Guide for employers
Becoming an employer can be challenging in many ways. Amongst other things, you have to comply with some new laws and regulations in addition to several reporting obligations. It might be a comfort to know that most employers manage this without any problems. However, as we say in the Guide to Accounting, this is often the time when many entrepreneurs start taking a serious look around for partners. For example, this could be an accounting firm that can do the complete job or part of the job. Or you can take on a member of staff who also can deal with the tasks relating to employer responsibility.
The contents of the guide:
Appointments ... 1
Employing foreign workers ... 2
Employment contracts ... 3
Working hours and overtime ... 4
The National Insurance scheme and occupational injury insurance ... 4
Mandatory occupational pensions (OTP) ... 4
Holidays ... 5
Health, safety and the environment (HSE) ... 5
Illness/ various leaves of absence ... 6
Temporary lay-offs ... 7
Dismissal ... 7
The employees’ situation in connection with the sale/purchase of an enterprise ... 8
References ... 8
What does an employee cost? ... 10
Rules relating to secondary jobs and non-competition clauses ... 11
In this guide, we will try to look at some of the most common issues that can arise once you have employees. These are the rules relating to appointments, including taking on foreign labour, the drafting of a satisfactory employment contract and your duties as an employer, as well as some information about working hours, holidays, sickness absence, temporary lay-offs, references and dismissals. We also touch on what you need to do in relation to your employees if the company is sold or if you are planning to buy a company. Finally, we include an example of how you can work out your total social security costs for an employee, and other issues.
Appointments
Please note that the main rule is that employees are employed on a permanent basis. It is only in certain circumstances that it is permitted to employ people temporarily. This can be done in the following cases:
when the work being performed is of temporary nature.
when the employee will be working in someone else's stead (stand-in), for instance in connection with holidays, sickness or leaves of absence.
for a period of up to twelve months.in the case of practical training
participants in labour market measures organised by or in cooperation with the Norwegian Labour and Welfare Service (NAV)It will be possible, for example, to employ a caretaker on a temporary basis if the sale of caretaker services is not part of the enterprise’s core business.
There are no specific requirements regarding the tasks that are being performed in order to hire someone temporarily for up to twelve months. Also, it is not required that special reasons are present. The employee can perform both permanent and time-limited tasks. However, there are limitations when it comes to temporary employment on this basis. First of all, only a limited number of people can be employed temporarily on a general basis. Also, a disqualification period of twelve months will occur if the employee is not offered continued employment. Furthermore, individual agreements on
calculation of average working hours can not be made with employees that are hired temporarily on a general basis.
It is also possible to include clauses in collective agreements that permit employees to be taken on temporarily if they are to perform artistic work, research or work in connection with sport.
An employee who has been temporarily employed for a continuous period of more than four years in the case of "work of temporary nature" can normally consider him/herself to be permanently
employed.
Employees that have been temporarily employed for a continuous period of more than three years in the case of "working in someone else's stead" and in the case of "for a period of up to twelve months", i.e. on a general basis, can also consider him/herself to be permanently employed.
Temporary employment contracts expire at the end of the agreed period or when the specific work is concluded, unless otherwise agreed in writing or laid down in a collective agreement. An exception applies if the employee has been employed for more than a year. In such case, the employee is normally entitled to a written notice of the date on which the employment relationship will end no later than a month before he/she is due to leave.
Note that part-time employees have a preferential right to an extended post if they are qualified. (On certain conditions, also employees who have been made redundant and temporary employees have such preferential rights to re-employment in the same business, cf. the Working Environment Act Section 14-2).
Be aware that if part-time employees in more than 12 months regularly work more than agreed, the employee will be entitled to an extension of its position, so that employment ratio corresponds to the actual working hours.
Employing foreign workers
It is the employer’s responsibility to check that foreign workers have a residence permit that entitles them to work in Norway. When taking on foreign employees, an employer must therefore check that the candidates have work/residence permits. The fact that the employee has a tax deduction card is not proof that he or she has a right to work or reside in Norway.
As a rule, foreign workers who wish to work in Norway need a residence permit. The rules differ depending on which country the employee comes from:
Nordic nationals do not need a residence permit to stay and work in Norway.
Nationals of EU/EEA/EFTA countries no longer need to apply for a residence permit, but instead they have to register with the Norwegian directorate of immigration (UDI). They then have to go to the nearest police station or a Service Centre for Foreign Workers (in Oslo, Stavanger or Kirkenes) to present proof of identity and documents relating to their grounds for residence. If the conditions for registration are met, they will be issued a registration certificate. This certificate is issued free of charge and is valid indefinitely (does not need to be renewed).
As a rule, nationals of countries outside the EU/EEA/EFTA must apply for a residence permit. There are several types of residence permit that can be granted. Certain groups do not need a residence permit to work in Norway.
Employment contracts
Before deciding who you want to employ, you may want to interview suitable candidates.
Once you have decided who you want to appoint, normal practice is to enter into an employment contract with the new employee before he or she starts work. If the employment relationship is planned to last for more than one month, an employment contract must be signed no later than a month after the employee has started in the job. If the employment relationship is planned to last for a shorter period, an employment contract must be signed immediately.
An employment contract must include certain ‘basic conditions’, which are regulated in the Working
Environment Act Section 14-6. The employment contract must contain information about matters that are of significance to the employment relationship, including:
the identity of the parties to the contract
the place of work
a description of the work or the employee’s title, post or category of work
the date on which the employment relationship commences, and how long it is expected to last if it is a temporary position
information about the rules for a probationary period, if relevant
the employee’s right to holidays and holiday pay, and the rules for deciding when holidays are to be taken
periods of notice for the employee and employer
the agreed pay and other remuneration on starting in the job
information about daily/weekly working hours and breaks. If an agreement is entered into for a special working hour’s arrangement, this must be stated in the contract.It is sufficient to refer to laws, regulations or collective agreements that regulate these matters. If your enterprise is covered by one or more collective agreements, you must take account of them when you draft the employment contract.
If you have a temporary need for execution of work, you can use a "Contract for summoned help" (Only available in Norwegian).
Working hours and overtime
Working hours, time off and overtime are regulated by the Working Environment Act. If you manage a company that is covered by a collective agreement, the agreement will often contain more detailed rules about working hours.
The Working Environment Act states that the normal working hours must not exceed 9 hours a day and 36, 38 or 40 hours a week regardless of what part of the day the work is carried out. If the work is carried out in normal daytime hours, it is the limit of 40 hours per week that applies.
The employer and the employee may agree in writing on calculation of average working hours implying that normal working hours will be exceeded from time to time.
In businesses bound by collective agreements, the employer and the employees' representatives may agree upon such arrangements.The employer and the employee may also agree upon this. However, such individual agreements can not be made with employees that are hired temporarily on a general basis, cf . the Working Environment Act Section 14-9, (1) f.
If the working hours are more than 5 1/2 hours per day, the employee is entitled to at least one break. If the employees can’t leave the workplace during break or if there is no satisfactory break room, the break is included in the working hours.
Overtime work is defined as work in excess of normal working hours pursuant to the limits stated in the law in a full-time job. A part-time employee is therefore not entitled to overtime pay until he or she has worked a full day. Overtime work is only permitted when there is an exceptional and temporary need for it. In other words, it is not permitted to use overtime as a permanent arrangement. Before overtime work starts, you as employer must, if possible, discuss the need for it with the employees’ representatives. You are obliged to exempt an employee from working overtime when he or she so requests for health or weighty social reasons. As long as the work can be postponed or carried out by others, you are also obliged to exempt an employee from working overtime in such cases, if they so request.
A supplement of at least 40% shall be paid for overtime work. Collective agreements can set other percentages for the overtime supplement. The parties can agree in writing that time off will be taken in lieu of the overtime hours instead of pay. The overtime supplement cannot be taken off in lieu,
however, and it must therefore be paid.
The National Insurance scheme and occupational injury insurance
When you have employees, you must make sure that you are registered in the Norwegian Labour and Welfare Administration’s employer and employee register (NAV’s AA Register). In addition to
registering yourself/your business as an employer, you must send notification to the AA Register no later than Friday in the week after an employee relationship starts, is changed or ends. You thereby help to ensure that your employees get the benefits they are entitled to in present and future. You register electronically via Altinn, either by filling in an electronic form or by sending a file containing information generated from your payroll and personnel system.
You are also obliged to take out occupational injury insurance for your employees to cover possible occupational injuries or illnesses. You can do this by entering into an agreement with an insurance company.
Mandatory occupational pensions (OTP)
The Act relating to Mandatory Occupational Pensions means that you as an employer are normally obliged to have an occupational pension scheme for your employees. You can choose between a
defined benefit scheme and a defined contribution scheme. Of course, the occupational pension comes in addition to the pension entitlements employees earn via the National Insurance scheme. Businesses that already have a pension scheme must make sure that the scheme satisfies the minimum statutory requirements. A defined benefit scheme ‘guarantees’ employees benefits/pension of a certain size, for example 66 % (the total of National Insurance pension and pension from your defined benefit scheme) of their final salary level. In a defined contribution scheme, you as employer are obliged to contribute a fixed amount (often a percentage of the individual employees’ gross pay). The future pension the employee receives in addition to their National Insurance pension will be the sum of all the contributions plus the return the pension insurance company has achieved on the funds contributed (minus the company’s profit). A defined contribution scheme is normally the cheapest alternative for employers.
The following enterprises fall under the scope of the Act:
enterprises where the working hours and pay of at least two persons in the enterprise are 75% or more of a full-time position
enterprises where the working hours and pay of at least one employee who does not have an ownership interest in the company is 75% or more of a full-time position
enterprises employing people with working hours and pay corresponding to 20% or more of a full-time position, provided that the work they carry out amounts to at least two full-time equivalents in total.
An insurance company that sells pension schemes can give you more information and help you to formulate statutes for the pension scheme.
Holidays
The holiday year follows the calendar year. Pursuant to the Holidays Act, you must make sure that your employees are given at least 25 working days’ holiday every holiday year (Saturdays are defined as ‘working days’ in this context). Employees over the age of 60 are entitled to six working days extra holiday a year. Note that, as an employer, you are obliged to discuss the timing of holidays with your employees, but that you have the final decision on when holidays are to be taken. Your employees are nonetheless entitled to demand that they be given three consecutive weeks’ holiday (18 working days) during the main holiday period, which runs from 1 June to 30 September. They are also entitled to clarification of when their own holidays are to be taken at least two months before the holiday is taken, and they are entitled to transfer two weeks’ holiday to the next year or to take advance holidays. Holiday pay amounts to 10.2 % of the gross pay paid during the preceding calendar year. For employees over the age of 60, holiday pay is 12.5 %.
Workers who become ill during all or parts of their holidays, are entitled to reclaim leave later the same year. Such a claim must be supported by a medical certificate and be submitted as soon as possible after return to work.
If paid holiday is transferred to the following holiday year, the holiday pay for this part of the holidays is not paid until the holidays are taken.
Many employers choose to pay holiday pay in June instead of wages, and then pay regular wages when the holiday is actually taken.
In some collective agreements, employees are entitled to five weeks’ holiday, corresponding to 30 working days. For employees of enterprises with such collective agreements, holiday pay is 12 % (14.3 % for employees over the age of 60).
Health, safety and the environment (HSE)
Internal control means working systematically, with good documentation and purposefully on health, safety and the environment in the workplace, as well as complying with Norwegian laws and
regulations that relate to HSE. For enterprises (and for society as a whole), the intention behind internal control is to ensure a better working environment, lower sickness absence, greater safety, better profitability and less pollution.
In practice, a small business only needs a ring binder containing the required documentation. The binder can, for example, contain descriptions of the work methods and practical checklists and forms relating to areas in the enterprise that can be hazardous to employees and/or the surroundings. Enterprises in which the management and employees work purposefully on their attitudes and behaviour with a view to preventing undesirable incidents are the ones that achieve the best results. Employers are also obliged to notify NAV about occupational injuries or illnesses that result in medical treatment, sickness absence of more than three days and/or can entitle the employee to benefits pursuant to the National Insurance Act. An injury report must also be sent in all cases where NAV request one or if the injured employees wishes one to be sent. In the event of a serious occupational injury that results in death or serious injury, the employer must immediately notify the Labour
Inspection Authority and the police.
Illness/ various leaves of absence
When your employees become ill, you as employer must cover their pay for the first 16 days of the sickness absence period (known as the ‘employer period’). After that, the National Insurance takes over responsibility for these costs. Many enterprises choose to continue to pay their employees sick pay after the employer period has ended. They then send a reimbursement claim to NAV. It is important that employees are informed if the employer does not pay wages beyond the employer period. Note that the National Insurance scheme does not reimburse pay in excess of six times the National Insurance basic amount, known as G.
The Working Environment Act and the National Insurance Act contain some provisions on leaves of absence with or without pay. If an enterprise is covered by a collective agreement, the employees may have more extensive rights to leave. Some collective agreements or enterprises’ internal rules also entitle employees to other paid and unpaid leaves of absence, such as leave of absence in connection with a child starting at kindergarten, a death in the family, marriage or similar. Employees have certain rights in connection with pregnancies, births and adoption. If a pregnant woman’s normal work is too physically heavy, involves too much stress or can result in harm to the foetus (work with chemicals), the employer is obliged to attempt to find other work for the employee. If that is not possible, the pregnant woman must start on pregnancy benefit instead. It is NAV that pays this benefit.
An employee is entitled to leave of absence for up to 12 weeks of her pregnancy. Pursuant to the National Insurance Act, an employee can receive parental support 12 weeks at the earliest and three weeks at the latest before her due date. Naturally, taking these 12 weeks shortens the total leave of absence the employee is entitled to after the birth/adoption correspondingly. Employees cannot transfer the last three weeks to after the birth. In principle, parental support can be received either as up to 49 weeks on full pay or up to 59 weeks on 80 per cent of full pay (including the three weeks before the birth). Employees who adopt have the same rights except for the three weeks that must be taken before the due date for a birth. As is the case with illness, pay in excess of six times the
National Insurance basic amount is not refunded by NAV. The paternal and the maternal quota are 10 weeks each. The remaining weeks of the total benefit period can be distributed freely between the parents. The father is also entitled to two weeks’ leave of absence on the birth of their child in order to assist the mother. If the parents do not live together, the right to leave of absence can be transferred to another person who assists the mother. Whether or not the father is entitled to pay for such leave, depends on the business’ policy or possibly collective agreements. Each of the parents is entitled to additional unpaid leave for up to twelve months after the paid leave. Employees are of course required to notify their employers as soon as possible about planned leaves of absence. It will be an advantage for both parties to enter into a written agreement about how the leave of absence will be taken.
Breastfeeding mothers are entitled to the time off. The time off can as an example be a reduction in working hours 30 minutes twice a day or a of up to one hour per day. The first year of the child, a mother is entitled to up to one hour pay per working day with agreed number of working hours of 7 hours or more.
Parents are entitled to ten days’ leave per calendar year in connection with a child’s illness (15 days if they have care for more than two children). The right to leave of absence applies up to and including the calendar year in which the child turns 12. Single parents are entitled to twice as many days of leave. Slightly different rules apply to parents of disabled or chronically ill children. (You can read more about the rules concerning sick children here: Lovdata and NAV. Here you can get more information about National Insurance legislation ).
Employees also have certain rights to leave of absence in connection with education. People who have been in employment for at least three years and who have worked for their employer for at least two years are entitled to full or part-time leave of absence (without pay) for up to three years to take an education. The education must be job-related to entitle the employee to leave. This means that it must be useful in the work context, but not necessarily for the same employer. It is a precondition that this does not create difficulties for the employer in terms of planning operations and deploying
personnel. In other words, as an employer you have a certain power of decision in this area. If the employee’s wishes cannot be granted and the matter develops into a dispute, the dispute is to be brought before a disputes board.
In addition to the above, employees are entitled to leave of absence to take care of close relatives in the home in the final phase of life and in connection with holding public office.
Temporary lay-offs
An enterprise can lay off employees for various reasons if it has occasional problems finding enough work for all its employees. This can be because of too few orders, a shortage of raw materials, few orders on the books, a fire, serious material damage, a strike at a supplier or similar. Laying employees off is a temporary arrangement. If the problem is of a more permanent nature, the enterprise will have to consider redundancies. As a rule, laid-off employees will be entitled to unemployment benefit from NAV pursuant to the provisions of the National Insurance Act after the period during which the employer is obliged to pay wages (minimum 10 days). Note that employees’ rights under the Working Environment Act, the Holidays Act etc. are not affected by them being laid off. In other words, you still have employer responsibility for your employees. The normal procedure is first to discuss the necessity of temporary lay-offs and to clarify the principle for deciding who will be laid off (qualifications or seniority) with your employee representative(s). The outcome of the
discussions must be recorded in minutes. After that, a letter of notice is drafted to the individual employees concerned.
Dismissal
Before you as employer make a decision to dismiss an employee, the matter must be discussed with the employee and his/her representative if this is practicable. This applies unless the employee in question does not wish this.
An employer may dismiss an employee based on circumstances relating either to the employer (for instance in connection with personal issues of the owner), the business itself (drop in sales,
necessary reduction of workforce etc.) or the employee (for instance lack of performance, drug abuse, unlawful absence etc).If the circumstances do not constitute good enough grounds for dismissal, or if you wish to give the employee a chance, you should consider whether to issue a written warning first. In the warning, you should clearly state what you believe is not satisfactory and the consequences of any recurrence on the employee’s part. If you later find it necessary to dismiss the employee and the employee chooses to take the case to court, you will usually have a stronger case since you have demonstrably given the employee the chance in writing to improve. Consideration of the fairness of a dismissal will always be based on an overall assessment of all relevant circumstances.
Dismissal of an employee must be done in writing. The notice of dismissal must either be given to the employee in person, in which case he or she should sign to confirm receipt of it (a receipt is not a requirement, but it can be practical for evidential reasons to require this), or it can be sent by
registered post to the employee’s address. The dismissal has taken place once the notice of dismissal has been received by the employee. A number of deadlines start running from that date. It is not a requirement that the grounds for the dismissal be given in writing unless the employee demands this.
It can nonetheless be an advantage that the employer states the grounds in writing at his or her own initiative, since failure to do so will not be in favour of the employer in connection with a possible court case.
The period of notice is usually one month unless otherwise agreed or stipulated in a collective agreement that covers the enterprise. The period of notice is longer for employees with long seniority and/or high age. Stronger protection against dismissal applies during illness, pregnancy and military service as well as after giving birth or adopting. Protection against dismissal is weaker during the probationary period.
Dismissal without notice can be used when an employee is guilty of serious dereliction of duty or material breach of the employment contract. Refusal to obey orders, theft, embezzlement or abuse of drugs or alcohol are examples of this. It is you as employer who must prove that the matter stated as the grounds for summary dismissal is true.
When the employment relationship ends, all holiday pay earned shall be paid on the last ordinary pay day before the employee leaves. The part of the holiday pay that cannot be calculated at that time can be paid in connection with a final wage settlement.
The employees’ situation in connection with the sale/purchase of
an enterprise
That an enterprise is bought or sold should normally not affect the employees’ terms and conditions of employment. Individual rights resulting from previous employment contracts or collective agreements are automatically transferred to the new owner. The former and new owners are obliged to discuss the sale/purchase with the enterprise’s employee representatives at the earliest possible stage. Information must be given in particular about the reason for the sale/purchase, planned measures in relation to employees and the legal, financial and social consequences of the sale/purchase. If the new employer does not wish to be bound by the collective agreement(s), the employer must notify the trade union of this in writing within three weeks of taking over the enterprise. Failure to do so means that the collective agreement(s) will be taken over by the new employer.
That an enterprise is bought or sold does not constitute fair grounds for dismissal. Regardless of this, the new owner may of course make employees redundant on business economic grounds. The above-mentioned formal requirements in connection with dismissals must be complied with in any case.
An employee can refuse to be transferred to the new employer (right of reservation). This right normally only applies if being transferred to the new employer involves substantial
changes/disadvantages for the employee. Employees have a deadline of two weeks after formal notice of the transfer has been given to inform their existing employer about this in writing. Employees who have exercised their right of reservation and who have been employed for at least 12 months during the past two years have preferential a right to a new job with their former employer for one year from the date of the business transfer. Naturally, the employee must be qualified for the job.
You will find the rules that apply to business transfers in the Working Environment Act (Ch. 16).
References
On termination of an employment relationship, you are obliged to issue the employee with a written reference. As a minimum, the reference shall include the employee’s name, date of birth, the period of employment and the nature of the work he/she has done. In other words, you do not have to state in the reference whether you have been satisfied with the employee. However, it is common that the
references is more supplementary and among other things, contain information about the work related tasks and how the employee has performed the work.
An employee who is summarily dismissed is also entitled to a reference, but the employer may state in the reference that the employee was summarily dismissed.
What does an employee cost?
In the budget context or in connection with price calculations, you may need to calculate the total costs of your employees.
The example below is based on an employee with gross annual pay of NOK 360,000. We assume that five weeks’ holiday has been agreed.
Basis NOK Comments
Annual pay 325,385 Pay for five weeks’ holiday has been deducted.
Holiday pay 12% 39,046
10.2% or 12%, depending on whether the holiday is in accordance with the Holidays Act or whether five weeks’ holiday has been agreed. For employees over the age of 60, the rate is 12.5% or 14.3%.
Employer’s National Insurance contributions 14.1%
51,385
Varies from 0% (Finnmark and Nord-Troms) to 14.1%. Employer’s National Insurance contributions shall be calculated on both wages and holiday pay.
Pension expenses (mandatory occupational pension, defined contribution scheme, 2%) 6,507
Based on a defined contribution scheme, where the minimum requirement is 2% of pay between 1 and 12 times the National
Insurance basic amount that the individual member is paid by the enterprise during the contribution year. Employer’s National Insurance contributions on pension expenses, 14.1% 917 Applies to pension Occupational injury insurance 1,500
The price can vary considerably depending on the risk of injuries in the industry in question
Total 424,740
Welfare costs should also be included. Examples of welfare costs are courses, gifts to employees, Christmas parties or other social gatherings, accident insurance and free or subsidised canteen. You should also consider whether to include costs relating to expected sickness absence in the budget. This should certainly be done in enterprises that need to hire temps to replace employees on sickness absence.
The costs of an employee will vary from one enterprise to the next depending on what benefits/terms have been agreed for the employees. A rule of thumb is that you can arrive at the expected total costs by adding 20–30 % to the gross annual salary.
Rules relating to secondary jobs and
non-competition clauses
In principle, your employees are obliged to put their labour at your disposal, and they are obliged to be loyal to you as their employer as long as they are in your pay. In many ways, this provides both clear and unclear guidelines as to what type of ‘secondary activities’ an employee can engage in as an employee of your enterprise. It will in any case be useful to include a clause in the employment contract stating that taking on other jobs, offices or starting one’s own business must be agreed in advance with you as employer. If an employee plans to open a fast food outlet in addition to working for your enterprise, this could affect his or her ability to work overtime or travel in connection with the job. In such case, it can be useful to have a clause as mentioned above in his/her employment contract.
In some cases, it will be natural to include a non-competition clause in the employment contract. This can for example be relevant when an employee learns about trade secrets, customer portfolios or to the work methods that you do not want your competitors to know about. A non-competition clause usually means that an employee cannot start a competing business or take employment with a competing enterprise on termination of the employment relationship.
The right to agree non-competition clauses is not currently regulated by law. However, Section 38 of the Act relating to the Conclusion of Agreements sets limitations on what can be agreed. The provision states that such an agreement is not binding on the employee if it unreasonably limits his right to make a living or must be regarded as going further than what is required to protect against competition.
If an employee who wishes to start a competing business or start working for a competitor resigns, you are entitled to shut the employee out of the enterprise or give him/her less ‘harmful’ tasks in the enterprise. As employer, you must of course pay your employees ordinary pay during their period of notice. In some cases, it is desirable to terminate the employment relationship quickly if both parties find this to be the best solution. The best way to formalise this is through a severance agreement. Difficult situations arise when an employee, without giving notice, engages in passive or even active negotiations to, for example, start a competing business while you are still paying his/her wages. Such ‘grey area activities’ can include establishing a company, planning the recruitment of employees, contacting banks or investors, leasing premises and buying equipment, hiring an accountant/auditor etc.
If an employee actively markets his/her own enterprise while he/she is still in your pay, this would be regarded as a clear breach of loyalty. The same can be said about an employee who actively attempts to recruit colleagues to his/her own business. There will also be a breach of loyalty if
employees take internal company information, such as customer lists, correspondence, templates etc. If an employee takes information that can be classified as ‘trade secrets’, Section 294 of the General Civil Penal Code may be affected.
A separate declaration of secrecy that employees must sign can help to underline the seriousness of such actions and serve as a preventive measure.
