Swedish employment law appears complex and confusing when looking from outside view although in some ways there are many similarities to other countries. Other factors that complicate matters include the differences between regions and an inconsistent approach to adherence to laws in different cities. For example, there are differences between minimum wages and welfare contribution amounts in different cities. For these and many other reasons the following are only guidelines in the broadest sense, and professional legal services are recommended when employing in Sweden.
Swedish employment law is highly regulated, particularly with regards to termination. The majority of Swedish workplaces have collective agreements in place between employers and unions to cover the regulation of wages, working conditions and insurance. Employers are free to offer better conditions than those stipulated by collective agreements. Personal agreements which create working conditions below those set out in the relevant collective agreement are illegal.
There are several key areas to be aware of within Sweden’s employment regulatory framework, especially for companies that plan to initiate a full local office and human resources department. These challenges can be mitigated by use of a locally sourced payroll provider who is familiar with all of the local laws and rules for both local employees as well as foreign nationals.
An employer may set up a probationary period of up to six months, whereby either party may terminate the employment during the period or at its conclusion. If the employer chooses to terminate the employment, two weeks’ notice is required. If the employee in question is a member of a trade union, the union must also be notified of the termination, with the employer liable for damages if these guidelines are not adhered to. If the employee continues to work after the trial period, the employment contract is automatically assumed to convert into an indefinite-term contract.
The minimum period of notice for termination is 1 month, although this varies according to the length of employment. Summary dismissal – applicable where an employee has grossly neglected their obligations to the employer – allows for immediate effective termination of the employment, with one weeks’ notice necessary. Notice must be given to the relevant union if the employee is a member.
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Notice of termination must be given in writing and include information such as the existence of priority to re-employment and how the employee should proceed if they wish to challenge the termination. Notice must be given personally to the employee, within the appropriate time frame as outlined above. If employees are on parental leave, the notice period begins from the date from which the employee is due to resume work. During the notice period, the employee is obliged to continue working and receive salary and all other employment benefits.
Employees are entitled to terminate the employment without giving reason so long as the notice period is adhered to.
Under the Swedish Employment Protection Act, employment contracts may only be terminated if objective grounds are at hand, such as shortage of work or personal reasons like serious misconduct or disloyalty. Employers are able to enter into a settlement with an employee, which sees the employee financially compensated and the employment is terminated if the rules are disregarded.
Under Swedish law, there is no mandatory severance payment – this would be set out in the employment contract if applicable.
As set forth in the Swedish Annual Leave Act, employees are entitled to annual leave benefits like vacation leave and pay, and compensation in lieu of annual leave. Usually, a minimum 25 vacation days is available to employees, within the qualifying year of April 1st to March 31st. During a vacation period, employees are entitled to vacation pay as qualified; thus, the vacation period may include both paid and unpaid vacation days. Saved paid vacation days must usually be used within a five-year period. Collective bargaining agreements tend to lack uniformity in this area, with differences from the Act not uncommon, particularly with regards to the determination of vacation pay
Parental leave applies until the child reaches 18 months of age. The child’s mother may be on maternity leave both 7 weeks before and 7 weeks after the estimated birth, for a total of 14 weeks. The child’s father is entitled to be on paternity leave for a total of 10 days either before or after the birth. The state sets aside a maximum 480 days of paid parental leave, of which only 420 days can be used by one parent. This state compensation generally amounts to around 80% of an individual’s salary. If a collective bargaining agreement is applicable, employees may be eligible to receive some compensation from their employer, in addition to the state compensation.
3. Sick/special leave
Employees are entitled to compulsory sick leave from their employer, provided that the employment is expected to exceed a one-month period or the employee has been working for more than 14 consecutive days. There is no compensation for the first day of illness. Sick leave compensation amounts to 80% of salary and benefits during days 2-14. From day 15, the employee may be eligible to compensation from the state, determined by the Swedish Social Security Agency. Employers are not obliged to provide any supplementary sick pay, unless otherwise stipulated by a collective bargaining agreement.
In addition to state pension, employees are frequently also entitled to supplementary pension from their employer. These are awarded discretionarily for employers not bound by collective bargaining agreements. For employers bound, the ITP pension plan is the predominant pension plan for white-collar workers, covering old-age pension, disability pension, and family pension. Dependent on age, employees belong to either ITP-1 (defined contribution plan) or ITP-2 (defined benefit plan). A defined contribution plan called SAF-LO exists for blue-collar employees.
In Sweden, the pension system is based on an income-related pension, premium pension and guarantee pension, administered by the state and financed by employers and employees together. Employer contributions are made through social security contributions, amounting to 31.42% of the employee’s gross salary and paid in addition to this salary. It is mandatory for employers to make these contributions, which cover charges such as the old-age pension, survivor’s pension, fees for work injuries and health insurance. Employees must make a 7% contribution towards the public system. Anyone residing in Sweden is covered under this scheme.
Salaried individuals, contracts, or self-employed individuals may alternatively be covered by the work-based scheme, which is essentially very similar to the residence-based scheme.
Compliance with local employment requirements is just one of the issues foreign companies face when employing staff in Sweden. For companies which intend to employ their staff directly through their incorporated Swedish entity, professional legal advice is recommended. Shield GEO provides an alternative path for companies to outsource the employment of their staff in Sweden.
As a Global Employer Organization (GEO), Shield GEO acts as the Employer of Record and ensures the employment is compliant with host country regulations regarding employment. In addition Shield GEO will handle payroll processing, tax and immigration. Using Shield GEO is the fastest and most cost effective way to deploy local and foreign workers into Sweden.
The Shield GEO solution is an attractive alternative where
– the company is looking to employ staff quickly
– the company doesn’t have an appropriately incorporated entity in Sweden
– the company wants to work within a defined budget
– the company wants to limit its initial commitment in Sweden
– the company needs help with tax, employment, immigration and payroll compliance in Sweden
Shield GEO can contract directly with the company to employ and payroll their staff in Sweden. Shield GEO supplies local employment contracts for the staff which ensure that local statutory requirements are met covering issues such as termination, probation periods, leave entitlements and statutory benefits. Shield GEO is able to advise companies how to cover local employment regulations whilst still providing consistent global employment policies. Understand more about outsourced employment through Shield GEO.