Speaking to Al Jazeera, Dagny Osk Aradottir Pind, a board member of the Icelandic Women's Rights Association, said: "The legislation is basically a mechanism that companies and organisations ... evaluate every job that's being done, and then they get a certification after they confirm the process if they are paying men and women equally".
The system was in works since 2012 and in June a year ago the 'Act on Equal Status and Equal Rights of Women and Men' was amended making it mandatory for organization with 25 or more employees to get certified by a certification body confirming that the payroll system and its implementation comply with the requirements of the law.
Equal rights researchers said they hoped Iceland's legislation would encourage others to follow suit in tackling the gender pay gap while also highlighting the need to address the lack of women politicians globally.
The system was in works since 2012 and in June previous year the "Act on Equal Status and Equal Rights of Women and Men" was amended making it mandatory for organisation with 25 or more employees to get certified by a certification body confirming that the payroll system and its implementation comply with the requirements of the law. Failure to prove that women and men are being compensated fairly will result in fines of up to 50,000 Icelandic krona (€400) per day.
Way to go Iceland!
Politicians introduced the plans for these new rules on International Women's Day in early 2017.
Since the launch of the WEF's Gender Pay Gap Report in 2006, Iceland has closed its total average gender pay gap by around 10%, but according to government statistics, in 2016 there was around a 20% mean gender pay gap based on total earnings, or 14% when based on regular earnings without overtime pay.
It's the land of fire and ice - and now equal pay.
She added: "Although there is now gender pay gap reporting in the United Kingdom, which is compulsory for employers of 250 or more, this is different to equal pay because it only reports the difference in average pay, rather than individual pay of men and women".
Hungary was the only European country to be ranked lower than the global average, having scored poorly on political empowerment.
It seems to be a Nordic trend: Iceland, Finland, Norway and Sweden are all in the top five of the gender parity index.