Many entrepreneurs find that the real change in the accounting routines takes place when an employee enters the scene. At that time many will choose to hire external expertise, or they engage an accounting agency.
If you decide to handle payment of wages yourself, you have to follow a rigid and fairly complex set of rules.
If the employees only receive wages and the tax deductions are standard, you may design a spreadsheet based system to keep track.
As an employer you have the duty to deduct tax from the wages and other types of compensation paid to your employees. The tax rate is listed in the employee's tax card. If you are employed by your own limited liability company, you must also deduct tax from your own salary.
Deduct tax from compensation such as free subsistence (accommodation and meals), use of company car and possible advantage from lower interest rate on loans from the employer.
The employee must present a tax card indicating the correct tax deduction rate. If the employer does not receive a tax card, he must deduct 50%.
The amount deducted must be deposited in a tax deductions bank account. The money stays in that account until paid to the local tax collector's office. Alternatively, the employer may secure the tax deductions by a bank guarantee. The periodic record sheet showing the deductions the former two months must be sent to the local tax collector's office. The record sheet (form) is issued by the tax collector's office.
If you have employees, you must pay payroll tax calculated from the wages and additional compensations/allowances. If you are employed by your own limited liability company, you also have to calculate payroll tax on personal withdrawals (salary).
Calculation of the payroll tax is your responsibility and you must pay the amount to the tax collector's office every second month. Use the standard form when the tax is paid. Payroll tax is paid from the ordinary operating bank account.
By the end of the year, the Certificate of pay and tax deducted is produced, one for each employee. These returns are sent to the local tax collection office and to the employees not later than 20 January the year following the income year.
Spouse and children
When both spouses are working in a sole proprietorship, the net profit from the business may be divided and taxed according to each spouse's contribution in the form of workload. Such income is not reported in the form of the standard wage and tax deductions return.
Wages and other compensation to children or adolescents working in their parents' business must be reported. In addition to the standard wage and tax deduction return, the owner must fill in a form giving additional information on the type of work carried out. The form is available from the local tax assessment office. The same form is used both for sole proprietorships and limited liability companies.
Using an accounting agency for wage procedures
If you have many employees, travel expense sheets, insurance schemes, free company cars, free telephones, you may find it worth while to buy such services from an agency. Then you also have a partner to whom you may turn when other questions touching employer/employee relations arise. Common questions are for instance holiday pay, leave of absence, temporary lay-offs and dismissals.
The accounting agency must, by the date agreed upon, receive a certified statement indicating the basis for the payment of the wages.
A sample statement:
|02 Nilsen||Regular||Bonus 5000||5000||.|
|03 Pettersen||20h x 150||.||.||.|
Certified travel expense sheets are attached to the statement.
Other expenses such as personal phone expenses that are compensated must be certified by the original bill or receipt, e.g. the telephone bill.
Payment of wages
Owners of small businesses often choose to handle payment of wages themselves. Each period you fill in a simple form, one for each employee. You may use a spreadsheet template.
|Name of employee:|
|Payment for the period: ................... to ....................|
|- Tax deduction:|
|= Net wage:|
|Wage transferred to bank account no: 1234.56.7890|
|Tax deduction transferred to bank account no: xxxx|
The employee and the accounting agency must receive copies of the wage payment forms. Then you must send the transfer orders to the bank.
The accounting agency may handle all aspect of the wage procedures, e.g. register and update the accounts, produce and submit the periodic record sheets, fill in and submit the tax deductions and payroll tax giros and of course produce the Certificate of pay and tax deducted.
Likewise, the business may carry out some of the tasks and the agency others; it just depends on the arrangements between the business and the accounting agency.
When you prepare wage payments yourself, but engage the accounting agency to handle all reporting and dealings with the authorities, you have in effect outsourced so much you might just as well let the agency do it all.
Travel and subsistence claims
The employees do not automatically have the right to be compensated for travel expenses according to the standard used by the authorities (state regulative or in Norwegian: Statens regulativ). The rate of compensation is either determined by the employer or regulated in an agreement between the employer and employee, alternatively between the employers' association and the trade union. However, the state regulative determines what and how much of the expenses that are exempted from taxation.
Even if you compensate according to the state regulative, the compensation must be included in the Certificate of pay and tax deducted.
If the travel subsistence claims form does not give necessary information, the recipient (employee) risks having to pay tax for all expenses.
The travel subsistence claims form should include the following:
- The name of the employer.
- The name, address, personal identity number and municipality to which taxes are paid.
- Date and time for departure and return arrival.
- The purpose of the travel.
- The name and address of the accommodation (hotel). Also add dates if several hotels.
- Type of accommodation, e.g. hotel, pension or private lodgings.
- Travel route.
- Total distance by (own) car.
- All costs (e.g. airplane fares, taxis, accommodation, meals, etc.)
- The signature of the employer and the employee.
The Ministry of Government Administration and Reform supplies current rates and even a program for producing the travel subsistence claims form. However, both the program and corresponding form are in Norwegian only.
Be precise with respect to information on accommodation. If you spend the night in private lodgings you have to use the meals rate for such accommodation, but you can claim the overnight stay compensation. A day is defined as the time of departure plus 24 hours. Note that you can claim subsistence for two days if the travel extends 6 hours into the second day.
The owner of a sole proprietorship cannot claim travel subsistence compensation the same way employees can. He/she must certify all expenses by receipts. However, the proprietor receives tax relief for the company's use of his/her private car.
- Employers have to report pay and tax information regarding the employees to the authorities
- Strict rules apply for travel and subsistence claims
- Owner of a sole-proprietorship needs to certify all expenses by receipts