Establishing a local office or a new department in a foreign market can be a challenging exercise, crossing the hurdles of local regulations and legislations, at the same time as learning about the local customs and practices. Especially, when employing local staff! We have spoken to Rickard Öberg at Athene Group, who specializes in helping you set up and manage your business in Sweden. His article gives a short presentation on the legal environment with regard to employment and gives a short guide on what you need to consider when employing staff, explaining the "Swedish Model" and the typical pitfalls of establishing a business in Sweden.
The “Swedish Model” is a phrase often used in different contexts to describe what is typically Swedish in different systems and functions. In the area of labour law, it is a system where the legislator has stepped aside to benefit agreements between different trade organizations and unions. This results in a flexible labour market where it is also relatively straightforward to hire staff in Sweden. At the same time, Sweden has very strong legislation, protecting employees from illegal termination and discrimination and it also offers very generous terms for work leave.
Collective bargaining agreements are the foundation of national employment law
In relation to other jurisdictions, Sweden has few legislative acts in the area of employment and for instance, there is no statutory minimum pay in Sweden. The most important legislation in the area of employment can be found in the Employee Protection Act (1982:80), the Codetermination Act (1976:580), the Discrimination Act (2008:567) and the Working Hours Act (1982:673). Together they provide a strong framework for protecting employees against unlawful termination and discrimination.
The main source of national employment law can be found in collective bargaining agreements, which fill in the framework of the legislative acts. The terms and conditions of these agreements are determined by trade unions and employer organizations in each particular business sector. The government does not interfere with these, though it may set the boundaries through labour laws, as the trade union and employer organizations are responsible for these agreements. The model combines flexibility for companies with security and influence for employees. The agreements regulate such matters as terms and termination of employment agreements, working time, minimum wages, vacation compensation and sickness compensation etc.
Employment is indefinite, if not otherwise agreed
There are two forms of employment – indefinite employment and temporary employment. Indefinite employment is the same as permanent employment. The main principle is that an employment contract is in effect until further notice. In practice, this means that employment is always indefinite unless otherwise agreed. The agreement will need to be provided within a month of the start of the employment and need to contain the following information:
- personal data, the workplace and the commencement date of the employment;
- description of the employee's duties, occupational designation or title;
- a form of employment and period of notice;
- pay, employee benefits and the intervals at which the payment will be paid;
- length of the paid annual leave and length of the normal working day or week;
- applicable collective bargaining agreement, where relevant.
- For indefinite employment agreements, a probation period can be included in the contract. This period can be up to six months maximum but can be shorter if agreed upon. During the probation period, the agreement can be terminated without giving any particular reasons for the termination (see more under "Terminating an Employment").
The employer needs to give notice to the employee at least two weeks before the probation period ends unless he wishes the probationary employment to transform into permanent employment. If none of the parties has given such notice by the end of the probation period, the employment is automatically transformed into permanent employment.
Employers have to register with and report to the Swedish Tax Agency
A Swedish employer, or a foreign employer with a permanent establishment in Sweden, is required to register with the Swedish Tax Agency in order to fulfill the employer reporting obligations, such as preliminary tax deductions and the payment of social security contributions. Also, foreign employers without a permanent establishment have to register for social security contributions if they have employees who belong to the Swedish social security system.
Once registered employers are obliged to file monthly so-called PAYE returns where employer contributions and employees' tax deductions must be paid/reported to the Swedish Tax Agency by the 12th of each month. The employer contribution is in reality composed of several different fees which provide basic social security coverage. The employer contribution is 31.42 % of the gross salary and benefits.
Sweden has one of world's the most generous parental leaves
Swedish employees are covered by the Swedish Annual Leave Act which gives them the right to a minimum of 25 days of paid vacation and 4 consecutive weeks of vacation during the period of June, July and August. Employees also have the right to save a number of vacation days each year, which makes it possible for employees to take out more vacation days if they have saved from previous years. The employer has an obligation to organize the work so that the employees can take a vacation in accordance with the Swedish Annual Leave Act.
Swedish employees enjoy one of the most generous parental leaves in the world. Parents are entitled to a total of 480 days paid leave per child, with both mothers and fathers entitled and encouraged to share the leave. The leave can be taken at any time until the child reaches the age of seven. In addition, parents receive benefits for staying home to care for a sick child (commonly known as VAB). This compensation can be received from the date the child is 8 months old until the child turns 12.
If the employee falls ill, employers are obliged to compensate the employee (so-called sick pay) from day 2 and up to day 14 of illness. The first day of illness is a qualifying period for which the employee does not receive any compensation. Employees that are sick for more than 14 days can instead receive compensation from the Swedish Social Insurance Agency/ Försäkringskassan.
Other, relevant information for you, when entering the Swedish market would be reading about the Swedish Business Culture.
Also, as of the 1st of October 2022, there are New Rules for Employment Protection Act.
Do you wish to know more about what Beyondo can do for you for your recruitment needs in Sweden and beyond? Do not hesitate to reach out! contact@beyondo.se
