What do I do as a self-employed and freelancer regarding layoffs/loss of income?
We get a lot of questions from clients who are managers in small companies about the regulations for layoffs. Here is an overview of the this. The Norwegian Parlament is now asking the Government to introduce a temporary arrangement.
As self-employed, you do not earn the right to unemployment benefits from what you earn. You do not receive wages, nor do you pay employer's social security contributions, but dispose of the profits of the company.
However, if you have earned income as an employee within the last 36 completed calendar months, you may be entitled to unemployment benefit.
The Parlament asks the government to introduce a temporary scheme for self-employed and freelancers who now loose all or part of their income base, as a result of the corona pandemic. They receive compensation where the coverage ratio is about 80% of the average of the last three years' income limited up to 6G. The compensation is covered from the 17th day after the loss of income occurred. This is a temporary arrangement for the time being. The change comes into effect immediately and the payments are made as soon as NAV gets a technical solution in place. (at the time of writing, final approval is still required for this to take effect)
As an employee of your own company (AS), you are not self-employed, and you generally have the same rights to unemployment benefits as other employees. See separate rules for unemployment benefit and severance pay in own limited companies.
Laid off when you are employed in your own company
- When you are employed in a company, you are defined as an employee. You can therefore be laid off, and you may be entitled to unemployment benefits. This also applies when you own the company and even if you are the only employee. You are then both the laid-off person seeking unemployment benefit and the employer who will document the situation in the company.
- You must explain to NAV what you as an employer have done to limit the need for layoffs. You must also explain when the situation that led to the need for layoffs arose and what you as an employer did to remedy the situation. You must also explain how you plan to safeguard the company's interests during the layoff period so that the company returns to full operation as quickly as possible.
- If you, as the only employee of your own company, leave yourself with a severance ratio of more than 80 per cent, it can be doubted that the company is doing what can be expected to obtain future work assignments and reduce the need for layoffs. If all activity ceases, the situation may appear as a shutdown of operations more than a temporary shutdown. Every activity you carry out in the company is important, regardless of whether the work is performed in the role of ordinary employee, general manager, working chairman or other.
Read more about proposals for changed rules here.