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New rules for temporary lay-off can save companies

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The Norwegian Authorities have passed emergency measures which means that the employer-financed period is reduced from 15 till 2 days and the Norwegian Authorities cover full salary from day 3 till day 20. The rules for unemployment benefits are also amended.

Change in the rules of temporary lay-off

  • The employer-financed period is reduced from 15 till 2 days
  • The Norwegian Authorities cover full salary from day 3 till day 20 of the temporary lay-off
  • Unemployment benefits cover up til 80 percent of previous income up till 3G, and 62,4 percent from 3G up till 6G. 
  • Wait-days are temporary set aside
  • The basis of income for being entitled to unemployment benefits is reduced to 0,75 G
  • The employee can receive unemployment benefits if the working hours are reduced by 40 percent. 

Temporary lay-off means that the employee is temporarily released from the obligation to work, and the employer is temporarily released from the duty to pay remuneration. Since January 1 2019 until now, the employer was obligated to pay remuneration the first 15 days of the temporary lay-off, after which the employee could apply for unemployment benefits from NAV up till 26 weeks, before the employer's duty of remuneration applied again.  

Today the Norwegian Authorities have announced that the employers duty of remuneration is reduced from 15 till 2 days. The grounds for the amendment is to provide companies with better liquidity, and contribute to avoiding terminations. 

After the end of the employer-financed period, employees that applied for unemployment benefits had to wait three days before the benefits from NAV were paid. Now these waiting days are temporarily set aside. 

The Norweigan Authorities will secure that the employees receive full salary the first 20 days after temporary lay-off. The employer covers the two first days, then NAV pays full salary from day 3 till 20.Then the employee will receive an income for min. 80 percent of the basis for unemployment benefits up till 3 G, and 62,4 percent from 3 G til 6G. The basis for being entitled to unemployment benefits is reduced to 0,75 G.  

The changes came into force immediately, and the payout happens when NAV has a technical solution in place.

Can notice of temporary lay-off be given two days in advance, when the duty of remuneration is reduced to two days?

A notice of lay-off shall normally be given the employees 14 days in advance. When unforeseen events occur the deadline can be two days. The loss of income as a consequence of the corona-virus can be an unforeseen event, but is not automatically one. The companies must make a specific evaluation of the economic situasjon, and how immediately it is necessary to commence the lay-offs. Even if the employer's duty of remunerations is reduced the question is still if the loss of income was foreseen or not, and this is decisive for when the notice of lay-off should be given.

When can you use temporary lay-off?

Many businesses are starting to feel the consequences of the corona-virus, Covid-19 by unexpected and sudden loss of income. When the loss of income is temporary, the employer can use lay-off as a means when trying to save the economic situation.Temporary lay-off means that the employee is temporarily released from the obligation to work, and the employer is temporarily released from the duty of remuneration. Temporary lay-offs may be fully or partially with reduced working hours.

The premise for using temporary lay-off

The premise for using temporary lay-off is that there is reasonable grounds and that the need is temporary. The need to reduce costs as a consequence of reduced orders and raw material shortage can be reasonable grounds. The uncertainty around the Covid-19 can make the need temporary. The corona-virus and being in quarantine is not a reasonable ground itself. It can however lead to medical certificate and sickness benefits.  

Short way back to resume the work

The employment relationship continues during lay-off, and the employee must be prepared to resume their work on short notice. If the temporary problems become permanent, the employees must be terminated instead of temporarily laid off. Thus, the employer needs to evaluate if the need is temporary, and if temporary lay-off or termination will be the right way to proceed.

Legal grounds for temporary lay-offs

Temporary lay-offs are regulated in the “Law on duty of remuneration during lay-off” (unofficial office translation) and is otherwise non-statutory law. The terms for lay-offs follows from The Basic Agreement and does in principle also apply for companies who are not bound by the agreement. Other collective agreements can also contain regulations that apply for lay-offs. Companies bound by collective agreements should therefore consider how their agreements affect the use and carrying out of lay-offs.

How should you proceed with lay-offs?

  • Companies bound by collective agreements need to discuss the possibility of temporary lay-offs with the employee representatives. A protocol should be made from the discussions, where the employer's actions to avoid lay-offs should be included.
  • NAV must be notified if at least 10 employees will be temporarily laid off without remuneration, or will have their working hours reduced by more than 50% for a period of four weeks or more.
  • If the temporary lay-offs does not involve all employees in the company, a selection of employees must be made. Selection criterias can be specified in relevant collective agreements. Typical criterias used are the company's need for competence, and the principle of seniority. The premise is that the criterias are reasonable based on the company's need.
  • The employees shall receive a notice of lay-off. The notice shall normally be provided at least 14 days before the lay-off is effective. If there is an unforeseen event a to days deadline can be used. If the notice is given shorter than 14 days the reason for this should be stated.
  • The notice should be dated, and include the grounds for the temporary lay-off, the degree and period for lay-off and the number of days the employer is obligated to pay salary. 

When does the employer have a duty of remuneration?

From January 1. 2019 until now, the employer was obligated to pay remuneration the first 15 days of the lay-off, after which the employee could apply for unemployment benefits from NAV the next 26 weeks, before the employer's duty of remuneration applied again.  The duty of remuneration applies for days the employee normally would work. The same applies for partial lay-off. 

The obligation to pay remuneration is now reduced from 15 till 2 days. 

By full lay-off the employer shall cover the average pay for a normal working day. For partial lay-offs the employer shall cover a percentage of the average weekly salary. The percentage of the salary should be equal to the percentage reduction of the working hours each week. 

If the employee is laid-off, the employee can claim unemployment benefits from NAV after the employers duty of remunerations ends. To claim unemployment benefits the standard terms for unemployment benefits must be fulfilled, even though the employee is laid-off.

From day 3 til 20 of the temporary lay-off, NAV covers full salary for the employees. 

From day 20 and up till 26 weeks the employees can receive unemployment benefits from NAV. Now the employees can receive unemployment benefits that cover min.80 percent of the previous income up till 3G, and 62,4 percent of the previous income over 3G up till 6G. (1G = National Insurance Scheme basic amount, currently 99.8.5.8 NOK per year, 8322 NOK per month)

In addition the basis for being entitled to unemployment benefits is reduced to 0,75 G. Previously it was necessary with more than 150 000 NOK in income over the last 12 months to be entitled to unemployment benefits. Now the limit has been reduced to 75 000 NOK.   

What applies if the employee is reported sick before and during lay-off?

The employer's duty to pay remuneration commences when the employee is reported fit and laid-off. As long as the employee is reported sick, NAV pays the sickness benefits. If an employee gets reported sick during the lay-off, the period for the lay-off can be extended equal to the sick leave. The employer-financed period shifts, and commences when the employee should have been back to work. 

When the employee is partially reported sick, the employer has a duty of remuneration for the part the employee is not reported sick, for the day when the duty applies.

Anni Terese Haugen

Anni Terese Haugen

Mitt navn er Anni Terese Haugen, og jeg begynte å jobbe som advokatfullmektig ved Advokatfirmaet PwCs Oslokontor høsten 2018. Jeg jobber med arbeidsrett og har min kjernekompetanse innenfor statsansatteloven og regelverket for offentlig sektor.

Ta gjerne kontakt dersom du har spørsmål, innspill eller øvrige kommentarer.

My name is Anni Terese Haugen and I work as an associate lawyer at PwCs office in Oslo. I work with labour law, and assist both Norwegian and international companies. I assist clients with advice within all areas of labor law, but my main competence is the regulations in the public sector.

Please do not hesitate to contact me if you have any questions or comments.

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