Payroll runs (what you need to know)

Payroll system

For many people, the big change in accounting routines comes on the day they employ someone. The regulations relating to appointments and salary payments are extensive. Keeping payroll accounts can soon become complicated if you are not sure how it should be done. At this point, many people decide to outsource their accounts to an accountant or let the accountant do the payroll runs.

If you do decide to do it yourself, a payroll system will be a big help. There are many different payroll systems available to suit different needs. Common to most of them is that they are structured in such a way that holiday pay and employer's National Insurance contributions, for example, are calculated automatically, the a-melding can be submitted directly via the payroll system. You will also receive completed lists showing which accounts you should post the various transactions under. If you have the same payroll and accounting system, the transactions will often be posted automatically.

If you decide to do it yourself, you must have an overview of at least the following:

Tax deductions/Payroll withholding tax

As an employer, you must deduct tax from the salary you pay to your employees. The amount you must deduct will be stated in the employee's tax deduction card. All tax deduction cards are digital. Tax deductions should be deposited to a locked bank account. If you do not wish to use a tax deduction account, you need to have a bank guarantee that at all times covers payable tax deductions.

Holiday pay

You must also calculate and set aside holiday pay on salary and other work remuneration in your accounts. According to the Annual Holidays Act, employees are entitled to four weeks and one day of holiday. The holiday pay will then amount to 10.2% of the basis for the holiday pay. Employees aged over 60 years are entitled to an extra week's holiday. For employees over the age of 60, the rate is 12.5%.

If you are covered by a collective wage agreement or another agreement which gives a fifth week of holiday, the ordinary rate is 12% (14.3% for employees over 60).

Employer's National Insurance Contributions

When you have employees, you must calculate and pay employer's National Insurance contributions on salaries and other remuneration, including payment in kind which you pay your employees. Remember that you must also calculate and post employer's National Insurance contributions on holiday pay.

Travel expenses

If you have employees who travel in connection with their work you must agree how their expenses are to be reimbursed. There are generally no restrictions on what you and your employees can agree as regards how travel and subsistence expenses will be reimbursed. However, there are specific rules determining what can be paid out tax-free. 

Payments in kind

In the context of employment, 'payments in kind' means benefits which the employee receives from their employer in a form other than money. They are sometimes also known as 'perks'. Company cars and free use of telephone/internet are payments in kind. A low-interest loan from an employer will also constitute a payment in kind.

Payments in kind are generally taxable for the recipient, but some benefits are tax-free.

Telephone/internet

If you cover costs for telephone/internet which the employee can also use privately this must be declared as a benefit for tax purposes. A standard rule is used concerning the taxation of benefits linked to the use of all forms of electronic communication services (EC services). The maximum taxable benefit is NOK 4,392.

You must declare this information together with the salary.

Company cars

If you have employees who use a car which is owned or leased by the company for private use, the employee must be taxed for this benefit. A car does not need to be used privately to any great extent before taxation is triggered. You should therefore familiarise yourself with the relevant rules before you allow your employees to use a company car for private travel.

Pay slip

You are required to produce a pay slip for the employee after each payroll run. The pay slip should describe salary, withholding tax, basis for calculation of holiday pay and any other deductions in the salary.

The Tax Payment Regulations on documentation to the taxpayer (in Norwegian only)

Sickness and sick-pay

When an employee falls ill, you need to be aware of your responsibilities as an employer. An employee is normally entitled to 16 days of sick-pay from the employer (the employer's period). If you pay out salary beyond, you need to apply to NAV for a refund. Alternatively, you can stop paying salary to the employee after the employer´s period, and let NAV pay out directly to the employee.

A-melding

When you pay salary, cash benefits, payments in kind or expense allowances, you must also submit an a-melding to the authorities. If you have deducted payroll withholding tax, this must also be reported in the a-melding. You must submit a-melding by the 5th of the month after the payment. It is the date of payment which determines when you must submit information.

Payment of withholding tax deductions and employer's National Insurance contributions

Tax that you have deducted from your employees' salaries and calculated employer's National Insurance contributions must be paid to the authorities six times a year. When you submit an a-melding, you will receive feedback in Altinn (or alternatively directly in your payroll system) giving information on the amount, account number and KID number. 

Attachment of earnings

If you have an employee who accrues unpaid debt or other monetary claims, as their employer you may be ordered to make deductions from their salary. This is known as a attachment of earnings. You will be told exactly how much to deduct and to whom you should pay the amount you deduct. Only public authorities can order deductions to be made from employees' salaries.

The Norwegian Tax Administration – Carrying out attachment of earnings

Annual summary

After the end of the year and before 1 February, you as an employer must provide each employee with an annual summary of all the information you have reported to the authorities. The summary should also contain the basis for holiday pay, tax withheld and the employee number used to identify the employee in your systems. There are no formal requirements as to the layout of this summary. The requirements only refers to the content.

The Norwegian Tax Administration – What information does an employer have to give income recipients?

Enforcement fines

Enforcement fines may be issued if you fail to submit you fail to submit an a-melding by the stated deadline, or if you submit an a-melding that contains errors.

The enforcement fine is NOK 127 (1/10 of a court fee) per wage earner with incorrect information for each day until the information submitted, or the error is corrected. The maximum amount of enforcement fine is 1,000 x NOK 1,277 (one court fee) = NOK 1,277,000.

The enforcement fine does not stop accruing even if you submit an appeal against the decision you have received. The a-melding must be submitted without errors before the fines will stop accruing.

Enforcement fines and appeals - the a-melding