Running payroll in Norway

Foreign employers have to fulfill the same payroll obligations as resident employers in Norway. This includes monthly payroll processing, tax withholding and national insurance calculations. Payments to local authorities are due every two months which decreases the administrative burden on employers. 

However, payroll calculation in Norway can be challenging due to the multifaceted tax system which comprises tax levies on municipal, county and state level as well as surcharges on high income. Non-resident employees temporarily working in Norway are subject to a separate tax system.

Foreign companies can hire employees in Norway without creating a local legal entity. However, they have to meet the same requirements in terms of registering as an employer. In concrete terms: They need to obtain a Norwegian organization number from the Central Coordinating Register for Legal Entities (Brønnøysund). 

Employers are further obligated to register their employees with the State Register of Employers and Employees (Aa-registeret) which is administered by the Norwegian Labor and Welfare Administration (NAV). In their own interest, employers should make sure every employee holds a tax card which can be used for payroll calculation. Additional employer obligations include taking out occupational insurance (yrkesskadeforsikring) and setting up an occupational pension fund (OTP) - certain conditions apply to the latter. 

In order to fulfill their filing obligations with regard to income tax and national insurance contributions, companies should register for the Altinn system, which is the government-supported platform for electronic filing and communication with the Norwegian authorities. The local tax authority is the Norwegian Tax Administration.

There is no formal requirement to set up a Norwegian bank account as payments to employees and authorities can also be issued from foreign accounts. However, it is mandatory to issue payments to the tax authority in the local currency which is Norwegian Krone (NOK).

The Norwegian income tax system comprises different tax levies on individual income. In addition to a standard tax levy of 22%, personal income is further subject to a progressive surtax as well as a wealth tax. Social security contributions are called national insurance contributions and are split between employee and employer, the latter paying the bigger share. 

Tax considerations

Income tax in Norway includes two different components. There is a general tax rate of 22% which includes municipal, county and national tax and which is levied on all individuals, plus a so-called bracket tax (progressive surtax) which applies to income exceeding certain thresholds. In 2022, the threshold for the Norwegian bracket tax is set at NOK 190,350. Rates start at 1.7% and go up to 17.4%. 

The maximum tax rate applicable to individual taxpayers is capped at 47.4% - including income tax and national insurance contributions (see below). There further is a municipal and national wealth tax which applies to income exceeding NOK 1,700,000. Above this threshold, municipalities charge another 0.7% income tax, while the state levies another 0.25% (for income between NOK 1,700,000 and NOK 20,000,000) or 0.4% (for income above NOK 20,000,000). The total additional tax levy is thus either 0.95% or 1.1%. 

An employee’s taxable income consists of all remunerations provided by their employer. This includes remuneration in cash and in kind (e.g. company car or housing). A personal allowance of NOK 58,250 (for 2022) is available to all employees. Personal and employment-related expenses can be deducted from taxable income under the form of a standard deduction equal to 46% of the employee’s salary - capped at NOK 109,950. This deduction is called minimum deduction. Alternatively, employees can claim deductions for their actual expenses if those turn out to be higher. 

Salary calculations are made based on the employee’s personal tax deduction card which contains all the necessary information regarding taxation, including deductions, allowances and more. Tax cards are issued by the competent local tax authority. In the absence of a tax card, the employer is obligated to withhold 50% tax from the employee's monthly income. 

Resident taxpayers pay tax on their worldwide income, while non-residents are only taxed on certain types of income sourced in Norway. An individual becomes a Norwegian tax resident after spending more than 183 days in Norway during a 12-month period or if they spend more than 270 days in Norway over the course of 36 months. 

In 2019, Norway introduced a separate PAYE-scheme for withholding income tax from non-resident employees temporarily working in Norway. Under the PAYE-scheme, employees are taxed at a 25% flat rate (including national insurance contributions) regardless of the amount they earn. However, PAYE is only available for employees earning less than NOK 643,800 (valid for 2022).

* Please note: There also is an additional wealth tax which is levied both on municipal and state level. At the state level, the rates are 0.25% for income between NOK 1,700,000 and NOK 20,000,000 and 0.4% for income exceeding NOK 20,000,000. Municipalities charge another 0.7% on income exceeding NOK 1,700,000. 

Tax withholding and reporting 

After each payroll run, employers have to withhold the appropriate amount of income tax from employee salaries. The withheld amounts have to be submitted to the Norwegian Tax Administration 6 times a year. The payment date is the 15th of the month following the two-month interval, i.e. payroll tax for the months of January and February must be paid by 15 March. Foreign employers have to fulfill the same payroll obligations as resident employers. 

There also is a monthly tax report, the so-called A-melding, which needs to be filed by the employer. The deadline for the A-melding is the 5th day of the month following the pay period. Both late payments and late filings are subject to financial penalties. An annual wage report must be prepared at the end of each tax year and be sent to each employee no later than 1 February.

Holiday pay must be calculated as part of the payroll process. The standard rate is 10.2% of the employee’s earnings. The calculated amount must be set aside for the next holiday period. The tax year runs from 1 January to 31 December. 

Social security contributions

Employers are responsible for withholding the employee’s share of the national insurance contributions as well as for making their own contributions. The employer share of the social security contributions generally amounts to 14.1% of the employee’s gross salary.

However, the contribution rate may be lower depending on the municipality where the company head office is located. In less populated areas, the employer contribution may be eliminated completely. Where required to set up an occupational pension scheme, employers must contribute at least 2% of the employee’s income to the scheme. 

Employees pay national insurance at a rate of 8% of their salary (was 8.2% in 2021), but contributions are only levied on income exceeding NOK 64,650. Foreign employees working in Norway may be exempt from paying national insurance under a social security agreement between Norway and their home country.

National insurance contributions must be withheld on a monthly basis, but payments are due every other month together with the payments for withheld income tax. The receiving authority is the Norwegian Tax Administration.

Employees in Norway are entitled to various benefits. These include:

• Annual leave and public holidays: 4 weeks and 1 day of paid holidays (1 additional week for employees over 60), 12 public holidays

• Maternity leave/Paternity leave/Parental leave: 49 weeks on full pay or 59 weeks paid at 80%; 15 weeks are reserved for each parent; 3 weeks before and 6 weeks after birth are reserved for the mother; maternity leave can start up to 12 weeks before the expected due date; 16 weeks shared as the parents wish; the mother’s companion can claim an additional 2 weeks of leave (either paid or unpaid) in connection with birth

• Sick leave: 16 days paid by the employer; thereafter, sickness benefits are paid by the National Insurance Scheme for a duration of up to 260 working days

For more information on employee benefits and other employment requirements in Norway (including severance pay and termination procedures), check out our Global Hiring Guide.

Norway does not stipulate a national minimum wage. It is therefore up to the employee and the employer to agree on a fair remuneration rate. In some cases, employers may be bound to offer a minimum level of pay by a collective bargaining agreement. Overtime work is permitted but must be remunerated at a rate of at least 140%. There are no legal provisions under which employers are obligated to pay employees an annual bonus. 

There is no law which regulates payroll frequency in Norway. However, most employers choose to process payroll and pay their employees once a month. Payments to employees must be made via bank transfer as cash payments are not accepted.

At the end of each pay period, a payslip containing detailed information on salary, withholding tax, basis for calculation of holiday pay and any other deductions must be issued to each employee. Online payslips are legally valid. Payslips and other payroll-related accounting documents must be kept for at least 5 years.