Payroll In Norway

Norway is suitable for foreign investment due to its high political stability, highly-skilled workforce, numerous tax incentives, higher productivity than the EU average, and government programs’ funding. The World Bank classifies Norway as a high-income economy, so it is one of the premier countries to commence a business. It ranks 30th globally in terms of GDP and 9th in the 2019 Ease of Doing Business Index.

Companies endeavoring to grow their business in Norway should be up-to-date with local rules and regulations set by the Norwegian government. This familiarity helps in effective payroll in Norway and entertains the skilled workforce in the country. Besides, a company should thoroughly understand tax systems, wage structure, payroll options, payroll cycle, entitlement and termination terms, social security contributions, etc.

Understanding labor requirements and payroll tax in Norway is vital to establishing error-free and compliant payroll. The following guide illustrates all the attributes you must know about payroll in Norway.

How Is Payroll Calculated in Norway?

Norway’s payroll policies and procedures ensure timely payment and accurate tracking of employees’ working hours. Maintaining record-keeping is vital to calculate payroll accurately. Furthermore, you must deduct social security contributions and other suitable deductions while following the payroll rules and regulations in Norway.

The following formula helps you to calculate payroll:

Net Salary = Gross Salary – Gross Deductions

where,

Gross Salary = Basic Salary + HRA + All types of Allowances + Arrears + Reimbursements + Bonus

and               

Gross Deductions = Public Provident Fund + Income Tax + Professional Tax + Insurance + Leave adjustments + Loan reimbursements (if any)

Important Elements of Salary Structure in Norway

The elements described below form the salary structure in Norway:

Cost to Company (CTC)

The CTC indicates an annual amount a company must pay to an employee while hiring them. It covers employees’ gross and net remuneration, additional benefits (like EPF (Employees’ Provident Fund), gratuity, food coupons, house allowance, medical insurance, travel expense, etc.), payroll deductions in Norway, etc.

Gross salary

It covers all aspects that help an employer formulate an employee compensation package. The incorporated aspects are health insurance, social security contributions, dearness allowance, compensatory city allowance, overtime wages, total income before considering payroll deductions in Norway, etc.

Net salary

It represents the amount added to an employee’s bank accounts after considering all deductions (like income tax, professional tax, and the public provident fund) from the gross salary.

Basic salary

It denotes the fixed amount directly paid to the employees. It doesn’t include bonuses, incentives, benefits, or any other types of compensation from employers. Essentially, it is the amount the employees receive after the employer has calculated all additions and deductions from the annual package. The value depends on the employer’s job title and the sector’s activities.

Allowances

It signifies all the employment expenditures employers must pay to their employees. All employees in Norway are provided with several allowances like paid time off allowance, maternity allowance, etc., regardless of the industry and the business. 

How to Set Up a Payroll in Norway

The below steps assist businesses intending to set up payroll in Norway:

Step 1: Register a business in Norway with the Central Coordinating Register (via the Brønnøysund Register Center) to get a Norwegian Organization Number. To obtain this number, keep the following details ready: application form, registration certificate from the native country, and information about the director/contact person.

Step 2: Get an EIN (Employer Identification Number) from the IRS.

Step 3: Obtain a state or local business ID (if needed).

Step 4: Mention each employee’s full name, address, date of birth, contact number, emergency contact, personal ID number, tax deduction card, and tax filing number. Also, you need details like each employee’s employment joining date, filled Form I-9, compensation details, job title, annual salary, work certificates from their earlier employers, and bank details. 

Step 5: Categorize your employees among part-time, full-time, and independent contractors. Part-time and full-time employees are required to fill W-4 form and Form W-9 for independent contractors.

Step 6: Register for VAT (via the Simplified VAT scheme for e-commerce) if the annual turnover is expected to surpass NOK 50,000.

Step 7: Register for an occupational pension plan (at the mandatory occupational pension scheme (OTP)) and mandatory workers’ injury insurance (via National Insurance Scheme).

Step 8: Register with the Tax Administration and the Labor and Welfare Administration (NAV) to pay deductions for social insurance and tax.

Step 9: Register with National Insurance Confirmations (NIC) to pay national insurance contributions.

Step 10: Open a Norway bank account in a local bank to disburse all payroll-related payments. You need the court and registration details (like health insurance registry, evidence of statistical number, etc.) before verifying the business bank account.

Step 11: Calculate each employee’s payroll amount and validate your company’s payroll cycle and structure. The payroll method you can use includes manual (a team of accountants handles the payroll system) or through a payroll service provider.

Step 12: Pay all employees via a local entity (which enables you to hire and pay employees compliantly) or partner with an Employer of Record (EOR) platform in Norway.

A Step-by-step Process of Payroll Processing in Norway

Three stages incorporated in the processing of payroll in Norway are discussed below.                                               

i. Pre-payroll stage

It complies with Norway’s legal requirements to process payroll and payments. The mandatory components of this stage are described below:

Business profile

Your business must be registered as a legal entity. The Brønnøysund Register Centre handles the business registration process. It also provides a unique business number you must specify on all formal payroll communication.

Attendance policy

The attendance policy lays down the rules for the employees’ attendance. It assists you in calculating overtime hours, attendance permissions, standard and special attendance, etc. Thus, the policy helps you with payroll calculation and compliance.

Statutory components

It states the existing and latest statutory compensation laws and regulations that provide employee entitlement benefits.

Salary components

It incorporates factors like deductions, allowances, and leave type that may affect salary calculation.

Payment schedule

It expresses the fixed date for salary disbursement to employees to prevent payment delays. It keeps employees informed on when they will get their monthly payments.

Employee details

You must collate the personal and professional details of all your employees. The details include employees’ names, job designations, departments, nationalities, etc. They will serve as evidence when any payroll-related issue occurs and guarantee that all employees receive timely payments. All these collated details are entered into the payroll software (for example, the Employee Self-Service portal (ESS)).

ii. Payroll calculation stage

You must enter the collated data from the previous stage into the payroll system. You should track working hours and calculate deductions and taxes. Subsequently, you should calculate employees’ net salaries and print payslips to ensure the payroll process is error-free.

You should calculate and upkeep payroll records manually or automatically (in payroll software). Hence, you can timely process payments.

iii. Post-payroll stage

Statutory compliance

The payroll supervisor must strictly abide by statutory compliances when processing payroll. Deductions like ESI (Employees’ State Insurance), TDS (Tax Deducted at Source), EPF (Employees’ Provident Fund), and more must be subtracted from the employee’s payroll. Such deductions will be transferred to the corresponding government bodies/authorities.

Payroll accounting

It considers payroll-related expenditures and tracks payments that help you to fulfill reporting and compliance requirements. You can use internal payroll accounting to control expenses or outsource it to an external auditing service corporation.

Payroll reporting and compliance

You should prepare reports containing details like withholdings, contributions, and compensation. These mandatory compliance and reporting forms are submitted to the finance department/regulatory authority.

Payroll Contributions

According to the salary, employers and employees must make social security contributions in Norway to abide by the Norway payroll requirements. They are mentioned below.

Employer contribution

The employer should make up to 14.10% of social security contribution (based on the zone).

Employee contribution

The employee should make social security contributions ranging from 5.10% – 8.20%.

However, the following conditions must be met:

• Employees with income up to 64,650 NOK are exempted.
• The contribution may not sum up more than 25% of the income for amounts in addition to 64,650 NOK.
• The employees under 17 or more than 69 years of age make social security contributions at 5.1%.

Payroll Cycle

In Norway, employees are usually paid at least once a month.

Norway Payroll Options for Companies

Employers can choose among different options to efficiently process the payroll in Norway based on their needs and budget. The following section discusses the HR payroll in Norway options.

• Internal payroll: You can use this option of the Norway payroll guide for your company if you are dedicated to your company’s presence in the country. You must hire experienced HR staff who thoroughly understand Norwegian employment and compliance laws.
• Remote payroll: It allows businesses to run under a single payroll system after adding employees in the country under your parent company’s payroll. It is an economical option, but the company must know different labor laws in Norway.
• A Norway payroll processing company: This option of the Norway payroll guide suggests that you should thoroughly research the market to find a reliable payroll processing company. The company must be well-versed in establishing and processing your payroll and payroll rules and regulations in Norway.
• Norway payroll outsourcing: It represents an easy, cost-effective, and flexible approach to handling payroll in Norway. Companies can use relevant services from a global PEO service provider like Multiplier. It ascertains compliance with the Norway payroll requirements and supervises all the elements of the Norway payroll process. Moreover, it eliminates administrative stress so that you can improve the company’s efficiency.

Entitlement and Termination Terms

Entitlement terms in Norway

The entitlements provided to employees in Norway are discussed below.

Paid time off

• Employees are entitled to 25 days of paid annual leave.
• The paid time off entitlement is 31 days per year for employees over 60.
• It is compensated at 10.20% of the employee’s total wage. The compensation is 12.50% of the total wage for employees over 60.
• An employee can take three weeks of constant leave between 1st June and 30th September.

Sick leave

• Employees are entitled to sick leave for up to 52 weeks.
• The employer pays 100.00% of the employee’s salary until the 16th day of sickness.
• The social security sickness benefit pays it during the 17th – 52nd day of sickness at up to 599,148 NOK.
• The employee must submit a written sick leave form within three days of sickness.
• A doctor’s note is needed if the sick leave surpasses three days.

Maternity leave

• Female employees in Norway are entitled to paid maternity leave of 59 weeks.
• The national insurance compensates it at 80.00% of the standard income.
• If the employee wants to take maternity leave for up to 49 weeks, they will be paid 100.00% of their income.

Paternity Leave

• Fathers in Norway get two weeks of unpaid paternity leave. 

Parental Leave

• Both parents can take up to 48 weeks of paid parental leave.
• It is compensated by NVA (the Norwegian Labour and Welfare Administration).
• Each partner can take an extra unpaid parental leave (after maternity leave) for up to 12 months.
• After maternity leave, the parent can take an extra year of unpaid leave.
• Employees earning more than 480,000 NOK annually don’t receive paid parental leave.

Public holidays

• Employees in Norway get ten public holidays per year.

Other leave

• If employees get injured at the workplace, they get compensation of up to 72,662 NOK yearly.
• The employee is entitled to a disability pension if they can’t work.
• The compensation rate depends on the employee’s inability to work.

Termination terms in Norway

• Factors that determine the termination process are the cause for termination, the type of contract, and the Collective Agreement or the Employment Agreement.
• According to Norway’s Working Environment Act, employers must provide written notice before terminating an employee’s contract.
• The written notice is not required if the termination happens due to misconduct.
• The employees working on probation are provided a notice period of 14 days before termination. The notice period for permanent employees is mentioned in the below table:

Duration of employment	Notice period
0 – 4 years	1 month
5-9 years	2 months
10 years and more	3 months

The notice period extension for employees who have completed at least ten years of employment and are aged 50 years or more is as below:

Employee’s age	Notice period extension
50 years or more	4 months
>55 years	5 months
>60 years	6 months

Norway Payroll Processing Company

Understanding local tax, reporting, and employment and compensation conditions is vital for foreign investors. This is because it helps them to administer accurate, punctual, and compliant payroll in Norway. They must also know the conformity with Norway Labor and local employment laws before forming payroll in Norway. The services from an international PEO company like Multiplier help you to acquire the optimal benefits of payroll rules and regulations in Norway.

How Multiplier Can Help with Global Payroll

Payroll management in Norway handles various payroll-related aspects like payroll processing, payroll calculation, payroll cycle, entitlement and termination terms, etc. It may be time-consuming for businesses to handle the entire payroll process autonomously. You can utilize the service from a global PEO platform like Multiplier to tackle all relevant challenges and implement the Norway payroll process.

Multiplier is notable for providing EOR solutions to global firms in 150+ countries. Our seasoned staff administers payroll-related tasks like payroll processing, contributions, employee onboarding, and more. Besides, our SaaS-based PEO services ensure that payroll processing is compliant and runs competently in the country.