Introduction to Payroll in Norway
Running payroll for remote employees in the Kingdom of Norway requires strict compliance with the country’s employment legislation. Beyond compliance, effective payroll in Norway guarantees that your employees are paid accurately and on time, every time. When it comes to compensation, noncompliance not only opens you up to potentially costly legal fees and penalties, but also strains your relationship with top talent. Ensuring that you comply with all of Norway’s labor laws, however, requires genuine in-country expertise that even large corporations struggle with, in-house. This is where Skuad’s worker management and payroll processing solutions come in handy.
Employee compensation, benefits, and taxes in Norway
Skuad gives you the local legal expertise and platform to navigate Norway’s local labor regulations spanning everything from employee wage computation to tax legislation to benefits and deductions, among others:
- Income, regional, or corporate taxes
- Social security, health insurance unemployment benefits, and pension
- Various types of leaves and holiday compensation
- Other employee deductions
Payroll Process in Norway
Norway’s local labor laws dictate every critical aspect of employment, including payroll, but the payroll process in general does not deviate from a standard formula.
This stage is all about due diligence: standardizing policies, collecting inputs, and validating the data gathered.
Setting up the organization
Different companies will employ different internal policies. For the purposes of payroll processing, you need to carefully prepare the following aspects of your organization during the pre-payroll phase:
Your business profile consists of the set of registered business numbers and other relevant identifications that will later be used for the mandatory submission and reporting of documentation such as invoices and tax forms.
Workplace policy is best customized to suit the specific location. even if all locations are within the same country.
The different types of leaves granted to employees will directly impact wage calculation. You need to make your leave policy crystal clear and compliant with local labor laws.
In the same vein, attendance policy needs to be compliant, transparent, and accurate, especially since it is the very basis of salary calculation. Note that your attendance policy should factor in adjustments owing to reduced or increased hours (e.g. half-days or overtime), and should also integrate the tools used to track attendance (e.g. timesheets and biometrics).
Norway’s labor laws are comprehensive, covering every aspect of employment from hiring to payroll processing, and detailing nuanced statutory requirements. An expert payroll solutions provider like Skuad can guarantee your payroll in Norway complies with legal requirements.
Every organization's policy when it comes to compensation will be distinct. Generally, however, you’re looking to balance:
- Local mandatory guidelines
- Internal company policy
- Market rates and industry standards
- Compensation package additions and structure
Employees in Norway will expect to receive their pay once a month, along with the mandatory payslip detailing the breakdown of compensation. It is important to take these workplace norms into consideration for the sake of your remote employees, and attempt to incorporate factors such as typical pay schedules in your internal policies.
The pre-payroll phase requires considerable input gathering and validation, including employee information as well as supporting documentation for anything relevant to payroll. Invoices, reimbursements, attendance adjustment approvals from direct-line manager, all of these are collected and validated during pre-payroll.
Payroll calculation phase
The second phase of payroll processing focuses only on the calculation of wages and nothing else. While straightforward, salary computation can be complex due to different base rates, adjustments, and other guiding policies that need to be accounted for to guarantee accuracy. Software can greatly alleviate the effort required for the payroll calculation phase, but only if it’s properly set up for the right payroll policies as standardized in the pre-payroll phase.
Salary payments take up most of the post-payroll phase. This is the time when you send advice to your corporate bank or payment processor with instructions regarding salary disbursement. Here too, automation and other software features like direct deposit integration can help make the process more efficient.
Salaries are one of the most significant business expenses shouldered by an organization, therefore making post-payroll accounting critically important to keep track of a company’s financial status.
Payroll reporting and compliance
Where accounting is for internal purposes, reporting is often for external ones. Payroll reporting typically involves the submission of appropriate reports and documents to the relevant local government bodies.
Book a demo with Skuad to see for yourself how payroll in Norway works.
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Payroll Processing in Norway
Payroll processing can come with complicated compliance issues that can bog down a company’s HR processes. One of the best ways to offload compliance concerns is to outsource to an expert HR and payroll solutions provider like Skuad.
Payroll Processing Company in Norway
A leading global HR and payroll processing platform, Skuad affords you the in-country expertise and software infrastructure to not only stay compliant with Norway’s local labor laws, but implement payroll in a cost-effective manner. Better yet, you gain the flexibility to make use of Skuad’s HR management for expanding your international teams when you need it.
Payroll Management in Norway
Additionally, Skuad also offers payroll management. Norway’s local labor laws require payroll management: the maintenance and safekeeping of financial records and other supporting documents relevant to payroll.
Payroll Compliance in Norway
Norway’s labor law is codified by the Norwegian Norwegian Working Environment Act of 2005, and also takes supplementary components from a number of other legislations, among them:
- The Constitution of 1814
- The Working Environment Act of 2005
- The State Employee Act of 2017
- The National Holiday Act of 1988
- The National Insurance Act of 1997
- The Personal Data Act of 2018
- The Gender Equality and anti-discrimination Act of 2017
Additionally, collective bargaining agreements decide wide-scale standards that span industries or regions, and specific contract terms iron out employee-employer relationship details. You need to be in compliance with all these moving parts to successfully run payroll in Norway.
Payroll Components in Norway
Complying with Norway’s employment legislation concerning payroll entails a clear understanding of its components. While payroll is typically broken down into the general parts of base pay, deductions, and bonuses, local regulation dictates their details.
There is no nationally mandated minimum wage in Norway’s local labor laws. Collective bargaining agreements often dictate wages. For your reference, you can use the average monthly salary in the country, which is 39,380.85 Norwegian Krone or NOK ($4,038) per month.
Employees in Norway expect to work at most nine hours a day, and 40 hours per week. Note, however, that collective bargaining agreements typically set the standard at 37.5 hours per week.
Overtime in Norway is not permitted to be a permanent fixture of employment; it can be used when need arises, but only for a limited time. Overtime work is paid with a supplement to the base pay rate of at least 40% of the base rate, with the following limitations:
- 10 hours every seven working days
- 25 hours every four consecutive work weeks
- 200 hours for a period of 52 work weeks
As a rule of thumb, overtime is capped at 13 hours for every 24 work hours, and 48 hours for seven working days.
Social security contributions in Norway are split between employer and employee at a 14.1% to 8% split. These contributions are governed by the country’s Social Security Law and payments are sent to the National Insurance Scheme.
Employees who have at least four weeks of tenure are entitled to 52 weeks of sick leave. The employer covers the first 16 days of absence, after which the National Insurance Scheme takes over paying out benefits.
Maternity leave in Norway lasts for 54 weeks where employees can choose to be paid 80% of their rates for the full 54 weeks, or 100% for 44 weeks. Furthermore, new parents also can opt to take a full year of absence without compensation.
Parents may share parental leave between them save for three weeks before and six weeks after childbirth, which is reserved for the mother. Ten weeks of parental leave are reserved for the father.
In Norway, employees with a monthly salary (or annual salary divided by 12) are entitled to their monthly rate regardless of how many working days there are in a month. In effect, they are still paid during public holidays when they are not working. Below are the public holidays in Norway:
- 1 Jan - New Year's Day
- 14 Apr - Maundy Thursday
- 15 Apr - Good Friday
- 17 Apr - Easter Sunday
- 18 Apr - Easter Monday
- 1 May - Labor Day
- 17 May - Constitution Day
- 26 May - Ascension Day
- 5 Jun - Whit Sunday
- 6 Jun - Whit Monday
- 25 Dec - Christmas Day
- 26 Dec - Boxing Day
Additionally, according to the Norwegian Holidays Act, all employees are entitled to 25 days of holiday, or more specifically, vacation leave. In the Act, Saturdays are considered working days, so this allowance is equivalent to four weeks and a day of paid leave. Furthermore, employees over 59 years old are entitled to another week on top of that. Three continuous weeks of vacation are taken between June 1 and September 30, Norway's main holiday period. The rest of the remaining vacation credits can be freely spent by the employee, even consecutively.
In the Norwegian Holidays Act, workers are required to take vacations, but are only entitled to the above vacation pay from their employer if they've been employed prior to September 30 of the calendar year. Otherwise, they can take vacations but are only entitled to a week of pay (one week, including Saturday)—although accrued vacation pay from previous employers are still paid to them. Employees can refuse to take a portion of their unpaid vacation, in this case.
Norway’s tax system is split between general and personal income. General income tax rates are set at a flat 22%, whereas personal income tax rates follow a progressive bracket based on earning:
- Between NOK 190,350 and NOK 267,900: 1.7%
- From NOK 267,900 to NOK 643,800: 4.0%
- From NOK 643,800 and NOK 969,200: 13.4%
- From 969,200 and NOK 2 million: 16.4%.
- Beyond NOK 2 million: 17.4%
Some additional aspects of HR related to payroll with which you would want to be familiar are probationary periods and termination. Probationary periods are agreed upon by employer and employee, capping out at six months. When it comes to termination, one month’s notice is the norm.
Do you require a more comprehensive understanding of payroll in Norway? Book a demo with Skuad’s in-country experts now.
Businesses in aggressive stages of growth can’t afford to be bogged down by compliance issues whenever they expand their globally distributed teams to new international locations. As a leading global HR and payroll processing solutions provider, Skuad can help you face the compliance challenges of every facet of your HR and payroll needs, so you can focus on growing your business.
Skuad’s local legal expertise keeps you compliant with employment legislation not only in Norway, but practically anywhere in the world where you want to build a team and pay employees.
Need to run payroll in Norway? Request a demo from Skuad to see for yourself how you can run payroll seamlessly and compliantly without issues.
Norway’s exchange rate currently stands at $1 for every NOK 9.76.