With one of the fastest growing economies in Europe, Norway has become a popular destination for foreign businesses. It offers a stable economy, unemployment rate of 3.8% (February 2020) and a wealth of natural resources such as oil, gas, minerals, fish, and forests.
As a result, many foreign businesses are expanding into Norway and are having to navigate the complexities of Norwegian employment laws. In this article we are going to provide an introduction to the Labor and Employment Law in Norway and what is required from the employer.
Overview of Norway’s Employment Market
Norway is known for its great working conditions and low unemployment rate compared to other European countries. On average, wages in Norway are generally higher than in the rest of Europe and workers are entitled to several weeks of paid holidays annually. All these factors contribute to Norwegian employees being overall satisfied with their work conditions.
The energy industry in Norway remains the biggest industry, with high demands for all kinds of professional engineers. Other high demand industries include marine, shipping and Technology.
Working Environment Act
The Working Environment Act which is classed as one of Norway’s most important laws, is an act which contains regulations around the working environment, working hours and employment protection. It is in place to maintain health and safety in the workplace and regulates labour rights and duties.
The legislation is in place throughout Norway to protect and safeguard all employees (both Norwegian employees, foreign employees, and service providers). It ensures they are protected in the case of illness or injury as a result of the work they do.
Contract of Employment in Norway
Due to the Working Environment Act in Norway, all employment relationships require a written contract of employment which applies to both temporary and permanent work regardless of the duration of employment. The responsibility is with the employer to ensure that the contract is written and prepared and then signed by both parties.
There are several items which must be included in the written contract including the following:
- The duration of the employment
- Employee wage (including how often they will be paid and how payment is made)
- The probationary period (usually six months)
- Terms for giving notice (during and after probationary period)
- Working hours
- The job description (including the duties, job title and other information for the employee)
- Holiday leave
Probation in Norway
When employing someone in Norway, their probation period can be agreed for up to six months. During this time, you will need to provide the training and guidance they need to do their job, as well as regular evaluation of their work. During your employee’s probation, you can terminate their employment within one month, or if they fail to meet the required skills or reliability. If they are absent from work, you are able to extend the agreed probation period corresponding to the period of absence.
Working Hours in Norway
The normal working hours per week according to the Working Environment Act is 40hrs. However, the standard laid down in all collective agreements is 37.5hrs a week. When writing the contract, you must state the working hours, and both you as the employer and the employee are obligated to keep account of the employee’s working hours. Employees may also have the right to reduced working hours due to health, social or welfare reasons. The Act also establishes the right to flexible working hours if it can be arranged without inconvenience to you as the employer. For overtime work which must be compensated, the employees are entitled to at least 40% of the agreed hourly pay.
Minimum Wages in Norway
The salaries in Norway are generally higher than in many other European countries. There is no stated minimum wage in Norwegian law, but within specific industries employees are entitled to a minimum wage which is stated in the generalized applicable collective agreements. The aim of the regulations is to prevent any foreign worker to be subject to lower pay and poorer working conditions than others.
Generally collective agreements are concerning pay and working conditions that apply to everyone within that sector such as Construction, maritime construction industry, electricians, etc. There are often different rates to distinguish skilled from unskilled work, for overtime, and for younger workers. In the sectors which do not have collective agreements, the salaries are negotiated between the employer and employee.
Holiday Pay in Norway
As an employer, it is vital that you know the legislations in place for both the calculation and payment of holiday pay in Norway. The Holiday Act (Ferieloven), along with the collective agreements, provides the overall framework for annual holidays. All employees are entitled to four weeks and one day of paid holiday each calendar year. An employee’s holiday pay should be stated clearly on their payslip each month. As an employer if your company is connected to the collective agreement then employees will be entitled to five weeks’ holiday a year.
Vacations are generally unpaid; 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, and the payment is calculated based on the employee's salary during the year of accrual so if the employee did not work the year prior they would be entitled to holidays but not holiday allowance.
For employees to be entitled to holiday pay they must be evaluated as an ‘employee’ meaning self-employed or freelancers are not entitled to holiday pay.
The collective agreements for offshore for example, have different regulations regarding both holiday pay and holiday periods. As an employer it is important to pay careful attention to the regulations applicable for your staff.
Pension in Norway
As the employer you will be required to set up an occupational pension scheme for employees. Employees are entitled to the state pension once they have been living and working in Norway for 40 years on the Norwegian National Insurance scheme. The State Pension is calculated according to what they have previously earned from ages 16 to 67 and is calculated by The Norwegian Labour and Welfare Administration (NAV).
Insurance in Norway
As the employer you are obligated to sign insurance agreements on behalf of your employees, to ensure they are covered in case of accident and death related to work which would be accident insurance (“yrkesskadeforsikring”) and life insurance (“livsforsikring”).
Social Security in Norway
Anyone who either resides or is employed in Norway on a permanent or contract basis is compulsorily insured under the National Insurance Scheme. As an Employer you must pay a contribution to the social security system for each employee and submit a tax report to the Norwegian tax authorities.
Employers Social Security Contributions: 14.1%, calculated on gross salary.
Employees Social Security Contributions: 7.8%, calculated on gross salary.
Employing Foreign Workers in Norway
As an employer before hiring foreign workers it is your responsibility to check that they are entitled to work in Norway and have a valid residence permit. Non-EEA nationals must contact their Norwegian embassy to apply for a residence permit. There are different types of permit, for example for skilled workers, seasonal workers, self-employed persons etc so it is important to ensure you are applying for the right one. The required documentation is different for each type of permit so you will need to research what you need to submit beforehand. As the Employer if you employ foreign workers who do not have the correct type of residence permit you can be punished by fines or imprisonment.
For employees coming to Norway and wishing to work and stay for more than 3 months, then they must visit their local tax office and apply for a tax deduction card. Which then needs to be passed on to the employer so that you can deduct the correct amount of tax from their salary. Keep in mind a tax deduction card is not valid proof that someone is entitled to work or live in Norway.
Termination in Norway
Employers must give employees one month’s notice according to the Working Environment Act, unless agreed otherwise in writing or in a collective agreement. Also, an employee’s notice period will increase the longer they work at a company. The notice period by law will not begin until the first day of the following month.
In Norway, an employee can choose to end their employment contract at any time, however, they must give notice and work for the full amount required by their employer. The employer is not required to issue a warning before an employee is dismissed. However, there are strict requirements set in the Working Environment Act that must be adhered to. Under Norwegian law there is no ‘at will’ employment in Norway, and therefore, the employer must have a solid cause for terminating an employee and they must prove the grounds for termination. When determining this, a court will evaluate both the process of dismissal used by the employer and any evaluations made by the employer before making a decision of dismissal.
Notice of dismissal must be objectively justified and given in writing unless otherwise agreed in the employment contract or regulated by law.
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