More than 100,000 people have been temporarily laid off in Norway because of the coronavirus crisis. Many more will likely follow. Here's what “permittering” means during these highly unusual times.
At the time of writing, an unprecedented number of people have been temporarily laid off in Norway because of the coronavirus crisis. Emergency legislation has allowed businesses to dismiss their staff with just two days’ notice. As the krone plummets to a record low, we ask what will be the long-term repercussions for economy?
What is “permittering”?
In Norway, employees can be ‘permittert’ from their job, meaning they are ‘temporarily laid off’. The employer is then temporarily exempt from pay obligations. However, the employment relationship remains, and it is assumed that the work stoppage is only temporary.
Read more: Coronavirus in Norway: The Latest News
Generally, ‘permittering’ is used when companies are going through financial difficulties. If it is likely the layoff will be permanent, the company is obliged to terminate the contract. Workers’ rights are passionately protected in Norway and the burden for proving the necessity of any dismissal has always laid firmly at the employer’s door.
Over the past few decades, Norwegian employees have had excellent job security and enjoyed some of the best social benefits in Europe. Usually the rules are that when a company has to temporarily lay off staff, it must give the employee a minimum of two weeks’ notice and provide detailed rationale for Welfare and Labour Administration (NAV). The company is then obliged to pay full salary for the first 15 days after the employee has stopped work.
After this, the state takes over. From this point, the individual will receive 62.4% of their regular salary directly from the government (up to a salary cap of NOK 600,000) for a maximum of 26 weeks. There are of course many details and exceptions, which are covered in detail (in Norwegian) here.
But the coronavirus is unprecedented – what was defined as ‘likely’ or ‘necessary’ in yesterday’s world, is less clear in today’s fluid times.
Layoffs during the coronavirus crisis
The big news here is that the Norwegian government rushed through emergency legislation in order to allow companies to only offer two days’ notice before their period of ‘permittering’ begins, and two days' payment.
Many workers in the travel and hospitality industries, which have been particularly hard hit by the Norwegian regulations on social distancing, have effectively lost their jobs overnight. At the time of writing the number of those temporarily laid off because of the coronavirus was well over 100,000.
In the last week 185,000 people have applied for financial support from NAV, including approximately 90% of SAS and Norwegian Airlines staff. It is the highest level of unemployment since the Great Depression. Leading financial newspaper Dagens Næringliv has billed it “just the beginning”.
One positive is that the hospitality industry has led the successful petition for laid off employees to get 100% of their salary for the first 20 working days in the wake of the crisis, instead of the standard 62.4%. This applies to all sectors, not just hospitality.
All things considered, it is a very accommodating parachute payment, which has been cobbled together to make the process easier for the hotels, restaurants, clubs, bars theatres etc. who have had to suddenly close their operations and are at particular risk from the ongoing crisis.
Having the status of unemployed also brings other social benefits to provide some welcome relief. For example, child benefit increases from the moment of registration. This demonstrates that some of the “safety net” social measures put in place over the years are effective when they are needed most.
It’s impossible to cover everything here as the rules are so complex, but you can get a good overview of the other benefits at NAV. Just bear in mind that right now they are busier than ever before, so it may take some time to get queries answered.
The pros and cons of the emergency measures
The coronavirus is a worldwide crisis and the best way to deal with the economic fallout is, at this stage, a hypothesis at best. Countries are having to create emergency legislation, building upon the realities of their political systems. Norway is taking advantage of 10 trillion kroner emergency fund which the state has ferreted away for a rainy day. The latest figures from Finance Minister Jan Tore Sanner suggest that crisis management has cost the government NOK 280 billion so far.
It is a favourable start-point, but 1.5 million jobs already said to be “affected” by the crisis (equalling ¾ of the private sector workforce). The support is functioning and morale is high, the concern is that if the situation lingers the rising debt will cause businesses to close, and thus the temporary lay-offs will become permanent.
In the short-term, small business owners have been given a more flexible approach to managing workers’ rights, which gives them a lifeline to survive. Several restaurant owners in Trondheim have expressed their gratitude at this legislation, claiming they would have been bankrupt before the end of the crisis otherwise. The changes to the law allow them to tighten their belts, go into hibernation mode and rest assured that everyone in their industry is “in it together”.
The state has stepped up and put its hands in to its, admittedly deep, pockets. Laid-off employees are reimbursed more than usual (and that's from a starting point way above most European countries) which has generated public support for the policies.
Norwegians’ relationships with the state
The cultural togetherness of Norway has parallels with China’s authoritarian regime, in that the homogeneity allows the state to pass draconian measures which would not be so readily accepted by most European neighbours. Norwegians have, by and large, accepted these measures with a smile, confident in their government’s ability to steer them through these waters and get them back to work.
However, Norwegian workers are ceding a lot of authority to the state. Large companies are suddenly able to fire their staff without notice or the obligation to pay for the severance. There has been a snowball effect with a wide-range of industries jumping on the bandwagon, cancelling events, reducing services and changing plans for months in advance, causing major repercussions.
An economic crisis
The result is ghastly. What started as measures to contain a health emergency are now tools being utilized to mitigate an economic disaster. Norway is generally a conformist country and as such people have by-and-large toed the party line.
They have answered the call for social distancing. The streets are empty, all events are cancelled, parents are home-schooling their kids, people have stopped touching each other or socializing, Facebook filters urge people to #staythefuckathome, businesses have embraced home offices and everyone’s screen-time is up.
Read more: Quarantined King of Norway Addresses Nation
The running joke is that Norwegians, who are typically reserved and value their personal space, have been preparing themselves for such a crisis all their lives! However, I am noticing more demurring voices as reality starts to bite. The longer this crisis goes on, the louder those they are likely to be.
The latest news is of the rapid weakening of the Norwegian krone. While this is good for businesses that export, it means prices for everyday goods are likely to soar in a country that imports much of its food. Another positive of a weakening currency—that the country is cheaper for tourists for visit—is not applicable right now.
The bottom line
The Norwegian policy seems generous but is it unwittingly bottoming out the market? Employers have received a get-out-of-jail-free card and most have cashed it in. This, in conjunction with strict instructions for people to stay at home, means the economy has come to a shuddering halt. The fallout could see generational shift in the way we travel and shop. This may come to haunt the travel and hospitality industries for years to come.
What will happen to those who have been temporarily laid off? In order to access the generous 100% job seeker’s money, they have had to sign on as unemployed. This means accepting all the standard criteria of a job-seeker, which of course NAV have not had time to change.
Such is the scale of the crisis, it is unlikely NAV will hold jobseekers to these criteria, but they have to declare they are willing to, for example; a) take a job (including part time) in a different area of the country; b) in a different industry and c) at a lower pay, or risk losing my benefits.
In theory, if job-seekers disagree with these criteria, they would have to provide lengthy explanations why not, and would probably see a delay in receiving the money. It kind of makes a mockery of the idea of the ‘permittering’ being temporary.
These might be seen as ‘luxury problems’, in the context of what is happening elsewhere in the world. One thing is for sure; the social democracy model is going to be put to the test in the coming months, and the legacy of Norway’s actions will be the subject matter of many a future history class.