Norway represents a unique opportunity for international businesses evaluating an expansion. Those that take the plunge will benefit from the feel-good factor of dealing with a country that is one of the world’s happiest. Norway was ranked number five in the 2020 World Happiness Report, driven by an excellent healthcare system, high earnings and a good quality of life.
Although only a country of around 5.5 million people, Norway punches above its weight in many industries. With more than 2600 kilometers of coastline, it is a major global player in the oil, gas, maritime and seafood industries, helping to make it the fourth most successful country on Earth in GDP per capita terms.
With such a strong focus on work-life balance and with so many opportunities available, it’s no surprise that Norway is such a strong candidate for an international expansion. Add in its position outside the European Union and it stands out as a unique choice. If your organization is evaluating a move into the Norwegian market, this guide sets out the key basics around payroll in Norway.
There are three main types of corporate entities in Norway: sole proprietorships, Norwegian-registered foreign enterprises (known as NUF) and private limited liability companies (known as AS). For the latter two, a minimum capital deposit of 30,000 Norwegian krone (approx. £2500; $3500; €3000) should be deposited into a corporate bank account.
Most business registration requirements can be carried out on the Norwegian government’s online platform Altinn. This includes registering with the Register of Business Enterprises and for VAT, and businesses then receive their own individual registration number. This process costs NOK 5570 (approx. £470; $650; €550) if conducted online. The company must have a Norwegian business address, and any person running the business who is not from an EU or EEA country must have a Norwegian residence permit.
The business ID number is required for companies to set up separate bank accounts for the business and as individuals. These accounts can be set up at most Norwegian banks quickly, especially if the global company is already part of the EEA (European Economic Area). Previous bank statements, company paperwork, and identification from authorized managers with access to the account will help in setting up your bank account efficiently.
Contracts of employment are required to state length of employment, job description, working hours and condition, salary and how it’s paid, probation period (3-6 months is commonplace), notice terms, and holiday, leave and pension considerations.
Working considerations and limits on hours are set out in law by the Working Environment Act, although further regulations may be defined in employment contracts or through collective bargaining agreements. Employees should not work more than nine hours in any 24-hour period, or more than 40 hours in any seven-day period: most full-time workers in Norway work between 35 and 40 hours a week.
Overtime is limited to a maximum of ten hours in a week, 25 hours in a four-week period and 200 hours over a year (extendable to 400 hours with the consent of the Labour Inspector). Overtime should be paid at a minimum of 140% of usual rate.
Compensation, Bonuses and Severance
There is no overarching national minimum wage in Norway. However, minimum rates have been introduced in certain industries through collective agreements, including construction, agriculture, cleaning workers, road hauliers, electricians, the hospitality industry and others. It should also be noted that wages in Norway are generally very high: as of January 2021, the national pre-tax average stood at around NOK 640,000 per year (approx. £54,000; $75,000; €63,000).
Norwegian employers are subject to strict guidelines about reporting income for employees. Companies must report the income, taxes and national health insurance contributions on a monthly basis. Payroll regulations also stipulate that employers also show sick pay or parental leave pay, holiday pay and the annual holiday payment.
Bonuses can be awarded to senior employees in Norway; the awarding of bonuses to lower-ranking workers is unusual. There are no set rules regarding bonuses, although they will be subject to taxation.
The statutory minimum notice period in Norway is one month, reduced to 14 days if the employee is still within their probation period. There is no provision for severance payments within Norwegian law, beyond payment of usual salary for the length of the notice period.
Tax and Social Security
Norway may have a high standard of living and a high-wage economy, but this is counterbalanced by high tax rates.
Income tax is now paid on a ‘pay-as-you-earn’ basis (introduced at the start of 2019) and is charged across two categories. The first is the base rate (known as ‘fellesskatt’), which is levied at 22%, although it is reduced to 18.5% for some territories in the Arctic north. The second category is the step tax (known as trinnskatt) which is levied progressively across five bandings:
- The first NOK 184,800 (approx £15,700; $21,800; €18,300) is exempt
- Income beyond this up to NOK 260,100 (approx. £22,100; $30,600; €25,700) is taxed at 1.7%
- Income beyond this up to NOK 651,250 (approx. £55,300; $77,700; €64,400) is taxed at 4%
- Income beyond this up to NOK 1,021,550 (approx. £86,800; $120,300; €101,000) is taxed at 13.2%
- Income beyond NOK 1,021,550 is taxed at 16.2%
Corporate income tax is levied at 22%, which rises to 25% for certain financial services companies. Furthermore, an additional 56% ‘special tax’ is applied to companies conducting upstream petroleum activity on the Norwegian Continental Shelf, bringing the tax total for these companies to 78%.
On top of the tax take, social security payments must also be made into the National Insurance scheme at 14.1% for employers and 8.2% for employees. A lower rate of 5.1% applies to employees under 17 or who are 70 or over.
Holidays and Leave
Norway has ten days of paid public holidays each year, although employees are only entitled to be paid if they would have worked that day had it not been a public holiday.
Paid leave entitlement is 25 working days per year, including an entitlement to a three-week continuous break between June and September for summer holidays. Holiday pay entitlement is 10.2% of annual salary (12.5% for employees over 60), paid on the last payday prior to the employee’s summer holiday and no less than one week before the holiday starts.
Parental leave for both mothers and fathers is available in two options: full pay coverage for 49 weeks or 80% pay coverage for 59 weeks. Each parent has 15 weeks reserved for them (for the mother, this must cover the six weeks immediately after birth), while the remaining time can be divided between parents at their discretion.
Norwegian law allows employees to self-certify sick leave without presenting a medical certificate, for illnesses of no more than three days - this can be used a maximum of four times in a 12-month period. Longer illnesses require a medical certificate. Sick pay should be paid by the employer at 100% of usual rate for the first 16 days of an illness, after which the payment of sickness benefit by the Norwegian Labour and Welfare Service (NAV) begins.
Norway is a country that welcomes investment from overseas, but there is a large amount of paperwork and administration that needs to be done to ensure compliance. To keep on top of this burden, and to easily adjust to changes in legislation or tax rates, an established global payroll provider with Norway-specific expertise can take the strain of payroll in Norway and allow you to focus on establishing yourself in the country.
This article is for informational purposes only and not intended to convey or constitute legal or any other advice. It is not a substitute for advice from a qualified professional.