Background information

The Norwegian layoff scheme ensures that an employer can temporarily lay off employees, if there is a justifiable basis for this and the need is temporary. Justifiable reasons may be low influx of orders, financial problems, need to repair machinery and more. The aim is to support businesses to stay afloat, and to support the employees on temporarily layoff financially.

Conditions for temporary layoffs are established in basic agreements between the social partners (1947) and in case law. Access to unemployment benefits during temporary layoffs is regulated in the National insurance act (4-7) , and accompanying regulations, while the obligation to pay wages is regulated in a separate act, the Act on the obligation to pay during layoffs (the Layoff Wages Act) from 1990.

Content of measure

An employer can temporarily lay off employees, if there is a justifiable basis for this and the need is temporary. Justifiable reasons may be low influx of orders, financial problems, need to repair machinery and more. Public sector employees are generally not qualified and temporary layoffs are not to be used in the public sector (with certain exceptions).

The employer still has to pay employees for the first part of the period of layoff. From 2019, the employer was responsible for the first 15 days, adjusted to two days from 20 March 2020 in response to COVID-19, and increased to 10 days from 1 September 2020. If the need to reduce the workforce is due to fire, accidents or nature, the employers' duty to pay wages for the initial days does not apply. After the pandemic, the employer is responsible for the first 15 days as before the pandemic.

Temporarily laid off employees are subsequently eligible for unemployment benefits, for a total of 26 weeks (temporarily adjusted to 52 weeks during the pandemic) of temporary redundancy within a time period of 18 months. The employer must then resume paying the employees' salaries.

Before temporary lay-off is decided, the employer should notify the public employment authorities. The choice of employees is based on the seniority principle, but this principle can be departed from if there is due reason. Employers are to consult with the shop steward before giving notice of temporary layoffs. This is not a duty by law but can be included in collective agreements. Before implementing temporary layoffs of a longer duration, the enterprise should alternatively assess occupational skill upgrading measures according to its needs in order to strengthen its competitive advantage. Employees shall be given in writing 14 days' notice of temporary layoffs (2 days if due to 'unforeseen events').

Employees who are temporarily laid-off are entitled to unemployment benefits in accordance with the National Insurance act.

There is also the opportunity to use part-time layoffs, for instance by reducing working hours. However, if working hours are reduced by less than 50%, the employee will not be entitled to unemployment benefits.

COVID-19 response

In order to support companies in coping with the COVID-19 crisis, the legal framework for the temporary layoffs has been adjusted, with new regulations in force from 20 March 2020 (see Temporary amendment to the regulation of layoffs .) The companies eligible for this instrument are unchanged.

See related case in the ERM Restructuring related legislation Norway: Working time flexibility .

Use of measure

The Norwegian temporary layoff scheme has been widely used especially by traditional industry to stay afloat in difficult periods. During the pandemic it was also used by SMEs in for instance the hotel and restaurant industry. The scheme is well-established and enjoys recognition from the social partners and the government as well as companies and employees.

Dokken, Kann and Sørbø (2017) investigate how small changes in layoff regulations (as was the case in 2009, 2012, 2014, 2015) affect the likelihood of return to work. The findings indicate that changes in layoff regulations affect the length of unemployment, and that extensions of the layoff period do not imply that more people get to work or return to the same job. 

Larsen, Berg and Klingenberg (2015) explore whether the use of layoffs helps to curb or increase retirement from working life. The findings indicate that, in the period from 1993-2011, about 81% of those who completed a layoff period returned to the company from which they were laid off. About 9% went to another employer and 11% were not in paid employment after the period of layoff ended. Out of these 11%, 7% were occupationally disabled, on unemployment benefits or with disability pensions. 

This measure allows companies to retain their workforce during situations where the need for labour is lower than usual and allows for a quick reduction in pay costs. It might be misused, as costs are turned over to the state. It might also delay necessary readjustments in situations where the workers should rather have looked for other work.

Contents

• Income protection

Target groups

Workers	Businesses	Citizens
Employees in standard employment	Applies to all businesses	Does not apply to citizens

Actors and funding

Actors	Funding
National government Social partners jointly Trade unions Employers' organisations Company / Companies Public employment service Social insurance	Employees Employer National funds

Social partners

Social partners' role in designing the measure and form of involvement:

	Trade unions	Employers' organisations
Role	Agreed (outcome) incl. social partner initiative	Agreed (outcome) incl. social partner initiative
Form	Not applicable	Not applicable

Social partners' role in the implementation, monitoring and assessment phase:

• Social partners jointly
• Main level of involvement: Peak or cross-sectoral level

Involvement

The social partners, that is the main trade union confederation LO and the main employer organization NHO, have taken an active role in establishing the Norwegian layoff scheme, and all the social partners have taken active role in reforming it and upholding it over the years. During the pandemic, the social partners were in active dialogue with the government on modifications in the layoff scheme.

Views and reactions

Unknown

Sources

• 08 October 2009: Eurofound, Tackling the recession (2009), Employment-related public initiatives in the EU Member States and Norway. Eurofound (www.eurofound.europa.eu)
• 01 April 2012: Clauwaert, S. and Schömann, I. (2013), The crisis and national labour law reforms: a mapping exercise. Country report: Norway, ETUI Working Paper, European Trade Union Institute, Brussels (www.etui.org)
• 01 January 2013: Svalund. J. (2013), The impact of institutions on mobility, labour adjusments and cooperation in the Nordic countries, Phd-dissertation, Fafo-report 2013:56. (www.fafo.no)
• 01 January 2013: Olberg, D. (2012), Bruk av permitteringer 2012 - omfang og reguleringer (www.fafo.no)
• 01 October 2013: The impact of institutions on mobility, labour adjustments and cooperation in the Nordic countries (www.fafo.no)
• 01 October 2013: Bruk av permitteringer 2012 - omfang og reguleringer (www.fafo.no)
• 01 July 2015: Larsen, Berg and Klingenberg (2015), Permitteringer og avgang fra arbeidslivet (proba.no)
• 01 March 2017: Dokken, Kann, Sørbø (2017), Hvordan endringer i permitteringsregelverket slår ut for de permitterte. Arbeid og velferd nr. 1 (www.nav.no)
• 01 January 2018: Basic agreement 2018-2021 LO-NHO (www.nho.no)
• 01 October 2018: Fullt og helt, ikke stykkevis og delt? Den norske permitteringsordningen i et komparativt perspektiv (www.fafo.no)
• 20 March 2020: Regjeringen.no - This is how the changes in the lay-off and unemployment benefits will be (www.regjeringen.no)
• 13 August 2020: Regjeringen.no - Extending the temporary layoff period (www.regjeringen.no)
• 01 March 2022: Permitteringslønnsloven (lovdata.no)
• 01 July 2022: National Insurance Act (Folketrygdloven) (lovdata.no)
• 01 October 2022: NHO - News on temporary employment, sick leave and care benefit (arbinn.nho.no)
• 14 October 2022: Permittering (www.arbeidstilsynet.no)