Iceland, the first country in the world to apply pay equity. The European Union and its Member States lagging behind …

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As a pioneer in gender equality, Iceland enacted an exemplary law on the 1st January 2018 to prohibit wage differences between men and women in companies and agencies employing more than 25 people. The island country aims to completely eradicate the pay gap by 2020.

Concretely, companies must obtain a certificate of good conduct, valid for three years. Companies with 250 or more employees will have to be certified by 31 December 2018. Companies with 150 to 249 employees, as well as public or publicly-owned companies, are required to comply with the regulations as of 31 December 2019. Those with 90 to 149 employees and those with 25 to 89 employees are granted additional time until, respectively, the end of 2020 and the end of 2021[1].

Similar legislation exists in Luxembourg[2] except that it is up to the victims to show that their employer discriminates against them. Iceland has gone further by requiring companies to prove their good faith. Companies that do not respect pay equity will be sanctioned financially. This new legislation was supported by the centre-right government and the opposition in a parliament where 50% of MPs are women. This new legislation should guarantee Iceland the first place in the annual ranking of the most egalitarian countries in terms of gender, published by the World Economic Forum, a position it has held for nine consecutive years.

And in the Union?

Equality between men and women is one of the fundamental values ​​of the European Union. Article 157 of the Treaty on the Functioning of the European Union (TFEU) enshrines the principle of equal pay. Article 4 of the Directive on the implementation of the principle of equal opportunities and equal treatment of men and women in employment and occupation (recast as “Directive 2006/54/EC’) establishes the principle of equal pay by providing that, for the same work or for work of equal value, direct or indirect discrimination on the grounds of sex is prohibited in all elements and conditions of remuneration.

However, this principle is not respected in all Member States. European women receive on average an hourly wage that is about 16% lower than that of men in all economic sectors[3]. This difference in pay is due, among other things, to the type of employment held by women, part-time work and career breaks for family reasons[4]. Because they earn less than men, women are entitled to lower pensions that put them at higher risk of poverty.

From a more economic point of view, wage inequality generates a loss of 370 billion euros per year[5]. Tackling wage gaps would not only make the labour market more equitable, but it will stimulate employment and growth, create a skilled and motivated workforce, and reduce absenteeism at work. Equal pay would therefore be beneficial for society as a whole.

However, wage inequality is entrenched in our societies, and to fight it, the EU needs a comprehensive approach encompassing other gender inequalities, particularly in the field of education.

Social conventions at the source of wage inequalities

Men’s and women’s traditional roles and social conventions can ultimately affect the wage gap by influencing a person’s educational background. This leads to a strong sectoral and occupational segregation in the labour market. Women are notably under-represented in the building sector (10%), transport (22%), science and ICT[6]. Conversely, women dominate the education and health care sector. The choice of education and career occurs early in a person’s life. It is therefore essential to intervene from an early age to eradicate gender stereotypes.

In addition, sectors dominated by women are often paid less than those dominated by men, even if they have the same value. Women’s skills and abilities are often under-valued because they are considered characteristics inherently feminine and not as acquired skills and competencies[7]. The 2017-2019 European Union Action Plan to eliminate the gender pay gap aims, inter alia, to improve the value of women’s skills and responsibilities in all sectors, under the New Skills Agenda for Europe strategy[8]. The tools developed under this strategy are gender neutral and will help maximize the use of skills and improve the transparency of qualifications.

Moreover, women are less likely to be promoted and/or entrusted with positions of higher responsibility. This trend is now known as vertical segregation. Currently, only 5% of CEOs are women. The Commission’s proposal for a directive on a better gender balance among directors of companies listed on stock exchanges aims to set quantitative targets for Member States and transparent selection criteria.

The absence or the conception of inappropriate work-life balance policies reinforces wage inequalities

Women’s career opportunities are often compromised by their family responsibilities. Generally, the pay gap widens with age because of the penalizing nature of motherhood. On average, men spend significantly less time than women caring for the home, children or a dependent parent. Caring responsibilities are a reason for inactivity for nearly 20% of inactive women, whereas this concerns only 2% of men[9]. Only 65.8% of women with children work, while 89.1% of fathers work. Half-time work concerns 32% of women but only 8% of men[10].

If they are well designed, work-life balance policies can help reduce wage inequality. On 27th April 2017, the European Commission presented a proposal for a directive on work-life balance of parents and carers[11]. The Directive aims to address the under-representation of women in the labour market through a better distribution of family responsibilities between men and women. The directive aims in particular to:

  • Introduce a paternity leave of at least 10 days, compensated at the least as a sick leave.
  • Strengthen the four month parental leave with a wage compensation equal to sick leave. Parents will also have the right to take parental leave flexibly. The age of the child for which parents are entitled to parental leave increases from 8 years to 12 years.
  • Introduce a carer leave for workers caring for critically ill or dependent parents. Carers will be able to take five days off per year paid at least up to the level of sickness benefits.
  • Introduce flexible working arrangements (flexible working hours and workplace) for parents of children aged 12 and under and carer of sick or dependent parents.

This directive proposal is a step in the right direction. However, the provisions presented remain modest and should be strengthened in the future.

More transparency for more equality

Pay transparency and awareness raising are measures that can help reduce the pay gap. The Commission’s recommendation on pay transparency adopted in 2014 encouraged Member States to take concrete action in this area[12]. The Spanish Institute for Equal Opportunities has, for example, developed a job evaluation document to be completed by companies with information on the organisation’s work structure and the salary level of each position. On the basis of this information, the pay gap between men and women is quantified and recommendations are made to reduce it within the company concerned[13]. This type of measure, while insufficient, is a step forward in terms of equal pay.

The European Association for the Defence of Human Rights deplores the fact that, due to very different national contexts, it is not possible to implement legislation similar to that which came into force in Iceland. AEDH is also surprised by the slow progress made on pay equity in the EU, especially as the European Union presents itself as a model to be followed in the field of human rights.

The pay gap between men and women will only be reduced with the active participation of all stakeholders. Workers, businesses and public authorities should be consulted equally in the legislative process.

AEDH is convinced that the Union is able to propose more ambitious measures. As a result, the AEDH is urging the EU to increase its efforts in shaping a fair labour market.

[1] Kvenrettindafelag Islands, Equal Pay Standard, available on:

[2] In Luxembourg, a law from 2016 raises wage inequality to the rank of offence. If a pay difference cannot be justified objectively and is based on gender considerations, the employer is fined from 251 to 25,000 euros.

[3] European Commission, EU Action plan 2017-2019: Tackling the gender pay gap, 11 November 2017.

[4] Eurostat, Gender pay gap statistics, mars 2017, available on:

[5] European Commission, Factsheets: A new start to support work-life balance for parents and cares.

[6] European Commission, EU Action plan 2017-2019: Tackling the gender pay gap, 11 November 2017, p.6.

[7] European Commission, Tackling the gender pay gap in the European Union, 2014, p.6.

[8] European Commission, New Skills Agenda for Europe: Working together to strengthen human capital, employability and competitiveness, June 2016.

[9] European Commission, Factsheets: A new start to support work-life balance for parents and cares.

[10] European Commission, Causes of unequal pay between men and women.

[11] European Commission: Employment, Social Affairs and Inclusion, Work-life balance.

[12] European Commission, Recommendation on strengthening the principle of equal pay between men and women through transparency, 7 March 2014.

[13] European Commission, Report on equality between women and men in the EU, 2017, p.22.