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:

* 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. 

Streamlining Payroll Compliance in Norway with Advanced Payroll Solutions

Managing payroll in Norway involves navigating a complex landscape of tax regulations, employee benefits, and statutory contributions. For businesses operating globally, managing payroll across multiple countries with different rules and requirements can be particularly challenging. This is where Global Payroll solutions come into play. Leveraging advanced Payroll Software and Payroll Services ensures that companies can stay compliant with local laws while simplifying payroll processes on a global scale.

1. Ensuring Compliance with Norwegian Tax Regulations

A critical aspect of payroll processing in Norway is understanding the intricacies of tax deduction, including the mandatory Forskuddstrekk or payroll advance tax deduction. Payroll Software integrated with tax systems ensures that businesses can automate tax deductions directly from employee salaries in accordance with tax deduction cards. By utilizing Payroll Services, companies can ensure timely and accurate deductions, avoiding penalties for non-compliance and optimizing tax processing for employees under the PAYE scheme.

2. Simplifying Reporting and Documentation

Norwegian law mandates regular reporting of salaries, benefits, and employment details to various authorities, including NAV and Statistics Norway. With Global Payroll solutions, businesses can automate these reporting tasks, ensuring that the data submitted to government agencies is accurate and timely. Integrated Payroll Software simplifies the generation of required reports such as the A-melding and annual income summaries, helping businesses avoid hefty fines for incorrect or late submissions.

3. Efficient Employee Benefit Management

Employees in Norway are entitled to a variety of benefits, such as sick pay, holiday pay, and pension contributions. Managing these benefits accurately is a significant part of payroll processing. Payroll Software helps businesses manage these benefits by automating calculations and ensuring compliance with the mandatory OTP (occupational pension) scheme. In addition, Payroll Services can assist in setting aside the required holiday pay, calculating sick leave, and managing layoff benefits in accordance with the local regulations.

4. Handling Complex Payroll Scenarios

From attachment of earnings to the management of national insurance contributions, Norwegian payroll processing can involve complex scenarios. For companies with international operations, managing payroll across borders while adhering to local regulations becomes even more critical. Global Payroll services ensure that such complexities are managed seamlessly by local experts who are well-versed in Norwegian payroll laws and can guide businesses through payroll deductions, contributions, and adjustments.

5. Automation for Enhanced Accuracy and Efficiency

Manual payroll processing can lead to costly mistakes. By investing in sophisticated Payroll Software, companies can automate payroll calculations, reduce human error, and streamline overall payroll management. This not only improves compliance but also reduces administrative overhead, allowing HR teams to focus on more strategic tasks. Through the implementation of Payroll Services, businesses can ensure their payroll operations are streamlined and aligned with evolving tax laws, making payroll management in Norway simpler and more efficient.

In conclusion, managing payroll in Norway demands a comprehensive and compliant approach. With the support of Global Payroll solutions, advanced Payroll Software, and dedicated Payroll Services, companies can ensure that they remain compliant with local payroll regulations, manage employee benefits effectively, and streamline their payroll operations for greater efficiency and accuracy.