve equal pay for equal work, and I hope and expect that a large proportion of our 2,000 member businesses will want to get the certification,” says Thorsteinn Víglundsson. 

Icelandic women earned on average 19.9 percent less than their male colleagues in 2013, according to Eurostat’s study ‘Gender pay gap in unadjusted form’. But only a small part of this pay gap - less than eight percent - is unexplained, according to 2010 figures from Statistics Iceland.

The equal pay standard is the first of its kind, developed by the partners in the private labour market. In 2008 they agreed to create a new, common pay standard, using ISO standards as a model. The standard was developed in 2012 by a working group and financed by the partners and the Icelandic Ministry of Welfare, with the participation of several other parties. The finished standard was published by Icelandic Standards, the country’s national standards body. Iceland’s gender equality law refers to the standard, and the Ministry of Welfare has drawn up a mandate to cover certification firms wishing to issue certificates.

The standard is an offer to businesses that want to document the extent of their dedication to equal pay. And this will be of advantage to many businesses, thinks Thorsteinn Víglundsson. 

No to compulsory measures

The partners have worked together to define the standards for equal pay which companies must meet in order to take part in the programme and get certification. Participation is voluntary, but Thorsteinn Víglundsson expects the programme will be widely picked up, especially among the larger SA member businesses:

“If this is to be successful we need many big companies to take part. My definition of success would be to get more than half of the 3 - 400 biggest companies to join, and I think this is realistic.” 

He believes there are major ethical as well as business advantages to be had for companies which can document that their employees get completely gender neutral performance related pay. A company’s competitiveness is strengthened when skills are rewarded. A company must also be able to explain and stand up for its pay structure to a much higher extent than before, and certification is an efficient way of showing transparency and fairness, he thinks.

“Certification is a clear competitive advantage for businesses that want to recruit the best qualified labour. We see that companies which have chosen to take part in the programme actively market their certification in job ads.”

A company wishing to take part in the certification programme must be willing to disclose a wide range of wage information to a certification body, which will check and confirm that the company is practicing equal pay - measured by the standards for equal pay agreed by organisations and authorities.  

For now this audit is being carried out only by one certification firm, BSI á Íslandi. Iceland’s largest trade union, VR (the commercial and office workers’ union) initiated a cooperation with BSI and ‘cold started’ the programme, but the aim is for the partners and authorities to develop a joint logo to be used as proof of certification, and to allow an independent third party to administer the task. 

The 20 or so companies which have been certified so far include food retailers and a major consultancy house. Thorsteinn Víglundsson wants to encourage the social partners in the other Nordic countries to copy the concept.

“I would very much like to see the programme extended to the other Nordic countries. The use of equal pay standards is being discussed both within the EU and globally, and if the other Nordic countries joined the programme it would improve its quality and impact a lot.”

Quotas not enough

He recognises that a broader take-up might take time, because companies are not obliged to participate. But for SA it is essential that the programme is voluntary. SA decided to object to the introduction of female boardroom quotas in Iceland exactly because it was not a voluntary measure. The quotas came into force on 1 September 2013 despite protests from business, and Thorsteinn Víglundsson admits the obligatory quota system has had an effect. But he considers voluntary agreements as a more sustainable way to achieve gender equality.  

“Female quotas have had an effect, even though many companies are still not adhering to them, but boardroom gender quotas are not a goal per se. We also need far more women in leadership positions, and there are no quotas for that. That’s why it’s far more important that companies themselves see that they are best served by offering equal pay and equal gender representation in leadership positions and in boardrooms.”

Iceland’s gender quotas were inspired by the Norwegian system, but are more wide ranging. In companies with more than 50 employees either sex must be represented by no less than 40 percent. While the Norwegian rules only apply to public limited companies, the Icelandic system applies to all listed and limited companies employing more than 50 people, as well as to boards with only three or more board members (compared to five or more in Norway).  

 Iceland takes the lead in other gender initiatives. The Icelandic government has just presented a white paper which could improve the world’s most radical parental leave even further by 2016: an extension of parental leave to five months for each parent and two months to share. The proposed legislation has not yet been approved in parliament. 

Workplace gender equality is one of the issues high on Iceland’s list of priorities during the country’s 2014 presidency of the Nordic Council of Ministers.