Lønsystem

Lønsystem is the framework a company uses to determine and administer employee compensation. It defines how wages and salaries are set, how they progress over time, and how they are combined with other compensation such as bonuses, overtime pay, allowances, benefits, and pension contributions. In Norwegian and Danish contexts, lønsystem is often influenced by collective bargaining agreements and sector-wide pay scales, but it can also be established at the level of the individual employer.

Core elements include: base pay (salary or hourly wage); a job‑evaluation-based pay structure with pay grades or steps; progression rules tied to tenure, skills, or performance; overtime and premium rates; performance-based bonuses or merit pay; allowances (e.g., for shift work, travel, or competence); benefits such as pension contributions and insurance; and deductions for taxes and social security. The system should align with external market levels and internal equity, and it should comply with relevant laws and contracts.

Wage formation methods vary: some sectors use centralized bargaining with sectoral scales; others rely on company-level agreements or individual agreements. Job evaluation and market data are used to place roles within pay grades. Transparency and governance mechanisms, such as annual pay reviews or collective negotiations, affect how and why changes are made. Lønsystem is often integrated with payroll and HR information systems to ensure accurate calculation and reporting.

Impact and considerations: a well-designed lønsystem supports fairness and motivation, helps attract and retain talent, and provides budget predictability. It must adapt to inflation, skills development, and changes in law or collective agreements, while avoiding disparities and compliance risks.

See also: payroll system, collective bargaining agreement, job evaluation, pay scale, merit pay, pay equity.