hiring a Norwegian employee

Are you representing a foreign company and are looking to hire a Norwegian to work in Norway? How do you make sure you are compliant with the Norwegian rules?

Here is a short overview of the most important things to keep in mind, having Norwegian employees.

  1. Written work contract
  2. Working hours
  3. Minimum wages
  4. Holiday pay
  5. Unpaid leave
  6. Pension
  7. Insurance
  8. Termination of contract
  9. Permanent establishment

Dowload free guide: Norwegian compliance and reporting responsibilities

1. Written work contract

All employees working in Norway, are covered by the Norwegian working environment Act.

All employees are entitled to a written contract of employment. This is applicable both for permanent and temporary employment. 

It is the employer’s responsibility that a written contract is prepared and signed by both parties. 

The employment contract should contain information on matters of major importance for the employment, and the Act has stated a list of minimum information

Also read: All you need to know about the Norwegian tax report system – a-melding 

2. Working hours

There are limits for how much an employee can work per 24-hours and per week. These limits must be followed, even though the employee agrees to longer working hours. 

The limits for normal working hours are:

  • 9 hours per 24 hours
  • 40 hours per 7 days

If the employee works shifts, nights or Sundays, regular working hours are 38 or 36 hours a week.

The regular working hours may be calculated based on a fixed average if the average number of hours worked are within the limit for normal working hours. In certain periods you may work more than the threshold for normal working hours in exchange for working correspondingly fewer hours during other periods. 

The working hours must be stated in the written contract between the employer, and the employee and the employer are obligated to keep accounts of the employee’s working hours. 

For overtime work, the employees are entitled to at least 40 % of the agreed hourly pay.

3. Minimum wages

There is no general minimum wage in Norway, but within specific industries, employees are entitled to a minimum wage. For example, within the construction sector. The minimum wage is stated in generalized applicable collective agreements. The purpose of these regulations is to prevent that foreign workers are subject to poorer pay and working conditions than others.
 

4. Holiday pay

In Norway, vacations are generally unpaid. The employees are not entitled to ordinary salary during holiday absence. Holiday allowance is paid instead of regular salary during the holiday absence.

The holiday pay is earned the year prior to the year the holidays are taken. The payment is calculated based on the employee's salary during the year of accrual.

Employees who did not work the previous year are entitled to holidays, but not to holiday allowance.

Minimum holiday pay is set to be 10,2 per cent of the salary paid during one calendar year (4 weeks + 1day). For employees over the age of 60, the rate is 12,5 per cent.

Many employees have an agreement with their employer or are a part of a collective agreement that gives them holiday pay at a rate of 12 per cent of the salary paid during one calendar year (5 weeks). For employees over the age of 60, the corresponding rate is 14,3 per cent. 

Also read: Calculation and payment of holiday pay in Norway

5. Unpaid leave

Employees are in certain cases entitled to paid or unpaid leave of absence. 

The leave could either be paid by the employer or by NAV. In some cases, the payment is made directly to the employee and in other cases as a refund to the employer. 

Examples of paid leave:

  • Pregnancy leave – paid by the employer
  • Maternity and paternity leave – paid by NAV
  • Illness of children and childminders – first 10 days covered by the employer. The employer can then claim a refund from NAV.
  • Hospital stay for a child – paid by NAV
  • Religious festivals for employees not belonging to the Church of Norway – paid by the employer (the employer can set terms to the leave).
  • End-of-life care for a close relative – paid by NAV 

Examples of unpaid leave:

  • Leave for education
  • Military service
  • Essential care for parents, spouse and cohabiting partner or registered partner 

6. Pension

The employer is required to set up an occupational pension scheme for their employees under specific conditions. 

This requirement covers the following: 

  • Enterprises with at least two employees who both have working hours and salary amounting to 75% or more of a full-time position.
  • Enterprises with at least one employee who has no ownership interests in the enterprise and whose working hours and salary amount to 75% or more of a full-time position.
  • Enterprises with employees who have working hours and salary amounting to 20% or more of a full-time position, provided that they collectively carry out work corresponding to at least two full-time equivalents. 

Employers that have employees who can document A1 sheet (confirmation of National Insurance payment in home country) are exempted from the above-stated pension requirement. 

7. Insurance

The employer is obligated to sign insurance agreements on behalf of the employees, to make sure that they are covered in case of accident and death related to work.

  • accident insurance (“yrkesskadeforsikring”)
  • life insurance (“livsforsikring”) 

 

8. Termination of employment

An employment relationship is usually terminated by a dismissal/resignation by one of the parties. 

In cases of dismissal with notice by the employer, the employer is obligated to comply with strict rules stated in the Act. 

Read more:  Be aware of the strict rules for termination of employment in Norway

 

9. Permanent establishment

Based on internal law, the threshold for becoming subject to corporate tax is rather low.

The starting point is that any foreign enterprise will become subject to Norwegian corporate tax if it conducts business activities within Norway or if it hires out employees to work in Norway.

However, Norway has tax treaties with about 90 countries, which may provide exemption from Norwegian tax liability. An assessment of tax liability must therefore be made specifically for each foreign enterprise and based on the relevant tax treaty.

The basic rule in the tax treaty is that a foreign enterprise becomes subject to tax if it has a so called “permanent establishment” or “PE” in Norway.

A PE may exist e.g. if the foreign enterprise:

  • has a fixed place of business in Norway through which the business of the enterprise is wholly or partly carried on;
  • is engaged in a building site or construction or installation project that endures for more than a given number of months, e.g. 6 or 12 months;
  • is represented by a dependent person or agent in Norway that is acting on behalf of the enterprise and has, and habitually exercises, an authority to conclude contracts in the name of the enterprise; or
  • is engaged in petroleum related business activities on the Norwegian continental shelf for more than in the aggregate of e.g. 30 days.

Also read: Corporate tax in Norway - the basics for non-Norwegian enterprises

 

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