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Comprehending Payroll in Norway

Norway, officially the Kingdom of Norway, is a Nordic country in Northern Europe, and also covers the remote Arctic Island of Jan Mayen and the archipelago of Svalbard. It is one of the world’s strongest economies and gives high priority to knowledge development, innovation, technology and maintaining a sustainable business sector.

Establishment of Employer

All enterprises that carry on commercial activity and/or declare that they intend to have employees need to get registered in the Central Coordinated Register of Legal Entities (Brønnøysund). Every foreign company also needs to have a Norwegian Organization Number with Brønnøysund to operate and process a payroll in Norway.

Payroll Advance Tax Deduction (Forskuddstrekk)

Tax year in Norway is from January to December. As an employer, one must deduct tax from the salary paid to employees. As a process, all employers are responsible for downloading their employees' tax deduction cards and withhold the taxes as stated in the employee's tax deduction card. Generally, tax deduction card contains information about the tax table, tax rate and tax-free amount.
There is a voluntary tax scheme for foreign workers who have short work stays in Norway known as PAYE (Pay As You Earn) scheme. Most foreign workers who are new in Norway will automatically become part of the PAYE scheme when they apply for a tax deduction card and the card is marked with "Kildeskatt på lønn" (PAYE). The worker can opt out of the PAYE scheme and pay tax under the general tax rules during his or her appointment at the Tax Administration for ID check.

Attachment of earnings (Utleggstrekk)

If there is an employee who accrues unpaid debt or other monetary claims, the employer may be ordered to make deductions from the salary, known as attachment of earnings. The public authority that issues the attachment of earnings order calculates the amount to be deducted and determines the period over which the deductions are to be made.

Employer's National Insurance Contributions (Arbeidsgiveravgift)

Employer's National Insurance Contributions are taxes which employers must pay for their employees as part of the financing of the National Insurance scheme.
Employer's national insurance contributions are regionally differentiated. Each municipality is assigned to a zone with associated differentiated contribution rates. There are seven different zones, namely, I, Ia, II, III, IV, IVa and V. The employer's contribution rate depends on the zone to which the employer belongs and the type of business the employer operates.
The contribution rates for 2022 are as under:


Zone

General Industries
(%)

Health trusts and parts of the State Administration
(%)

Agriculture, forestry, and fishing
(%)

Only reporting withholding tax
(%)

Sector-excluded activity
(%)

Freight transport by road
(%)

Wage Deduction for Svalbard
(%)

I

14,1

14,1

14,1

0

14,1

14,1

0

Ia

10,6*

14,1

14,1

0

10,6*

10,6*

0

II

10,6

10,6

10,6

0

10,6*

10,6

0

III

6,4

6,4

6,4

0

6,4*

6,4

0

IV

5,1

5,1

5,1

0

5,1*

5,1

0

IVa

7,9

7,9

5,1

0

7,9*

7,9

0

V

0

0

0

0

0*

0

0

* Certain employers are eligible for the contribution-free amount scheme. The contribution-free amount is NOK 500 000/ 250 000 for the year 2022 and the highest rate of 14,1% is used after this amount has been used up.

Mandatory occupational pension scheme (OTP- Obligatorisk tjenestepensjon)

All employers who are obliged to have a pension scheme must save at least 2 per cent of the employees' income from the first krone. An employer is free to choose among a defined contribution plan, a defined benefit/corporate pension plan and an occupational pension plan.

Working Hours (Arbeidstid)

There are limits for how much an employee may work during a day and during a week. The limits prescribed by the Working Environment Act for normal working hours are:

  • 9 hours in 24 hours, and
  • 40 hours in 7 days

If an employee works in shifts, nights or Sundays, normal working hours are 38 or 36 hours a week.
Any work done beyond the limits of the Working Environment Act for normal working hours is overtime.
In the case of overtime work, the employee is entitled to a supplement of at least 40% of the agreed hourly wage.
Overtime rules are subject to collective agreements which provide for more favourable terms.

Leaves

Whether an employee is entitled to paid or unpaid leave depends on type of leave he/she applies for and the reason for the leave. The leave will often be entirely or partly covered by benefits from Arbeids- og velferdsforvaltninga (NAV, the Labour and Welfare Administration), paid either directly to the employee or as a refund to the employer.

Sickness Benefit

Employees must notify their employer as soon as possible in the event of absence due to illness. The obligation to pay sick pay commences on the day on which employers are notified of the absence unless the employee has been unable to notify.
An employer must pay sick pay, corresponding to full pay, for a period of up to 16 calendar days (known as employer's period) and the employee must have worked for at least four weeks to be entitled to sick pay.

Holidays

All employees are entitled to at least four weeks and one day of holiday every year. Employees aged 60 or over are entitled to an extra week. Many people are entitled to five weeks’ holiday through a collective agreement or other agreement with their employer.

Holiday Pay

Holiday pay is earned during the year before (the accrual year) the holiday is taken in the holiday year and paid instead of salary when the employee takes holiday leave.
Holiday pay amounts to a minimum of 10,20% of the salary earned during the year of accrual. For employees over the age of 60, the rate is 12,50%. Employees who are entitled to five weeks' holiday through a collective agreement or other agreement, employers must set aside holiday pay at the rate of 12%. For employees over the age of 60, the rate will then be 14,30%.

Lay-off/Redundancy (Permittering) Pay

Layoffs can be implemented either over a continuous period (full layoff) or through the introduction of reduced working hours (partial layoff). The employees must be given at least 14 days' advance notice before the layoff takes effect.
Employees can be laid off without salary for a maximum of 26 weeks within an 18-month period (exemption period). When the layoff starts, employers have a payroll obligation and must pay salary to the laid-off person for 15 days from the first day of the lay-off (employer period I).
Regulations can be issued on extending the exemption period before the employer's wage obligation of 5 days (employer period II) re-enters.

Reporting

In a payroll system integrated with Altinn, employers download their employees' tax deduction cards using the request Form 'RF-1211’
As an employer, one must also:

  • Report the start, changes, and cessation of employment relationships to the Register of Employers and Employees (NAV's Aa register)
  • Report salaries and other benefits to the Norwegian Tax Administration and NAV
  • Submit information to Statistics Norway (SSB)

Employers must report this information through A-melding.
Every year by February 1, employers must also submit an annual summary of incomes, deductions and withholding tax to their employees.

The enforcement fine for not timely submitting or incorrect A-melding is NOK 122 per employee per day, and the fine will continue to accrue until the information has been submitted or the error has been corrected. The fine can be maximum NOK 1 223 000. Information concerning the payment and the deadline will be given in the invoice sent to employer’s Altinn inbox. Processing payroll in Norway and ensuring timely compliance is no mean task. For seamless payroll compliance in Norway, organizations must invest in a powerful payroll platform capable of resolving such challenges as well as streamlining operations.

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