LONDON (CNNMoney) - Iceland has made it very difficult to pay women less than men.
Employers in the Nordic country now have to prove that they pay men and women in the same jobs equally. If they fail to do so, they risk being fined.
Discrimination based on gender is already illegal in many countries -- but research shows the legislation is far from effective. Women are paid less than men in every country in the world, according to research by the World Economic Forum.
Iceland is the first country to take the fight against the gender pay gap a step further, requiring companies to proactively get equal pay certification from the government.
The law came into effect on Monday and applies to all companies and organizations with at least 25 full-time employees. Firms with more than 250 employees will have to get the certification by the end of this year, while smaller companies will follow in the next few years, according to their size.
The possible fines are set at around $500 per day in the current legislation.
The new law has resonated with activists around the world.
Actress and gender equality campaigner Patricia Arquette tweeted: "Yoo Hoo!! In Iceland it is now Illegal to Pay Women less."
Tennis player Billie Jean King added: "Iceland again leading in the equality movement. A new female Prime Minister, and a Parliament where nearly half of its members are women. Equal representation benefits everyone!"
Sam Smethers, who campaigns for women's rights as CEO of the Fawcett Society, said equal pay "isn't just about what is in women's interests."
"Holding women back holds our economy back. Tackling gender inequality and discrimination is good for business and for all of us," she said.
The new rules don't mean that companies must pay everyone doing the same job the exact same salary.
Employers still have the option of rewarding their workers based on experience, performance and other aspects. However, the companies must show that the differences in wages are not due to gender.
Iceland has been at the forefront of fighting gender inequality for years. For the past nine years, it has placed top in the World Economic Forum's Global Gender Gap Report, which measures differences between men and women in health, economics, politics and education.
But despite the country's global leadership, Icelandic women were still paid 78.5% of men's total employment income in 2014, according to the country's welfare ministry.
The government has committed to closing the gender pay gap by 2022.