NORWAY GUIDE

Norway – The Economy

The economy of Norway is a highly developed mixed economy with state-ownership in strategic areas. The government controls key areas, such as the vital petroleum sector, and the government maintains control over a number of large-scale state enterprises – some of them fully owned, and some publicly traded, but where the government has controlling interests.  

Although sensitive to global business cycles, the economy of Norway has shown robust growth since the start of the industrial era.

Norway is a modern, energy-rich country, and is considered one of the world’s wealthiest countries with a GDP per capita based on purchasing power parities (PPP) exceeding USD 63,500.  Incomes are also more evenly distributed, making every person a consumer.

The country has a very high standard of living compared with other European countries, and a strongly integrated welfare system.

Norway’s modern manufacturing and welfare system rely on a financial reserve produced by exploitation of natural resources, particularly North Sea oil. The country is richly endowed with a number of natural resources – petroleum, hydropower, fish, forests, and minerals – but is highly dependent on the petroleum sector.

The oil and gas industries play a dominant role in the Norwegian economy, providing a source of finance for the Norwegian welfare state through direct ownership of oil fields, dividends from its shares in Equinor, and licensure fees and taxes.

Norway is the world’s 3rd largest exporter of natural gas and 15th largest exporter of crude oil.  Its large merchant shipping fleet is one of the most modern among maritime nations and ranked the 4th largest by value. Other major industries, such as offshore shipping, shipbuilding, fishing and fish farming, information technology, pulp and paper products, and light metals processing have prospered as well. 

Norway is located in Northern Europe and is a part of the Scandinavian Peninsula.  Jan Mayen and the Arctic archipelago of Svalbard are also part of Norwegian territory. 

Most of the country shares a border to the east with Sweden; its northernmost region is bordered by Finland to the south and Russia to the east; and Denmark lies south of its southern tip across the Skagerrak Strait. Norway’s extensive coastline is facing the North Atlantic Ocean and the Barents Sea.

Norway is not a member of the European Union (EU) but is linked to the EU through the European Economic Area (EEA) agreement. By virtue of the EEA, Norway is practically part of the EU’s single market, except in fisheries and agriculture.

Norway is also part of the Schengen Agreement, which guarantees free movement of persons and the absence of internal border control between 22 of the 27 EU Member States, as well as Norway, Iceland, Switzerland, and Liechtenstein.

Small and Medium-Sized Companies

97% of all firms in Norway employ less than 50 people. The SME definition in Norway differs from the definition in use in most EU countries.

The structure of the Norwegian business economy is significantly different from the European average. While in the European Union about 58% of the value added is generated by SMEs, the equivalent share in Norway is about 71%.

At the same time Norwegian SMEs account for about 68% of all persons employed in the Norwegian business economy, which is only 1 percentage point higher than the EU average. This large disparity is mainly caused by micro- firms which generate 40% of total value added in Norway, almost twice as much as the EU average.

However, Norway’s share in employment is lower than in the EU. This indicates that Norwegian micro-firms are highly productive.

Compliance Highlights

• The Norwegian Tax Administration (Skatteetaten) – a government agency responsible for resident registration (National Population Register) and tax collection in Norway.
  
  The agency is subordinate to the Ministry of Finance and is based at Helsfyr in Oslo. It is organized in six regional organizations, based in Oslo, Skien, Bergen, Trondheim, Mo i Rana and Tromsø, in addition to local tax offices.
  
  
• The Norwegian Labour Inspection Authority (Arbeidstilsynet) – is a governmental agency under the Ministry of Labour and Social Affairs, focused on occupational safety and health.
  
  The Labour Inspection Authority has approximately 600 employees and consists of a central office – the Directorate, seven regional offices and 16 local offices throughout the country.
  
  The Directorate in Trondheim regulates the agency’s overall strategy, programmes, and information. The district offices guide and supervise individual enterprises in local communities.

Labor Contracts Law

The employer-employee relationship in Norway is governed by the Working Environment Act, which stipulates the employer must draft a written contract to be entered into no later than one month after the start of work. Any changes to the working conditions should be written into the contract within one month after they were implemented.

Verbal contracts are equally binding on employer and employee, but not advised as they are harder to enforce in the case of dispute; employers may be considered ‘at fault’ for not having provided a written contract.

General requirements apply to all contracts. These include:

1. Written contracts detailing essential elements of the job are required for all employees. In the case of foreign employees, the contract should be in a language they fully understand. If an agreement is verbal, it is equally binding legally.
2. The contract includes the following: Names and addresses of employer and employee; the workplace location, role and start date of employment; duration if fixed-term or temporary and any probation provisions; holidays and holiday pay; terms of notice; salary and payment schedule; working hours and breaks; and collective agreements affecting the employment.
3. All employees must be registered with the State Register for Employers and Employees.
4. Employers with 10 or more employees in office, industrial or commercial establishments must post staff rules in the workplace.
5. The emphasis is on permanent open-ended contracts, although fixed-term contracts are allowed within certain restrictions. Temporary employment agreements cannot exceed 15% of the total workforce.

The main types of contracts and significant factors are seen below:

• Indefinite, Open-ended, Permanent Employment Contracts:  These are the favored option and remain in force until terminated by either party, according to rules on termination as set out by the Working Environment Act.
  
  
• Fixed-Term Employment Contracts:  Since July 2015, these contracts have been permitted for up to 12 months without the employer having to justify specific circumstances for the time limit. If the fixed-term employment stretches over three years – or in some permitted cases four years – the employee is entitled to a permanent position. If fixed-term employment lasts less than four years but contravenes the legal requirements of the Working Environment Act, the employee becomes entitled to a permanent position. Employees on fixed-term contracts have a preferential right to employment if vacancies appear in their former place of work within 12 months of their contract ending.
  
  
• Probationary or Trial Periods:  The legal maximum is six months and cannot be extended by the employer. In the case of sick leave during probation, the trial period can be extended by an equivalent amount of time.
  
  
• Part-time, Temporary and Agency Employees:  Employers cannot discriminate against these categories in relation to the rights, benefits and entitlements applying to permanent employees. Part-timers have the right to work extra hours if they wish and the employer needs extra labor.
  
  
• Collective Bargaining Agreements: Collective bargaining and trade union agreements cover a significant proportion of workers in Norway, covering such areas as wages, working hours, notice periods, overtime, general working conditions and vacations. Such agreements overwrite other statutory minimums where they provide a higher level of benefits.
  
  Agreements generally come in three levels. The Basic Agreement deals typically with the obligations of employers; the Business Sector Agreement contains provisions for employees; Special Agreements are local, company level agreements between management and shop stewards.

Payroll – Tax Contributions and Benefits

Income Tax:

Individuals become tax residents by living in Norway for more than 183 days in a 12-month period or for 270 days over three years and pay tax on their worldwide income. Non-residents are liable for taxes on certain categories of income earned in Norway and since 2019 have been able to opt for a Pay-As-You-Go (PAYE) system. Norway has a dual tax system with a flat rate of 22% applying to ‘general income’ and four rates from 1.7% to 16.2% applying to ‘personal income’. The tax year generally runs from January 1 until December 31.

Health and Social Insurance: Norway’s National Insurance Scheme (NIS) provides for universal health and social care regulated by the Patient Rights Act and the National Insurance Act. The government is responsible for funding while primary, preventative and nursing care is organized locally. Norway has four regional health authorities responsible for hospital and specialty care.