Employer of Record (EOR) Norway

In Norway, the role of an Employer of Record Norway is pivotal for effective and seamless workforce management. As a distinguished Global Professional Employer Organization (Global PEO), the Employer of Record Norway assumes a comprehensive stance in overseeing various employment aspects. This encompasses stringent compliance with local labor laws, meticulous management of payroll intricacies, handling tax compliance, and provision of essential benefits to align with legal requirements.

Roles and Responsibilities of an Employer of Record (EOR) in Norway: 

  • Employer of Record Norway shoulders crucial responsibilities for effective workforce management.
  • As a distinguished Global Professional Employer Organization (Global PEO), it oversees various employment aspects.
  • Responsibilities include stringent compliance with local labor laws, meticulous management of payroll intricacies, handling tax compliance, and provision of essential benefits.
  • The Employer of Record (EOR) in Norway plays a pivotal role in providing accurate, detailed payslips and ensuring timely distribution of salary payments.

Discover the myriad advantages offered by our tailored Global PEO services designed specifically for Norway, presenting a streamlined solution devoid of entity setup hassles. Serving as your trusted Employer of Record Norway, Mercans not only ensures legal compliance but also establishes a physical presence and safeguards Intellectual Property. This allows your business to focus on its core operations. Experience a simplified global mobility journey, streamlined visa processes, and the cultivation of a diverse and proficient global workforce with Mercans by your side.

Things you need to know before hiring in 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.

CriteriaEmployeeIndependent Contractor
Responsibility for Work ResultEmployee bears the risk of delivering a specific result; responsible for day-to-day tasks.Independent contractor bears the risk of delivering a specific result; responsible for the outcome.
Day-to-Day InstructionsObligated to follow the employer's day-to-day instructions.Not obligated to follow the other party's day-to-day instructions.
Personal Performance ObligationObligated to perform the work personally.Can use another person to fulfill obligations.
Responsibility for Work ToolsUses the employer's tools or assets.Holds own work tools; may use other party's tools.
Number of CustomersUsually works for one principal.Entitled to have multiple customers.
Tax TreatmentEmployer pays Social Contribution Tax and income tax.Obligated to pay taxes and VAT personally.
Benefit EntitlementEntitled to holiday pay, sick pay, and pension benefits.Responsible for own benefits, no entitlement to employer-provided benefits.
Protection from TerminationProtected from unfair dismissal; regulated by labor laws.Not protected; termination based on contract terms.
Local Limitations on UseNo limitations.No limitations.
Working Hours RegulationSubject to maximum working hours regulations.Not subject to regulations but must comply with contractual terms.
Leased or Seconded EmployeesHiring out employees regulated by temporary work agencies.Hiring of labor from temporary agencies permitted under certain conditions.
Regulations of Different ContractsDefined by mandatory legislation in employment, tax, and social benefits law.General civil law applies if not considered an employee.

Payroll in Norway

Minimum Wages in Norway:

In Norway, there are no statutory provisions governing minimum wages. However, the norm or minimum wage is typically outlined in collective agreements. Certain sectors have introduced minimum wages based on universally applicable collective agreements, covering all workers within a specific industry, regardless of their direct involvement in the agreement. Sectors with such generally applicable collective agreements include construction, maritime construction, agriculture, horticulture, cleaning, fish processing, electricians, freight and passenger transport, hotel, restaurant, and catering.

When a collective agreement does not establish payment terms or if the work falls outside the scope of such agreements, employers and employees are free to mutually agree upon wages without specific statutory minimum requirements.

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:

Employee’s Contribution

Individuals, including non-residents earning remuneration for services in Norway, are subject to social security and pension contributions, paid alongside income taxes. The individual’s contribution is set at a higher rate for self-employed persons (11.1%) compared to employees (7.9%). Foreigners may be exempt, either wholly or partially, based on social security agreements or upon application if satisfactorily covered in their home country.

Conditions include

  • Income below NOK 64,650 is exempt; contributions cannot exceed 25% of income beyond this threshold.
  • Individuals under 17 or over 69 years pay a reduced rate of 5.1%.
  • Employee contributions are not tax-deductible.

Employer’s Contribution

Employers must contribute to social security based on total Norwegian gross salary costs. The standard rate is 14.1%, but it may be lower in sparsely populated areas. For income exceeding NOK 750,000, the rate increases to 19.1%. Exemptions or credits may apply under social security agreements or if similar contributions are paid to another state.

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.

Other Taxes:

Wealth Taxes:

  • Municipal wealth tax: 0.7% on assets over NOK 1.7 million (single) or NOK 3.4 million (married).
  • State wealth tax: 0.3% on assets over NOK 1.7 million (single) or NOK 3.4 million (married), increasing to 0.4% for wealth over NOK 20 million (NOK 40 million for married couples). Maximum combined wealth tax rate: 1.1%.

Inheritance, Estate, and Gift Taxes:

Inheritance and gift taxes were abolished from January 1, 2014.

Property Taxes:

Municipalities decide on property taxes. For personal and vacation homes, rates range from 1‰ to a maximum of 4‰, with a basic deduction applicable.

Consumption Taxes

Value-Added Tax (VAT):

VAT rates include:

  • Principal: 25%
  • Train, airplane, taxi: 12%
  • Rental car: 25%
  • Hotel, boarding house, rent: 12%
  • Buying food (grocery, take away): 15%
  • Buying food in a restaurant: 25%

In summary, Norway’s tax structure incorporates social security contributions, income tax, wealth taxes, and consumption taxes, each subject to specific rates and conditions. Mercans ensures compliance with these regulations, offering comprehensive payroll solutions tailored to individual and employer needs.

Employee Benefits in Norway

Statutory Leaves

Below are the types of leaves in Norway: 

Annual Leave

In Norway, the Annual Holiday Act ensures employees receive 25 days of paid holiday annually, equivalent to four full weeks and one day. The Act mandates holiday payment at 10.2% of the previous year’s annual wages. Many collective agreements provide employees with five weeks of holiday, increasing the holiday payment percentage to 12%. This contractual right is a prevalent arrangement in Norway.<

Sick Leave

The National Insurance Act of 1997 governs sick leave in Norway. During the first 16 days of illness or injury, employees are entitled to payment from the employer (employer-paid period). After this period, Social Security takes over. Sick pay from Social Security is limited, providing 100% of wage benefits up to approximately NOK 561,804 per year. Immediate notification to the employer and a doctor’s certificate for absences over four days are necessary. Employees may have contractual rights to full payment during sick leave based on individual employment contracts.

Maternity Leave

Parents in Norway are entitled to 12 months’ leave during the first year of their child’s life, not exceeding 12 months for both parents combined. Each parent can take an additional unpaid leave of up to one year per child, with specific reservations for the mother and father. Compensation from Social Security for wage loss during the first year of leave is available for employed parents. Additionally, individual employment contracts may entitle employees to full payment during maternity leave.

Paternity Leave

Fathers are entitled to two weeks of unpaid leave in connection with childbirth. Ten weeks are reserved for the mother, with the first six weeks included in her entitlement. Parents can divide the remaining period freely. Social Security compensates parents for wage loss during this leave if employed.

Partial Leave and Parental/Adoption Benefit

Employees may negotiate partial leave combined with partial payment of parental or adoption benefits through agreements with their employers. Overall, Norway’s statutory leave provisions aim to support employees during significant life events, ensuring both financial security and work-life balance. Mercans assists employers in navigating and complying with these regulations, promoting a harmonious work environment.

Adoption and Foster Care

The right to leave in connection with birth also applies to adoption and foster care. Compensation from Social Security and potential contractual rights to full payment from employers remain applicable.

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

  • EOR for Prospective Employees: Mercans offers seamless Employer of Record (EOR) solutions for businesses that have already identified their ideal candidates in Norway. Our services encompass every aspect of the employee lifecycle, ensuring compliance with Norway labor laws and regulations.
  • EOR + Recruitment: For those seeking assistance in talent acquisition, our EOR and recruitment services provide a holistic solution. We tap into our extensive network and expertise to help you find, onboard, and retain top talent, streamlining your expansion into the Norway market.
  • Visa Sponsorship and Global Mobility: Navigating the intricacies of expatriate employment is simplified through our visa sponsorship and global mobility services. We facilitate the relocation of your international workforce, ensuring compliance with Norway immigration and employment laws.
  • AOR for Contractor Payments: Businesses grappling with contractor payments can leverage our Assistance on Record (AOR) services. We handle the complexities of contractor payments, guaranteeing accuracy and compliance.
  • Converting Freelancers to Employees: Mercans supports the transition from independent contractors to permanent employees in Norway. Our expertise ensures smooth conversions while adhering to legal requirements.
  • HCM Integration: Integrate Mercans’ EOR services seamlessly with your HCM system in Norway for real-time data exchange, enhanced compliance, and cost-efficiency. Trust our expertise for a unified, compliant, and efficient approach, elevating your workforce management and payroll operations.

Conclusion

Mercans’ EOR solutions in Norway go beyond traditional services, offering a comprehensive package that addresses legal, financial, and operational aspects. Subtly embedded in our services is a commitment to supporting your business’s growth while ensuring compliance and efficiency in the dynamic Norwegian business landscape. Choose Mercans as your trusted partner for a compliant and efficient employment experience in Norway.

This document was prepared for informational purposes only. As local laws & regulations keeps on changing. Please consult your tax & legal advisors as well.
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