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Workforce Flexibility and Government Incentives in times of Covid-19 - Norway

Short-Term Work State Aid

Covid-19 Questionnaire

Are there any regulations in place providing an employer with possibility for flexible workforce planning such as part-time work/temporary leave which are triggered in a situation similar to a pandemic outbreak as Covid-19?

Yes

If YES on question 1, please describe which type of regulation. Please confirm if and to what extent such leave can be supported by state aid and/or other extra-ordinary governmental support.

For all practical reasons, temporary lay-offs (NW: "Permittering") will be the chosen measure by employers in Norway and it has recently has been enacted several changes in the relevant legislation / rules because of the Corona-crisis. Lay-off can be done either full-time or part-time basis (however, please see our response under question 2 below regarding the employees' entitlement to benefits from the state, i.e. the employment must be reduced by a minimum of 40 % due to a lay-off).

Laying off employees is a temporary measure under which the employee's obligation to work and the employer's obligation to pay salary are suspended, i.e. the employment relationship continues to exist and it is assumed that the work stoppage is temporary.

A lay-off requires reasonable grounds related to the business and not the employee. If the undertaking has a temporary need to reduce its workforce due to the Corona-crisis, e.g. due to lack of work, the employer may consider to temporary lay-off employees. Furthermore, the employer must act reasonably in the evaluation of who should be laid-off and has to follow a prescribed procedure. The procedure includes, among other things, sending a notification to the Norwegian Labour and Welfare Service ("NAV"), I / C-obligations towards the employees' elected representatives / the employees and delivering a notice of lay-off to the employees in questions which include certain information. It is important that the employer ensures having sufficient documentation regarding the justification of the lay-offs, the selection between the employees and that the procedure has been carried out in accordance with the applicable rules.

A lay-off may last for 26 weeks during a period of 18 months. For unemployed and laid-off workers who are about to expire the maximum period of unemployment benefit, the Parliament has extended the period to June.

If it becomes clear or highly likely that the situation will be permanent, the employer must give notice of dismissal. We emphasize that if such a notice is given, the main rule is that the temporary lay-off stops and the employment relationship is taken up again, included that the employer has to pay full salary during the notice period. Dismissals have to be handled in accordance with the applicable strict rules.

if YES on question 1, please describe which contacts that may need to be initiated with trade unions and/or works councils. Must a special process be followed?

  • Consider whether the undertaking has reasons to lay-off employees and the potential selection between the employees (which has to be reasonable and objective)
  • The employer must notify NAV as soon as possible, and at the latest at the same time as the employer calls a consultation meeting
  • Even though it is not a statutory duty for undertakings that are not bound by a collective bargaining agreement, we recommend that the lay-offs are discussed with the employees’ elected representatives / the employees. Undertakings bound by collective bargaining agreements will have to carry out a I/C procedure according to the collective bargaining agreement.
  • Notice of temporary lay-offs, which, among other things, must include information about the notice period, the reasons for and extent of the lay-offs, the period under which the employer will pay salary etc.
  • When the notice period has expired, the employer will pay salary during the employer’s period before the state takes over.
  • Employees must apply NAV for compensation for loss of income because of a lay-off. The employees must, however, first register as a job seeker.

Are there any governmental programs if a company needs to close totally or partially for a certain time period?

Employers are to some extent obligated to pay the employees' salary, i.e. during the notice period of the lay-offs and the employer's period. Please find more information on the economic consequences of a lay-off below.

  • The notice period is generally 14 days. This may however be reduces to 2 days in case of an “unforeseen event”. The effects of the Covid-19 virus is such an unforeseen event an may trigger a 2 days notification period.
  • When the lay-offs are in effect, i.e. when the notice period has expired, the employer must pay salary for 2 days (normally 15 days, but this has been changed because of the Covid-19 crisis). Following the employer’s period, the employer is exempted from the obligation to pay salary for a period of 26 weeks during a period of 18 months. If the crisis continues the Norwegian Parliament may expand this period.
  • Following the employer’s period (2 days after the lay-offs are in effect), the state takes over the duty to pay salary (upward limited to 6 G - which is further described below) for 18 days. (Please note that the employer in addition have to pay salary during the notice period, which in case of unforeseen events usually is 2 days).
  • After the mentioned 20 days, laid-off employees are ensured an income from the state equal to 80 % of their income up to 3 G. For income between 3 G up to 6 G, laid-off employees receive 62,4 % of their salary. Salary exceeding 6 G is not compensated. The G is short for “Grunnbeløp” and is the calculation amount for the National Insurance System when they calculate the benefits. The G is subject to annual adjustments every 1 May. Currently the G amounts to NOK 99 858.
  • While employees previously had to wait three days from the employer’s payment ended to unemployment benefits were received, they are now entitled to unemployment benefits from compensation from the State immediately following the employer period and do no longer have to wait three days.
  • Employees must apply NAV for compensation for loss of income because of a lay-off. The employees must, however, first register as a job seeker.
  • If an employee’s employment is reduced by a minimum of 40 % (previously 50 %) due to lay-offs, the employee will according to the new rules be entitled to unemployment benefits from the Norwegian Labour and Welfare Service (“NAV”).
  • The threshold for eligibility for salary compensation as laid-off is reduced from 1,5 G to 0,75 G. This helps the part-time workers to secure an income.
  • Unemployed are now entitled to unemployment benefits during Easter and Christmas. According to the Regulations on Unemployment Benefit (FOR-1998-09-16-890), it is usually a requirement that unemployment benefit is not disbursed in the period from December 20 until January 1, and from Palm Sunday to the 2nd Easter Sunday (cf. Section 6-3). Section 6-3 has been temporarily repealed by Regulation March 20, 2020, No. 373.
  • The employer period for paying salary related to sick-leave related to Covid 19 is reduced to 3 days (previously 16 days).
  • Self-employed workers and free-lancers are entitled to sick leave pay from NAV from day 4 in connected with the corona pandemic. This is a direct response to the Corona-crisis with the aim to reduce the costs related to sickness benefits.
  • The paid days for taking care of small children (12 years and younger) is doubled from 10 days to 20 days. The employers are to pay 3 days of the care leave while the state pays the rest. This is a direct response to the fact that schools and kindergartens are closed. Self-employed workers and free-lancers are to receive paid care leave from day 4.

In principle, a reimbursement scheme for unemployment benefit is not envisaged so that employers can offset unemployment benefits to their employees until the unemployment benefits application is granted. However, to help NAV who is under a tremendous pressure, Minister of Labour and Social Affairs Røe Isaksen urges all employers, who have the opportunity, to pay the 18 days of salary that the State is responsible to pay for. Employers who offset will have their wage costs reimbursed by NAV, upwards limited to 6 G.

NAV has in addition opened for employees to apply for NAV to offset 60% of salary until the unemployment benefits application is processed. The payment will be offset against the final unemployment benefit, when available. On March 27, the Government decided that, NAV now may grant unemployment benefits, without employees having to wait for the unemployment benefit application to be processed. NAV will pay the unemployment benefit in advance, however limited to approximately 60 % of the unemployment benefit basis. The unemployment benefit will be offset against the final decision when the application is processed. It is voluntary for the employees to apply for such payments in advance, and the application form is available in the following link.

https://www.nav.no/dagpenger/forskudd/

An employee is entitled to unemployment benefits during a period of 26 weeks during a total period of 18 months. For unemployed and laid-off workers who are about to expire the maximum period of unemployment benefit, the unemployment benefit period is extended to June. After the end of this period, the employer's wage obligation will again occur.

If state aid and/or other extra-ordinary governmental support is available, please describe the necessary prerequisites to qualify for such state aid.

Many companies in Norway are experiencing a dramatic decrease in revenue amid the evolving Covid-19 pandemic. To mitigate the economic consequences of the occurring crisis, the Norwegian Government announced on 27 March 2020 a new and comprehensive 10-20 BNOK Government aid scheme for business in Norway that are suffering from the Covid-19 crisis. The main goal of the proposed act is to partially cover businesses’ current operating expenditure, whilst companies experience significant a temporary decline in revenue due to the economic consequences of the Corona virus.

According to the Ministry of Finance, the Government aid plan is built on the following seven guiding principles:

  • The scheme must be efficient and have immediate effect
  • The scheme must be targeted
  • The scheme will be temporary
  • The scheme must be comprehensive
  • The scheme must be manageable and convenient
  • The scheme must be in accordance with EU state aid regulations
  • The scheme must be subject to oversight and control

The Government’s proposal entails a Government aid scheme for business suffering from the Covid-19 crises which stipulates different models for compensation. The one model applies for companies operating within activities that are mandated to close by the Government, i.e. hairdressers, beauty salons, tattoo shops, swimming halls, sporting complexes and similar environments where person-to-person contact is inevitable. Businesses affected be these measures will have their current operating expenditure compensated based on this equation: decrease in revenue based on March/April 2019 in % * (current operating expenditure) * 0,9. For those businesses not directly impacted by the Government restrictions a different calculation will apply: decrease in revenue based on March/April 2019 in % * (current operating expenditure- 10 000 NOK) * 0,8.

Only businesses with a 30 % decrease in revenue (20 % is sufficient for the month of March), with revenue loss of minimum 5 000 NOK in the designated month are eligible. Furthermore, the scheme only applies to businesses operating in Norway. The scheme is not applicable to business that have already filed or in the process of filing for deregistration, closure or bankruptcy/liquidation prior to the implementation of the cash support scheme.

The 7 April 2020 there was a session in the Norwegian Parliament which resulted in the bill being approved. The legislation on compensation schemes will be in force as soon as the Parliament has discussed the matter a second time (as prescribed by the Constitution) and it is sanctioned by the King. Unless something extraordinary takes place in the days to come, it is reasonable to expect that the enactment will go through without any significant changes.

It is expected that businesses may apply for this scheme from 17 April, however we do not know any further details in relation to what must be included in this application. It is expected that the government will elaborate more on the application process after Easter. We will be able to provide you with further details when we know more.

If state aid and/or other extra-ordinary governmental support is available, please describe the application procedure for such state aid (e.g. how and when is the application filed with the government etcetera; what shall such application include).

Please see the answer to question 3 above. We do not yet know any definite details regarding the application procedure. We do however know that businesses must provide the government with documentation that supports a decrease in revenue equal to a certain percentage. Thus, businesses must likely present financial statements from the comparable month(s) the previous year. If the business is newly started, it is likely sufficient to provide financial statements from the previous two or three months. It is important that what the business presents accurate documentation, because there will be no governmental control with these numbers prior to the cash support being disbursed. However, it is expected that all numbers must be verified in retrospect.

Please note that the COVID-19 scenario is constantly changing and that this information is current as of 28 April 2020. This publication should not be regarded as offering a complete explanation of the legal matters referred to and is subject to changes in the law and other applicable rules.