The Payroll Methods in Norway
There are four payroll methods that you may opt to run in Norway. These are remote payroll, local payroll administration, internal payroll, and fully outsourced payroll and employment.
Remote payroll, like the name suggests, is suited for employers who manage a foreign company that employs Norwegian workers. The tasks of remote payroll service providers are focused on helping businesses and companies ensure that their employees are receiving the right benefits and are protected from exploitation.
Each remote payroll company has a remote payroll manager who monitors employee work hours, calculates commissions, facilitates benefits and any additional payment, and issues payslips to the employees.
Under Norwegian law, the employer may either register a subsidiary in Norway for employment purposes or procure the services of an employment provider.
Rivermate is a remote payroll company that offers Human Resource outsourcing solutions that ease the complexity of payroll management on your behalf. Rivermate helps you manage the expansion of your business in the global market. Send Rivermate a message now and let us talk about how we can help you!
One of the few steps of tackling overseas payroll is establishing a legal presence in your chosen market. States require a taxpayer ID to any type of business and you can get it by placing employees on a local payroll. It is worthy to note that administering a local payroll can be done remotely. Businesses obtain this via a foreign subsidiary.
Companies in Norway may register their business as any of the following types of partnerships:
- Companies Limited by Shares Aksjeselskap (AS) or Allmennaksjeselskap (ASA)
According to Cleartax, the ownership of a company limited by shares is mostly composed by the general public members. This means that anyone with the means can buy and own a share in the company through the stock exchange. The stakeholders’ liability, on the other hand, is limited to only the shares’ nominal value.
- Fully Liable Partnerships (ANS)
Fully liable partnerships take place when all the member partners in an organization share in profits, liability for debts, and managerial responsibilities.
In some cases, a legal partnership agreement may be necessary to avoid disputes between partners, especially when there are intentions to share profits or losses unequally.
Other business owners also opt for a joint venture where the general partnership remains until the completion of a project. All partners have a mutual right to manage the business and share in any profits or losses. Additionally, a fully liable partnership requires that the partners meet the fiduciary obligations to act in the best interests of all members and the venture.
- Limited Partnerships (KS and DA)
Investopedia defines a limited partnership as a corporate relationship between or among at least two partners. It is commonly used as an investment vehicle to obtain assets like real estate, inventory, and land. The difference between a limited partnership and the other forms is that in a limited partnership, the partners can only acquire limited liability, which also limits them from risks including and especially incurring high amounts of debt.
- Sole traders
A sole proprietorship, otherwise known as a sole trader, is an unincorporated form of business that makes the owner responsible for paying personal income tax on profits earned from the business.
A sole proprietorship works best for sole traders, consultants, and self-contractors. Due to a limited number of government regulations concerning this type of ownership, a sole proprietorship is regarded as the easiest and most convenient form of business.
In some cases, employers choose to employ a third-party entity to administer their payroll, compliance, and hiring processes. Rivermate is an Employer of Record (EoR) that is more than capable of taking your business to the next level. Rivermate helps you micromanage your payroll regulations, employment, immigration, while also making sure that your company stays compliant with the labor law.
The internal control in payroll can be described as the procedures your business follows to secure its payroll information. This prevents employees from accessing sensitive information and steals your business revenue through overpayments and false time records. Hence, an internal payroll suits best for larger companies and businesses. In comparison to local payroll, you cannot process your payroll remotely.
In order for you to administer an internal payroll you need to follow the two steps below:
- First, you need to complete incorporation, register your business, and hire staff. It is also worthy to note that in running a local payroll office you need to have a county human resources personnel who will be responsible for managing a Norwegian payroll and can fulfill all tax, payroll requirements, and withholding.
- Second, your company will be needing a local accounting firm and legal counsel to ensure full compliance with employment laws in Norway. This payroll system requires a great amount of money and knowledge about local employment and payroll regulations.
Fully Outsourced Payroll and Employment
Most of the companies that plan to expand their businesses in the international market rely on Employer of Record, like Rivermate.
Outsourcing of payroll and employment means getting a third-party entity that handles and offers fully outsourced payroll services. If you want to keep your payroll organized and accurate, getting “professional payroll help” is the solution. For instance, you no longer need to worry about securing data or upgrading downloadable payroll software because the third-party service provider will handle that task.
A fully outsourced payroll and employment is the most convenient, safest, and fastest way to administer payroll in Norway. Rivermate offers human resource outsourcing solutions that can manage all aspects of payroll for employees in Norway, including monthly national insurance fees, taxes, withholding, and other statutory requirements and regulations.
Basic Facts about Norwegian Payroll
All residents in Norway, including foreign workers, are entitled to be covered under the National Insurance Scheme. Every year, the benefits covered by the National Insurance Scheme in Norway are set at a basic amount based on computations of different factors, especially the country’s economic stature.
- Corporate Income Tax Rate. The corporate income tax is set at 27%, which is multiplied to the taxable profit earned by the worker. As mentioned above, the state has reduced the corporate income tax rate to allow foreign investors to expand their businesses in the country.
- Sales Tax. The sales tax is set at 25%.
- Withholding Tax. The dividends are between 0% to 25%, while the interest is 0% similar to royalties.
- Other Taxes. The stamp duty is 2.5%, while the real estate tax is between 0.2% to 0.7%. The Double Taxation Relief tax is based on the credit method.
Required Documentation for New Hires
In Norway, employers are required to provide employment contracts to their employees, particularly new hires. The written contract must contain the following information: the duration of employment, holiday leave, working hours, job description (job title, duties, and other necessary information), notice provisions, probationary period, and employee wage.
Holidays and Observances in Norway
Norwegian employees are entitled to holiday leave. The following are the public holidays recognized in Norway:
- New Year’s Day (January 1)
- Easter (April 14-18)
- Labour Day (May 1)
- Constitution Day (May 17)
- Ascension Day (May 26)
- Whit Monday (Pinse) (June 6)
- Christmas Day (December)
- St. Stephen's Day (December 26)
Social Security Registration
In Norway, once an individual begins work and obtains a tax deduction card from their employer, they are automatically enrolled in the national social security system and become eligible for benefits.
Required Employee Information
Prior to a new employee starting work, the employer must have all the required information about them. This includes the full name and address, phone number, emergency contact number, personal identification number, and the tax deduction card.
Large corporations and businesses usually pay their employees electronically because it is the quickest and easiest method. You can also pay by cash or check. Nonetheless, you must ensure that employees are paid on time.
Frequency of Payment Salary
Like payment methods, you can choose how often your employees are paid. It is customary in Norway to pay employees on a daily, weekly, bi-weekly, monthly, quarterly, and annual basis. The standard frequency is monthly.
Norway's working hours differ from other countries. Norwegian workers are limited to nine hours per day and 40 hours per week. Employees are entitled to an 11-hour rest period every 24 to 35 hours. Sundays and public holidays are also off limits. Employers may ask employees to work overtime if both parties agree and the employee receives additional benefits. In Norway, the overtime compensation is at least an additional 40% of the regular hourly pay.
The law requires employers to provide invoices and payslips to their employees. The payslip allows the employee to keep track of their gross pay, tax deductions, and total salary paid to them over time. Failure to fulfill this duty may lead to further disputes between both parties. Employees can sue employers who fail to issue invoices and payslips.
When entering the global market, every employer must consider various legal issues. In order to comply with Norwegian regulations, policies, and laws, foreign employers should take bold steps. It is possible to manage and operate payroll in Norway without relying on payroll solutions. However, managing a company entails a long list of obligations such as invoicing, keeping up-to-date with the recent changes in the economy, facilitating employee disputes, and countless other issues.
Contact us at Rivermate and let us be the ones to handle your human resource tasks.