EMCC European Monitoring Centre on Change

Temporary layoffs

Norway
Phase: Management
Tipas:
  • Response to COVID-19
  • Employment incentive
  • Income support for workers
  • Working time flexibility
Last modified: 03 August, 2021
Projekto pavadinimas::

Permittering

Angliškas pavadinimas:

Temporary layoffs

Coverage/Eligibility

Conditions for temporary lay-offs are established in basic agreements between the social partners 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. Public sector employees are generally not qualified and temporary layoffs are not to be used in the public sector (with certain exceptions).

Temporary layoffs are permitted when valid reasons make this necessary for the enterprise, provided that the enterprise has made reasonable efforts to avoid layoffs and that permanent dismissal is not indicated. Temporary layoffs can last for 52 weeks (normally 26 weeks) during a period of 18 months.

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.

Main characteristics

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 employer still has to pay employees for the first part of this period. 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. Temporarily laid off employees are subsequently eligible for unemployment benefits, for a total of 26 weeks (temporarily adjusted to 52 weeks, effective from 1 November 2020) 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 lay-offs. This is not a duty by law, but can be included in collective agreements. Before implementing temporary lay-offs 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 lay-offs (2 days if due to 'unforeseen events').

Employees who are temporarily laid-off are entitled to unemployment benefits in accordance to the National Insurance act. In response to COVID-19, a wage compensation scheme was introduced in March 2020 where the state pays the equivalent of a full salary for the first 18 days, after the two days employer period. 

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

From 20 March 2020 the period in which the employer still has to pay the employees during temporary layoffs is reduced from 15 to 2 days. The state sustains the cost of the wages of the relevant employees from day 3 to 20.

In addition, the minimum requirement to admit workers to this unemployment benefit scheme is reduced from 50% of normal working hours, to 40%. 

Unemployment benefits for low-wage workers were simultaneously expanded, including a lower eligibility threshold and an increased benefit (from 62.4% to 80% of income, up to approximately €30,000 year).  

On 13 August 2020, the government proposed to expand the right to unemployment benefits for temporarily laid off employees, from 26 weeks to 52 weeks, effective from 1 November. The proposal was made after requests from the social partners, as well as opposition parties. The proposal also includes an additional five days employer-financed period after 30 weeks.

Funding

  • National funds
  • Employees
  • Employer

Involved actors

National government
Funding.
Public employment services
The Norwegian Labour and Welfare Service (NAV) - the employment service - will be involved both in the payment of unemployment benefits as well as in following up on the laid-off workers.
Employer or employee organisations
Conditions for temporary layoffs are established in basic agreements between the social partners and in case law.
Kiti
Partly funded by the employer, and partly by the employee as unemployment benefits do not equal full pay.

Effectiveness

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. 

Strengths

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.

Weaknesses

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.

Pavyzdžiai

Halliburton, Bergen Engines
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