In Norway, employers have a legal responsibility to contribute to their employees' retirement savings through the Mandatory Occupational Pension scheme (OTP). This requirement ensures that workers in the private sector receive pension contributions in addition to benefits from the National Insurance Scheme. In this blog, we explain who this applies to, how it works, what happens if it's not followed, and how international schemes may be treated under Norwegian law.
What is Mandatory Occupational Pension (“OTP”)?
Mandatory Occupational Pension is a legally required pension scheme for employees in private companies in Norway. All employers must allocate at least 2% of each employee's salary to a pension scheme. This ensures that employees accumulate pension savings in addition to the National Insurance Scheme.
Note: This only applies if the employees are members of the Norwegian social security system.
Also read: What are the legal responsibilities of an employer in Norway?
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When is a Pension Scheme Required?
The requirement to establish a pension scheme is triggered when an employer meets at least one of the following criteria:
- The enterprise employs at least two individuals whose working hours and salaries each are at least 75% of a full-time position.
- The enterprise has a single employee, without any ownership stake in the business, whose work and salary equate to a full-time equivalent (FTE) of at least 75%.
- The enterprise has multiple employees, each with working hours and salaries equivalent to at least 20% of a full-time position. Combined, their efforts equate to at least two full-time positions.
Employers are responsible for ensuring that a pension scheme is in place within six months of hiring. In addition, it is important to note that if the employee becomes disabled, the pension scheme will also grant contribution waivers corresponding to the actual degree of disability. However, this coverage only applies until the employee reaches the age of 67, meaning the pension liability may continue for the remainder of the employee’s lifetime. This means that an uninsured employer must pay the contribution for the disabled employee until he is 67 years old.
Also read: Employment contracts — What do you need to include?
Can an existing pension scheme abroad be approved in Norway?
If you have a pension scheme abroad, it may be approved in Norway under certain conditions. To be eligible for a tax deduction for contributions to a foreign pension scheme, the pension institution provided by the employer must:
- Be established in another EEA state or a country with which Norway has a social security agreement.
- Have the necessary authorization to operate such a pension business in the relevant EEA state.
- Be subject to public supervision in the relevant EEA state.
For contributions to pension schemes to be tax-deductible:
- The taxpayer must have been a member of the scheme when establishing tax liability in Norway and for at least one year before this date.
- Contributions to the scheme must have been eligible for tax deductions in another EEA state.
- Old-age pension must be the main benefit under the scheme.
Do you wish to apply for a pension from a country outside the EEA area or which Norway does not have a social security agreement? In that case, you must contact the relevant country’s pension authorities.
What happens if you don’t comply?
Enforcement fine
If your company or organization is obligated under the Mandatory Occupational Pension scheme and a pension plan is not created, you will receive a notification of a possible order to establish an agreement within a given deadline.
Additionally, if you have received a notice of a possible decision, and you believe this is incorrect, you have the right to submit a response. If you’ve not complied with the establishment order by the given deadline, you’ll be charged with an enforcement fine.
The enforcement fine is 250 kroner per employee per day. The fine accrues until you can document that the pension plan has been established. If the issue was rectified before it was reported to the Labour Inspection Authorities, they can waive the fine from the day the pension plan was entered.
Penalties for breach of Employer Obligations under the Mandatory Occupational Pension Act
Employers who do not fulfill their obligations under the Mandatory Occupational Pension Act regarding establishing or paying contributions to occupational pensions for their employees may be punished with fines or imprisonment for up to 2 years.
Ordered to establish a pension scheme - Your right to appeal
If you have been ordered to establish a Norwegian pension scheme, or have received a decision concerning an enforcement fine, and you do not agree with the decision, you have a right to appeal. The appeal deadline is three weeks from the date you received the decision. You may request that the implementation of the decision be deferred. Any appeal must include evidence to support your position. Such evidence must include documentation for why the requirement to establish a pension scheme is not triggered in your specific situation.
Questions about the Norwegian Mandatory Occupational Pension?
Navigating Norwegian employment law and compliance requirements is essential for any company operating in Norway. The rules surrounding occupational pensions are strict, and non-compliance can lead to significant financial penalties.
If you're unsure about your obligations or how to move forward, it's wise to seek expert guidance. At Magnus Legal, we have extensive experience assisting foreign companies with Norwegian labor law and compliance. We can help you establish a Mandatory Occupational Pension Scheme tailored to your needs, working with various providers to find the most suitable and cost-effective solution for your business
ASK US ABOUT NORWEGIAN LABOR LAW
Employing in Norway? Our skilled labor lawyers are here to assist. Reach out for help.