An employer of record service is one of the most resourceful solutions for global hiring. Access to highly skilled talent is the key reason foreign employers should hire in the next tech hub of Europe.
How Does an Employer of Record Help with Remote Work?
A foreign company lacking permanent establishment (PE) status in Norway cannot legally hire in the country. Establishing its own legal entity in the country is one way. A far simpler alternative is to hire employees through an employer of record (EOR). Working with a foreign company legal employer, an EOR hires, withholds taxes, structures competitive compensation and benefits packages, and more.
The Benefits of Hiring Remote Workers in Norway
A Highly Educated Workforce Paired with a Push for Innovation
Individuals aged 25 to 34 in Norway placed above the OECD average of 39% in its 2022 report focused exclusively on tertiary education. Norway also placed seventh on the 2022 Global Talent Competitiveness Index (GTCI). The GTCI is a key indicator of the corresponding report by the World Economic Forum, which ranked 132 countries on various metrics, from talent readiness, education, and workforce development, to innovation.
Thanks to its focus on STEM education, Norway boasts an incredibly educated and skilled workforce. As of 2020, women made up 55% of all scientists and engineers in the nation, more than any other European country. Innovation Norway, the government’s venture funding and innovation program development arm, is a huge proponent of the tech sector.
Norway's transition from the world's eighth-largest oil exporter to a technological maven with explosive growth indicates its continuing expansion. The cost of hiring an employee, around 1.27 times their base salary, makes it a very worthwhile investment for foreign employers.
Not needing permanent establishment status to hire in Norway results in reduced costs of global hiring. Through an EOR platform, a foreign employer would typically only be subject to taxes on payments such as service or commission fees. For this reason, among several, EOR is one of the most economical ways of global hiring.
Manage Employees through a Global Employer of Record
Employment is largely regulated under the Working Environment Act (WEA) with some conditions subject to the terms of collective bargaining agreements. Here are several key areas of employment that a foreign employer must comply with when hiring employees in Norway.
Employment Contracts
In Norway, verbal contracts, legally binding and enforceable, are allowable for employment under one month. Under the WEA, longer lengths of employment require a written contract. A probationary period must also be included in employment contracts and may not exceed six months.
Fixed-term contracts are allowable under strict conditions, but indefinite contracts are much more favored in Norway. Where the nature of work does not justify fixed-term employment, among other criteria, the employment relationship automatically becomes permanent.
With seniority, crucial benefits such as annual leave and severance pay, entitled to both permanent and fixed-term employees, may increase. The implication for foreign employers is to conclude lengths of contracts appropriate to the requirements of work. They should also be aware that these contracts must protect employees' benefits and entitlements. Understanding these distinctions can also aid in estimating headcounts, budget forecasting, and document preparation for global expansion.
Guidance on benefits from an EOR like Borderless can assist in creating competitive packages that meet evolving labor regulations.
Basic Salary
There is no universal minimum wage in Norway and most wages are instead set through collective bargaining agreements. In the absence of a collective agreement, the Norwegian Labor Inspection Authority (NLIA) sets the minimum wage. Some industries regulated by this body include construction, agriculture, and transport.
In practice, workers receive at least 140 Norwegian Kroner per hour. This is about EUR 12 and USD 13, given that all wages regulated by the NLIA are higher than this amount. The median salary in Norway of USD 55,000 (about NOK 573,329) is higher than the US' 51,480 USD, a global benchmark. Norway has one of the highest average salaries in the world but works fewer hours than many countries. This is due to its focus on work-life balance and well-being.
Norway landed seventh place in the 2023 World Happiness Report as well as ninth place among nations with the highest productivity. The significance is the reduction in costs coinciding with increases in efficiency, in effect boosting an employer’s bottom line.
An EOR like Borderless can support the creation of attractive compensation and benefits packages that adhere to local labor laws.
Overtime
Per the WEA, a standard work week is Monday to Saturday. Sundays and public holidays are not work days. 40 hours per seven days and nine hours in a 24-hour period are the maximum allowable weekly limits. In practice, the total hours per week generally do not exceed 37.5, often under collective bargaining agreements.
Working at night and on Sundays are generally not permitted unless the nature of work requires it. This category of work is generally limited to 36 to 38 hours per week. There are no legal provisions regarding special compensation for night work, which occurs 21:00 to 6:00. Employees who work Sunday are entitled to days off the following Sunday and weekend.
According to the WEA, overtime, allowable only under exceptional circumstances, is any hours worked over these weekly limits up to 13 hours per day and 48 hours per week. Under collective agreements, overtime is any hours worked above the agreed-upon amounts in individual contracts and is typically limited to 20 hours per seven days. With an employee’s agreement, hours including overtime can total up to 16 hours per day. In response to an employer’s application, the NLIA permits overtime work of up to 25 hours per 7 days and 400 hours per 52 weeks.
Under the statutory requirement, it must be compensated with an additional 40% of hourly pay at minimum. In a collective agreement, compensation may not be lower than this rate and is generally higher. Time in lieu, an alternative compensation for overtime, is paid on an hour-for-hour basis. In this arrangement, every hour of overtime is granted a proportional hour of time off.
Under collective agreements, work on Sundays and any of Norway’s 12 public holidays is compensated at 100% of hourly wage. Work on May 1 (Labor Day) and 17 (Constitution Day) are compensated with 50% additional pay. This is contingent that they are not Sundays or are the same days as other public holidays.
Paid Leaves
There are a number of leave entitlements in Norway.
Annual leave entitlements, under the Annual Holidays Act, vary by age and the type of standard workweek as follows:
- Employees under 60 receive 21 days (5-day workweek) and 25 days (6-day workweek) at 10.2% of basic pay
- Employees aged 60 and above are entitled to 26 days (5-day workweek) and 31 days (6-day workweek) at 12.5% basic pay
Similarly, within collective agreements, they are as follows:
- Employees under 60 get 25 days (5-day workweek) and 30 days (6-day workweek) at 12% of basic pay
- Employees aged 60 and above are granted 30 days (5-day workweek) and 36 days (6-day workweek) at 14.3% basic pay
Sick leave is 16 days with full pay. A sickness benefit of up to one year is paid at an average salary of the last three calendar months. If an employee is sick during vacation, sick days may be claimed with submission of medical proof, saving vacation days. Parental leave is divided between parents at 100% pay for 49 weeks or 80% pay for 59 weeks.
An EOR like Borderless can ensure clarity pertaining to each type of leave entitlement, helping you fulfill your employer responsibility.
Social Security Benefits
Topping the 2019 United Nations’ Human Development Report of 189 countries, Norway boasts the highest quality of life, in large part thanks to its universal healthcare. And so health benefits are not mandatory for employers to provide. Social security benefits are divided among: sickness, injury, disability, parental leave, and retirement, among other programs. Calculated as a percentage of base salary, contributions to social security are as follows:
- Employers: 14.1% and an additional 5% on wages over NOK 750,000
- Employees: 7.9%, applicable only on income above NOK 64,650. The contribution may not constitute over 25% above NOK 64,650.
Including the employer-withheld employee contributions remitted on their behalf, an employer’s payroll cost is 27%.
An EOR like Borderless will provide revised rates of social security that employers need to make, helping you budget accordingly.
Other Employer Responsibilities
If the terms of separation are excluded in employment contracts, dismissal must be provided in writing. One month’s notice is required to be given by either an employer or employee. 14 days’ notice is required if termination takes place during probation. There are no statutory requirements on severance pay but it may be available to eligible employees under collective agreements.
An EOR like Borderless can ensure that you fulfill your employer responsibilities in the event of separation in employment.
Choosing the Right EOR for Your Business
There are several key considerations for employers to make the most informed decisions in choosing the best employer of record for their global hiring needs.
- Geographic coverage: Make sure that your EOR of choice can legally operate in Norway.
- Employment services: The suite of employment services offered by a competitive EOR should cover hiring, onboarding, global payroll management, benefits, and HR management.
- Reputation: When selecting an EOR, get a sense of its past work and experience. Make sure that it has a great track record and the local know-how to bring you value add.
- Cost: A high-value EOR’s pricing should be transparent and reasonable.
- Flexibility: An EOR should offer customized employment solutions to meet your specific needs and requirements.
Overall, foreign employers should choose an EOR that can provide cost-effective, reliable, and compliance-first employment solutions. This will enable you to navigate and expand into foreign waters with confidence, ease, and trust.
An EOR Like Borderless Can Help
In over 150 countries, we are ready to help you hire, onboard, manage, and pay remote employees, wherever you are. Our experienced team of legal experts provides guidance on compliance and assists employers all over the world in navigating global hiring. Whichever country you choose to do business in, book a demo today and discover what Borderless can do for you.
Disclaimer
Borderless does not provide legal services or legal advice to anyone. This includes customers, contractors, employees, partners, and the general public. We are not lawyers or paralegals. Please read our full disclaimer here.
