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Workplace Pension in Sweden:  A Guide for International Companies

Hiring employees abroad has many advantages, and can expand your access to global talent in specialized roles.  But when you hire a remote employee in their own country they will expect to have the same entitlements and benefits as other residents.

Pensions are an essential benefit for most employees, as a pension will offer security in retirement in addition to other personal savings.  If you are hiring employees in Sweden you will find a range of pension programs and benefits, some of which are mandatory while others are optional.

What are the different types of pensions in Sweden?

Public Pension

Every worker in Sweden will have a public pension, which will be calculated based on taxable income, and contributed through payroll. 

  • Income contribution: 16% of pensionable income and taxable benefits
  • Premium contribution: 2.5% of pensionable income and benefits

The employee can choose the type of fund the pension is placed in for the premium portion, otherwise, the fund will be selected for them.  Contributions are subject to an average income maximum which changes each year, based on 7.5 times the income base amount.

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Occupational Pension

As an employer, the other type of pension to be aware of is the occupational pension.  The employer will make contributions based on the public pension maximum benefit.  It is a defined benefit, guaranteeing a percentage of employee salary upon retirement, depending on the type of funds chosen.

It can be paid to start at age 62, or at a later date of the employee’s choosing.  Self-employed don’t make contributions and are not entitled to an occupational pension.

Private Pension

Private pensions are those that are self-directed and managed by the employee.  It is voluntary and employers are not involved in pension administration, so it will be managed through a bank or insurance company.

What are the contribution rates for pensions in Sweden?

Public Pension: Employee: 18.5%

Occupational Pension: Employer contribution: 4.5% up to maximum public pension limit and 30% after employee limit is reached.

Private Pension: Employee: optional

Who is entitled to a pension in Sweden?

Anyone who has worked and lived in Sweden is entitled to receive a public pension.  There is also a ‘survivors’ pension, that will cover an individual when a loved one dies who was providing support.  Those with low or no income will also receive a ‘guarantee pension’, depending on marital status and length of residency in Sweden.

If an employee moves out of Sweden they will still keep their public pension (income and premium), no matter what country they move to.  The guarantee pension will be kept if the move is within the EU, and the individual lived in Sweden at least three years before age 65.

Client Case: Can an employee contribute to a private pension?

Context:

One of our clients with an employee in Sweden asked us whether their employee could contribute to a private pension in addition to their public pension.  The employee wanted to contribute 35% and needed to know how we would handle that in payroll with our local partner.

Solution:

We explained it was permitted and that the contribution would be included in payroll for tax calculation and reporting.

Do you need more information about Sweden?

Companies that are new to hiring in Sweden may have other questions such as:

Is the occupational pension managed by the employer or a third party? 

How is the maximum contribution cap on public pension calculated each year? 

Are all pension contributions taxable?

These are the kind of issues that our clients bring us frequently so that they know how to stay in compliance with foreign labor, payroll, and tax laws.  We make international employment simple.

 Need more information about employing in a new country? Learn more about:

 

 

Looking to hire an employee in Sweden? Get in touch.

 

The information in this article is subject to changes in local legislation.

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