Expanding your workforce internationally can be a strategic way to reach new markets, and the beautiful country of Norway, with its highly skilled labor force and stable economy, is a prime location for hiring talent. However, the process of hiring employees in Norway without establishing a legal entity can present some unique challenges and requirements for foreign companies. In this guide, we will walk through the key steps and considerations for setting up as a foreign employer in Norway, focusing on employing staff without the need for creating a separate legal entity. We also recommend reading our blog about creating a legal entity vs. setting up as a foreign employer.
1. Understanding the Foreign Employer Status in Norway
Norway allows foreign companies to hire local employees without setting up a legal entity, meaning there’s no need to create a branch or subsidiary. This type of arrangement is beneficial for companies testing the waters in Norway or those with a limited need for on-the-ground operations. However, as a foreign employer, you’ll still need to comply with Norway’s employment laws, social security contributions, and tax obligations for your employees.
2. Registering as a Foreign Employer in Norway
Before you can employ workers in Norway, you must register as a foreign employer with Norwegian authorities. This process includes several steps:
- Obtain a Norwegian Organization Number (Orgnr): Every company employing workers in Norway needs an organization number, which is provided by the Brønnøysund Register Centre (Brønnøysundregistrene). This number identifies your business in Norway for tax and social security purposes.
- Employer Registration with NAV: Norway’s Labour and Welfare Administration, NAV (Arbeids- og velferdsetaten), handles social security contributions. As a foreign employer, you will need to register with NAV to ensure compliance with the Norwegian National Insurance Scheme.
- VAT and Tax Registration with the Norwegian Tax Administration (Skatteetaten): If you are providing goods or services in Norway, your company may need to register for VAT with the Norwegian Tax Administration. Additionally, you will be responsible for withholding income tax from your Norwegian employees’ salaries, which is remitted to the Norwegian tax authorities.
3. Understanding Employment Law and Obligations in Norway
Norwegian employment law is highly protective of employee rights, and foreign employers must comply fully with local regulations, including:
- Employment Contracts: Employment contracts are legally required in Norway. These contracts must outline job duties, salary, benefits, work hours, and other terms consistent with Norwegian labor standards.
- Social Security Contributions: Norway requires social security contributions, which go toward funding public services like healthcare and pensions. Foreign employers must ensure that they register with NAV and remit these contributions monthly.
- Pensions: Employers in Norway are required to provide a mandatory occupational pension for their employees. Even as a foreign employer, you must establish a pension scheme for Norwegian employees that complies with local regulations.
- Working Hours and Overtime: The maximum working hours in Norway are 40 hours per week, and employees are entitled to overtime pay. Norwegian law also regulates annual leave and holidays, with a minimum of 25 days of paid leave each year.
- Sick Leave and Parental Leave: Norway has generous sick leave and parental leave policies. Employees can take up to one year of parental leave, and employers are responsible for covering a portion of sick leave pay.
4. Payroll Requirements for Foreign Employers
Payroll in Norway requires careful planning and adherence to specific guidelines. Foreign employers must ensure that payroll systems are equipped to handle the following:
- Income Tax Withholding: Employers must withhold income tax from their employees’ salaries and remit this to the Norwegian Tax Administration. The tax rate depends on each employee’s tax bracket and personal circumstances, which can be determined through their tax card.
- Reporting Requirements: Foreign employers must submit monthly a-meldingen reports to Norwegian tax authorities, detailing employee earnings, tax withholdings, and social security contributions. Accurate reporting is crucial for compliance.
- Holiday Pay: Norwegian employees are entitled to holiday pay instead of regular salary during their vacation, generally calculated as 10.2% of their annual income (12% for employees over 60). Holiday pay must be accrued and managed separately from regular wages.
5. Compliance and Staying Updated
Foreign employers in Norway must stay updated with any changes in tax rates, social security contributions, and employment laws. Compliance can be complex due to language barriers and regulatory differences, but resources are available:
- Tax Representatives: For foreign companies, appointing a tax representative familiar with Norwegian tax regulations can be helpful, especially for managing payroll taxes and VAT.
- Employment and Labor Law Advisors: Consulting with a legal expert on Norwegian labor laws can ensure that employment contracts, work conditions, and employee rights are compliant.
- Payroll Providers: Utilizing an experienced international payroll provider can streamline the entire process, from tax withholding and social security to mandatory reporting, reducing administrative burdens on your HR team.
6. Benefits of Hiring in Norway Without a Legal Entity
Setting up as a foreign employer in Norway allows your business to tap into local talent without the commitment of establishing a formal branch. This approach provides flexibility and cost savings, making it easier to test the market, manage short-term projects, or access skills specific to Norway’s highly educated workforce.
Final Thoughts
Employing staff in Norway as a foreign employer can be a manageable and strategic choice for companies looking to expand operations into Scandinavia. By following Norway’s registration process, adhering to labor laws, and managing payroll and taxes properly, you can build a compliant and productive workforce. Although the process requires attention to detail, working with local advisors and compliance experts can help you navigate this landscape successfully, allowing your business to focus on growth and innovation in a new market.
By understanding the landscape and seeking professional guidance as needed, you can establish a presence in the Norwegian market and explore new opportunities for business growth and expansion. With the right approach and compliance measures in place, your business can thrive in this dynamic and business-friendly environment.
Internago is your trusted partner, supporting you when entering new markets and with your international and local payroll as well as bookkeeping services.
Interested in learning more? Please visit Internago or our Payroll Portal. For further inquiries, contact us at info@internago.com