Sweden currently stands at an impressive 4th position out of 63 economies in the 2022 IMD World Competitiveness Ranking, which makes it an advantageous landscape for businesses. The country’s competitive mixed economy is a desired location for privately owned market-oriented entities owing to the huge highly-skilled talent pool it offers. As your Employer of Record in Sweden, we provide a tailored solution to navigate and thrive in this dynamic and competitive business environment, ensuring a smooth and compliant entry into the Swedish market for your organization.

Firstly, the cost and time taken to set up a business in Sweden can slow your expansion. The Swedish Companies Registration Office (Bolagsverket) charges a fee for registering a new business entity. They also mandate a minimum share capital for establishing a limited liability company (AB), which lies somewhere around 25,000 SEK, while in the USA, the UK or Germany, there is no minimum share capital requirement. With the assistance of an EOR service, employers can simply focus on their hiring and their core business functions while onboarding talent through the EOR’s entity.

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Secondly, Sweden’s labor laws are quite different from their business-friendly counterparts like the USA and Singapore around termination procedures, collective bargaining, parental leave, and minimum share capital. For example, collective bargaining is a common practice, with strong involvement of trade unions in Sweden, while in the USA, this is less common in the private sector. 

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Hiring in compliance with these laws can be difficult for foreign employers. Partner with a Slovenia Employer of Record (EOR) like Gloroots to onboard local talent compliantly in under a day. We make your hiring compliant with local labor laws so that hiring and payrolling become less complex and more streamlined. Our Slovenia EOR will ensure full compliance with local employment obligations, and you can fully focus on core business functions.

Sweden EOR/PEO pricing is contingent upon factors such as the number of employees, service scope, and project complexity. Typically structured as a monthly fee per employee or a percentage of their salary, the pricing model allows flexibility. Additional charges for supplementary services or customization to meet specific business needs may apply. Employers interested in Sweden EOR/PEO services are encouraged to engage with service providers to discuss their requirements and establish a customized cost structure aligned with their business objectives.

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Key Metrics For Foreign Employers 

Sweden ranks 9th in the Insead’s Global Talent Competitiveness Index 2023. It is a high-income country in the European region, making it ideal for business growth and expansion.

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Here are some key indicators of the country's talent competence for employers planning to hire from Sweden.

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Through the Gloroots’ Recrew platform, you can discover amazing talent in Sweden.

In Sweden, misclassifying employees can jeopardize legal protections. Opting for a PEO/EOR mitigates risks by ensuring compliance, accurate classification, and comprehensive benefits, allowing businesses to focus on core operations while experts efficiently handle employment responsibilities.

Sweden's labor laws are primarily governed by the Employment Protection Act (Lagen om anställningsskydd, commonly referred to as LAS). The Employment Protection Act outlines employers' and employees' rights and obligations in the employment relationship. It covers various aspects of employment, including termination procedures, notice periods, and protection against unfair dismissal. 

In addition to the Employment Protection Act, there are other laws and regulations that contribute to the overall framework of labor laws in Sweden. Some of these include: Working Hours Act (Arbetstidslagen), Annual Leave Act (Semesterlagen), Discrimination Act (Diskrimineringslagen), and Collective Agreements.

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Employment contract

An employment contract, a formal agreement between an employee and employer under the official Employment Act, outlines their respective rights and responsibilities. While written contracts are not obligatory in Sweden, employers commonly provide written agreements detailing work responsibilities, salary, and employment regulations. Although there's no specific format requirement, Swedish law mandates employers to inform employees about key terms within a month of employment commencement. Contracts should be in English; if initially in another language, translation to English is necessary for consistency. Key information required by Swedish employment law encompasses:

• Company details: Name, registered office address, registration number, etc.
• Employee details: Date of birth, current address, nationality, job designation, etc.
• Start date of employment
• Nature of the employment
• Employee duties
• Duration of employment for determinate contracts
• Payroll cycle and monthly salary disbursement date
• Compensation structures
• Length of the probationary period, if applicable
• Leave details
• Notice period
• Applicable collective bargaining agreements

Working time

The regular workweek comprises 40 hours spread across five days, and after working five consecutive hours, an employee must be granted a break.

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Overtime

Overtime in Sweden is compensated for the hours worked beyond the standard 40 per week, as per employment contracts or collective agreements. Overtime limitations restrict the hours to 48 hours weekly, an average of 50 hours monthly, or 200 hours annually. Compensation rates are stipulated in the contract, with weekday overtime before 8:00 pm calculated at monthly salary divided by 94, and after 8:00 pm or on weekends at monthly salary divided by 72. Managers or those with flexible schedules aren't eligible for overtime pay however, for non-managerial roles, there is an option to include overtime in the gross salary.

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Public Holidays

The country observes 13  public holidays employees can take as paid days off.

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Minimum Wage

In Sweden, there is no officially set national minimum wage. Instead, minimum wage standards are established through collective bargaining agreements negotiated by trade unions representing employees.

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Annual Leave

Employees receive 25 days of paid vacation annually after completing one year with the company, accruing at a rate of 2.08 days per month. It's customary to provide 30 days per year, and any unused days beyond 20 can be carried over to the next year. Accumulated vacation days can be retained for up to five years. Vacation pay amounts to 12% of an employee's gross annual salary.

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Paid Sick Leaves

In Sweden, employers compensate employees for paid sick leave from the 2nd to the 14th day, while social security covers benefits for sickness beyond 14 days. The initial day of sickness is unpaid. Typically, sick leave is remunerated at a rate of 75.00% to 80.00% of the employee's regular pay, with the specific percentage contingent on the duration of the illness.

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Maternity leaves

Maternity leave in Sweden spans 14 weeks, with mothers encouraged to take seven weeks before and seven weeks after childbirth.

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Paternity leaves

In Sweden, fathers have the right to take 10 days of paid paternity leave.

Tax and Social Security contribution:

Employer

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Employee

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Employee Income tax

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State income tax is not levied on individuals below 65 with an annual income up to 540,700 SEK. For individuals aged 65 and above, the tax applies to incomes exceeding 540,700 SEK.

For more information, please refer to   A-tax certificate and tax tables | Tax (skatteverket.se)

The procedure for termination depends on the terms of the employment and collective agreements, contract type, and the grounds for termination. However, termination for economic reasons or long-term disability requires approval from the Employee Insurance Agency (UWV). Employers must inform the Employment Service about an employee's termination, and if the company has over five employees, negotiations with trade unions may be necessary. After any negotiations, the employer must furnish a written and in-person termination notice to the employee. If a direct meeting is not feasible, a registered letter must be sent to the employee's home address.

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Severance Pay

Severance pay is not obligatory in Sweden, but it may be necessary if specified in a collective agreement or employment contract.

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Notice Period

The notice periods in Sweden are established by the employment contract, collective bargaining agreement, and the Employment Protection Act. Employers with a collective agreement determine notice periods through mutual agreement in the employment contract, typically set at one month. For employees lacking a collective agreement, notice periods are contingent on the employee's tenure:

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In cases of an employer dismissing an employee without notice due to gross misconduct, those with a collective agreement should adhere to the notice period specified in their employment contract (typically one month). Conversely, employees without a collective agreement are subject to a one-month notice period as per the Employment Protection Act.

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Probation period

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In Sweden, the probation period is specified in the employee's employment contract or collective agreement and cannot exceed six months. It may conclude earlier, with the employee transitioning to permanent employment. If the probationary period is not terminated within six months, the employment automatically becomes permanent. The employment contract must explicitly state the probationary period, and the employee must receive notification at least two weeks before its conclusion regarding permanent employment status. Salaries and benefits remain consistent during the probationary period.

When expanding globally, ensuring compliance poses unique challenges. Employers must navigate employment laws, adhere to payroll protocols, uphold DE&I standards, comply with GDPR and data protection regulations, and more. While establishing local entities and commencing hiring can be daunting, staying abreast of a dynamic compliance landscape is even more demanding.

Gloroots streamlines this process, offering a centralized platform to manage these tasks effortlessly. Our in-house experts provide comprehensive protection against cross-border employment and payroll compliance risks. We assist in crafting employment contracts, ensuring timely payments, and delivering compliant benefits, allowing you to concentrate solely on talent screening.

Elevate your team expansion in Sweden through strategic hiring that aligns with your business goals. Streamline the complexities of local employment with Gloroots's global Employer of Record (EoR) service. Rely on our experts to handle compliance, payroll, tax, and benefits, allowing you to focus on fostering your team and propelling company growth in the dynamic Swedish market.