Iceland has become the first country to make companies obtain certification to prove they offer equal pay, regardless of gender, ethnicity, sexuality and nationality.
The Equal Pay Standard, on which the certification requirements are based, assesses a firm's pay policies, classification of jobs according to equal value and wage research on the basis of classification, as well as formalising policies and processes related to pay decisions.
Companies with more than 25 employees will have to offer equal pay for equal work and "for work of the same value".
It forms part of the country's move to eradicate its gender gap by 2022.
Þorsteinn Víglundsson, Iceland’s minister of social affairs and equality, said: "As a country we set ourselves the challenge to eradicate the gender pay gap by 2022 but, despite taking steps such as introducing dedicated paid leave for new dads and 40 per cent quotas for women on boards of larger companies, we have not made the progress we would have wished."
It is the right time to do something radical about this issue. We want to show the world that eradicating the gender pay gap is an achievable goal and we hope other nations will follow suit in adopting the Equal Pay Standard in years to come.
Iceland is renowned for leading the world on gender equality, regularly topping studies exploring the issue and has been ranked number one on the World Economic Forum Gender Index for eight consecutive years.
However, women still earn on average 14 to 18 per cent less than their male colleagues. According to women's organisations this effectively means for every eight hour day, women work without pay from 2.38pm.
In October last year, female employees across the country walked out of workplaces at 2.38pm to protest against earning less than men.
The legislation for the certification will be tabled by the Icelandic government in parliament this month, and pending approval, will become compulsory for companies and institutions over the next few years.