Incentive Schemes in Norway | Employee Bonus & Share Plans

Incentive schemes for employees in Norway

Incentive schemes in Norway are commonly used to motivate employees, retain key personnel and align employee performance with company growth. Typical employee incentive schemes in Norway include cash bonuses, share-based incentives such as stock options and share purchases, as well as certain tax-free benefits and discounts.

The tax treatment of incentive schemes depends on the structure of the arrangement. While cash bonuses are generally taxed as ordinary salary, gains from shares and options may, under certain conditions, be taxed as capital income at a lower rate.

Common employee incentive schemes in Norway

Cash bonus schemes

Cash bonuses are paid as additional salary based on individual, team or company performance.

• Taxed as ordinary salary
• Subject to employer social security contributions
• Simple to administer but impacts company liquidity

Stock options in Norway

Stock options give employees the right to buy shares at a predetermined price at a later date.

• Taxation is typically deferred until the option is exercised or sold
• Gains may be taxed as capital income if qualifying conditions are met
• Often used by growth companies and startups

Employee share purchase schemes

Employees purchase shares either:

• at market value, or
• at a discounted price (the discount is taxed as salary)

These schemes usually require employees to invest their own funds and therefore involve financial risk.

Synthetic shares and options

Synthetic schemes provide a financial return linked to the company’s share value without transferring actual ownership.

• No shareholder rights
• Tax treatment must be assessed on a case-by-case basis
• Often used when actual share transfers are impractical

Gifts and employee discounts

Certain gifts and discounts may be tax-free in Norway within annual limits.

• Applies to non-cash benefits
• Strict valuation and reporting requirements apply
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Advantages of incentive schemes in Norway

Liquidity and cost control

Share-based incentive schemes generally have less impact on company cash flow compared to cash bonuses.

Employee loyalty and retention

Ownership-related incentives strengthen commitment and are often crucial when attracting and retaining key employees.

Potential tax benefits

When structured correctly, incentive schemes may offer tax advantages for both employer and employee under Norwegian tax rules.

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Important considerations before implementing incentive schemes

Legal and regulatory requirements

Incentive schemes must be clearly documented. Share-based schemes often require shareholder agreements regulating matters such as:

• transfer restrictions
• good leaver / bad leaver provisions
• exit events

Administrative complexity

Share-based incentive schemes require ongoing administration, reporting and legal oversight to avoid compliance issues.

Financial risk for employees

Employees investing in shares take on financial risk, which should be clearly communicated and understood.

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Need advice on incentive schemes in Norway?

Choosing the right employee incentive scheme in Norway requires careful assessment of tax, legal and commercial implications. Poorly structured schemes may lead to unexpected tax exposure or disputes.

ECOVIS advises Norwegian and international companies on designing and implementing compliant and tax-efficient incentive schemes for employees.

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