Employer of Record (EOR) Norway

Employment Contracts in Norway

In accordance with the Working Environment Act in Norway, a written employment contract is mandatory for all positions. This contract must outline the terms and conditions of the employment and be provided to the employee within one month of their start date, or immediately for engagements lasting less than one month.

Typically, employment contracts are indefinite, granting employees the right to work until either party terminates the agreement. Temporary or fixed-term employment is restricted to specific situations, such as temporary work, replacements, traineeships, labor market schemes, sports-related roles, and CEO positions. General use of fixed-term contracts for specific work is limited to 12 months, with a 12-month restriction on rehiring for similar roles if the employee is not offered permanent employment.

Collective agreements with unions may govern temporary employment for specific groups like artists, researchers, or sports-related workers. The Working Environment Act specifies essential elements to include in employment contracts, covering details like party identities, workplace location, job description, commencement date, expected duration (for temporary roles), trial period conditions, holiday rights, termination notice periods, compensation, working hours, breaks, special working arrangements, and information about collective pay agreements if applicable.

Working Hours

Employees in Norway are entitled to clear information about your work schedule, including the timing and duration of your work. Regulations govern ordinary working hours to prevent excessive work, and provisions are in place to ensure compensation for overtime work.

Standard working hours in Norway adhere to the following guidelines:

• 9 hours within a 24-hour period (considered a normal working day)
• 40 hours over a 7-day period (considered a normal work week)

Probation Period 

An employer has the option to hire an individual on probation for up to six months. Upon completion of the six-month probationary period, the employment automatically transitions into a permanent position without a specified end date. However, the employer can choose to avoid this automatic transition by providing a notice of termination on the last day of the probationary period at the latest. Such termination should be based on valid reasons such as the employee’s unsuitability for the role, lack of proficiency, or unreliability. Additionally, the employer may dismiss a probationary employee if the dismissal is objectively justified based on circumstances related to the company, the employer, or the employee.

Employees vs Independent Contractors Compliance in Norway

Navigating the nuances of employee classification is crucial for compliance in Norway, distinguishing between Employees and Independent Contractors.

Pension Requirements

Obligatory Occupational Pension (OTP)

• Mandatory for companies with at least two employees or one employee without ownership interest working full-time.
• OTP must be established within six months of the obligation arising.
• Not taxable for employees; incurs 14.1% Employer’s National Insurance Contribution.
• Additional pension contributions can be agreed upon.

AFP (Alderspensjon fra Folketrygden)

A private sector tariff-based pension scheme supplementing the retirement pension from the National Insurance Scheme.

Employment Obligations

Labor Laws: Cover various aspects including:

Minimum Salary

There’s no general minimum wage; however, minimum wages exist in specific industries to protect foreign workers.

Mandatory Occupational Insurance

Employers must secure coverage for occupational injuries and illnesses, which is not taxable for employees or subject to Employer’s National Insurance Contribution.

Payroll Requirements

Pay Slip: Required to be issued, containing:

Payroll Cycle

Mercans ensures a seamless payroll cycle in Norway, aligning with the specific requirements of each client. Our expertise extends to navigating the absence of statutory minimum wage regulations, allowing us to tailor payroll solutions based on collective agreements within relevant sectors. Whether your industry falls under construction, maritime, agriculture, or other categories, Mercans adapts payroll cycles to meet both legal and collective agreement standards, providing a comprehensive and compliant payroll experience.

Mercans’ Payroll Capabilities in Norway:

At Mercans, our payroll capabilities in Norway leverage our deep understanding of the absence of statutory minimum wages. We specialize in aligning with collective agreements to establish appropriate pay structures within sectors like construction, agriculture, and more. Our tailored approach ensures that payroll cycles are accurate, efficient, and fully compliant with applicable agreements, allowing businesses to navigate the nuances of wage determination in Norway seamlessly. Trust Mercans for precise and customized payroll solutions in alignment with the country’s regulatory landscape.

Note: All payroll processes are conducted within the framework of relevant collective agreements and industry-specific norms.

Social Security and Income Tax in Norway

Social Security Contributions

Income Tax

Employer’s National Insurance Contributions

Employers pay national insurance contributions on employees’ taxable remuneration. Rates, regionally differentiated, are set annually by the Norwegian Parliament. For 2023, the rates vary across zones for ordinary industries and agriculture/fisheries.

• Zone I 14.1%
• Zone Ia 14.1% (10.6% until the tax-free amount is reached)
• Zone II 10.6%
• Zone III 6.4%
• Zone IV 5.1%
• Zone IVa 7.9%
• Zone V 0%
• Zone V 0%
• Additional on wages over NOK 750,000 5.0%

National Insurance Contributions

Contributions fund the National Insurance Scheme and are calculated on personal income.

• Salary income (aged 17 to 69) 7.9%
• Salary/business income, pensions (under 17 or over 69) 5.1%
• Primary business income (fishing/hunting, childminding) 7.9%
• Other business income 11.1%
• Pension income 5.1%
• Lower limit for calculating contributions NOK 69,650

Contributions must not exceed 25% of income exceeding NOK 69,650. Fishing, hunting, and childminding have a reduced rate of 7.9%, linked to a product tax.

Employee Benefits in Norway

Statutory Leaves

Below are the types of leaves in Norway: 

Overtime Pay

Overtime encompasses all hours worked beyond the regular working hours and on-call periods. The standard limit for general overtime is set at 10 hours per seven days, 25 hours per four consecutive weeks, or 200 hours within a 52-week period. However, under collective pay agreements binding the employer and elected employee representatives, a written agreement can permit up to 20 hours of overtime within a seven-day period. In such instances, the cumulative overtime should not exceed 50 hours per four consecutive weeks or 300 hours within a 52-week period. 

Special cases may warrant approval from the Labor Inspection Authority for a total overtime limit of 25 hours per seven days or 200 hours within a 26-week period upon application. It is crucial to note that general overtime can only be assigned to employees who have explicitly expressed their willingness to undertake such additional hours. For overtime services, employees are entitled to a supplementary payment, and according to the Working Environment Act, this overtime supplement should be a minimum of 40 percent. However, many collective agreements stipulate a higher rate, typically demanding a minimum of 50 percent additional payment for overtime.

Termination, Severance Pay and Notice Period

Employers in Norway have the option to terminate employees either with notice (discharge) or without notice (dismissal). Typically, discharge with notice is the standard termination procedure, and the Working Environment Act outlines the mandatory steps that must be followed before informing the employee of the company’s decision. Dismissal without notice (N. avskjed) is legally permissible only in cases of fundamental breach of contract, such as gross misconduct or disloyalty, such as working for a competitor, and should be reserved for exceptional circumstances.

Termination based on objective grounds (N. saklig grunn) is allowed, with objective grounds falling into two categories: subjective personal reasons (related to an employee’s conduct or performance) and objective reasons (including redundancy, lack of work, and the employer’s economic situation). However, a discharge is not considered based on objective grounds if alternatives, like reassigning the employee within the business, could have been pursued. Employers need to thoroughly explore all possibilities before deciding to discharge an employee.

In cases where termination lacks objective grounds, an employer becomes liable for damages, covering the employee’s loss, wages, and other entitled benefits. As a general rule, the employer must compensate for lost wages, with deductions for unemployment benefits, until the employee secures new employment. The employer may also be responsible for non-economic severance losses, although these are typically not substantial.

Notably, Norway lacks statutory provisions regarding severance pay. However, certain businesses practice offering severance payments based on agreements. These payments generally range from one to 24 months of salary, considering factors such as seniority, age, and social considerations. The standard notice period is one month unless otherwise agreed, with a common practice of extending it to three months.

Work Permit

Navigating the Norwegian work permit system is essential for both employers and foreign nationals seeking opportunities in the country. Norway, being part of the common Nordic and European labor markets, has streamlined its immigration procedures.

For EU/EEA/EFTA nationals, the need for a work permit has been replaced by a registration requirement if staying for more than three months. A Norwegian personal identification number or a temporary D number is necessary for residence.

Foreign citizens from non-EU/EEA countries typically need a visitor’s visa for purposes like tourism, business, or study. Certain groups, such as Schengen-country nationals and those with specific passports, are exempted. However, those planning to work in Norway generally require a residence permit, which should be obtained before entering.

Common residence permits include:

• Residence permit as a skilled worker: For individuals with specialized training corresponding to upper secondary education level or higher, relevant qualifications, and a concrete job offer from a Norwegian employer. The “early employment scheme” allows work commencement before permit processing.
• Skilled workers providing services: Applies to foreign employees working in Norway or international company employees serving a Norwegian branch. Similar qualification requirements as skilled workers and adherence to the “early employment scheme.”

Nationals from EU/EEA/EFTA countries follow a registration scheme, allowing them to live and work in Norway without a residence permit, provided they register with the police.

For those seeking permanent residency, a continuous three-year stay with a relevant residence permit is necessary. Language classes and specific conduct conditions must be fulfilled. The process involves online registration, document submission to the police, and potential review by the Norwegian Directorate of Immigration. The estimated processing time varies but is approximately 10 months.

Understanding these procedures is vital for a smooth transition to working or living in Norway, ensuring compliance with immigration regulations and enhancing the overall experience for foreign nationals and their prospective employers.

EOR Solutions in Norway