A Lesson from Iceland on Equal Pay Laws

There has been a lot of talk about implementing equal pay laws in the United States; laws that guarantee women earn as much as men for the same work. Whether you are for or against such laws, legislation must be clearly thought through before anything is enacted. An equal pay law in Iceland illustrates why.

It is one thing to create an equal pay law, but it is an entirely different matter to implement said law. Iceland enacted the Act on Equal Status and Equal Rights for Women and Men on January 1 (2018). Among the law’s many provisions is a requirement that payroll systems be certified in order to prove compliance. Certification must be obtained every three years.

This may seem like a good idea on its surface, but anyone who pays attention to government certification knows just how dangerous it can be. As soon as the government gets into the business of certifying something, the door is opened to all sorts of intrusions that could end up doing more harm than good.

Why Certified Payroll Systems?

Iceland’s certification law will be implemented in four phases. The largest employers are required to complete certification no later than December 31 of 2018. Deadlines for smaller companies have been set for 2019, 2020, and 2021, depending on employee numbers. Certification itself is based on employers and/or payroll providers developing payroll management systems that include job classifications and salary analyses as determined by Iceland’s government.

In simple terms, the Icelandic Standards Council has taken upon itself the responsibility to create job classifications and pay scales. Employers must now demonstrate their payroll management systems comply with the new standards via accreditation by an approved government body. You can bet the accrediting bodies will not certify for free.

The question to be asked is this: why certify payroll systems to begin with? What do software and payroll processing have to do with how much a person is paid? As explained by Dallas-based BenefitMall, software and processing are mere tools for making sure employees get paid accurately and on time. Ownership and management decide who gets paid what, making equal pay less about payroll systems and more about decision-making.

With that said, the answer to the question of why payroll systems must now be certified boils down to control. By certifying the systems, the government is forcing companies to be transparent about how much they pay for certain kinds of work. This forced transparency will ostensibly lead to legal compliance.

What Is the Danger?

Again, none of this may seem like a big deal to people who support government-enforced equal pay. But there are real dangers here. First and foremost are the differences between federal and state laws. Our Constitution established a clear and distinct difference between federal and state governments; it gave states a lot of independence specifically to prevent the federal government from becoming an overreaching, highly controlling entity.

Any attempt to force equal pay across the United States would require a federal mandate. Such a mandate would run contrary to the Constitution while simultaneously stripping states of some of their independence. The danger here should be obvious. Any time states are made more subservient to Washington, the more control Washington exerts over the lives of individual citizens.

Businesses in Iceland are now facing the reality that government-mandated equal pay is going to cause them big headaches. For right or wrong, that is what government regulation does. Business pays for it initially, but the cost is always passed on to employees and customers.

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