Complete Guide to Hiring Employees in Sweden: Legal Steps and Best Practices

Sweden is one of the most appealing destinations to start a business. It invites global employers to benefit from its open trade policies. Due to this, the employment rate in the country has seen considerable growth over the last few months. The employment rate in Sweden has increased to 68.5% from 67.7% in March 2022. 

The Scandinavian country is home to some of the fastest-growing industries across ICT, Automation, Motor Vehicles, Telecommunications, and Fintech. The nation has robust healthcare and social services and provides stable business services and trade. As per the Ministry of Finance, the Swedish economy is expected to increase by 3.1% this year. 

With the availability of a skilled workforce and robust economy, Sweden has become a hotspot for businesses to set up a company in the country. However, there are certain difficulties when going through the recruitment and selection process in Sweden. 

Before hiring employees in Sweden, employers need to register with the Swedish Tax Agency (otherwise called Skatteverket in Swedish). Further, an employer must report, deduct income tax for your employees, and pay employer contributions.

This guide emphasizes the most frequently sought-after answer on how to hire employees in Sweden. Employers with a vision of capturing global economic opportunities will benefit greatly. Global employers planning to hire Swedish workers can navigate the guide to better understand the recruitment process in Sweden.

Things to Know Before Hiring in Sweden

Establishing a business and hiring a skilled workforce in a foreign country can be challenging. The following factors provide a holistic perspective on what kind of advantage recruitment and selection in Sweden bring to any business. 

Free movement of human capital 

• The free movement of human capital across 27 member countries of the European Union without work permits makes hiring in Sweden convenient.
• Most citizens of non-EU countries need a permit to work in Sweden. 
• If you are planning to hire a non-Swedish employee, then you must contact the Swedish Migration Agency (Migrationsverket). 

Swedish labor market

• The workforce in Sweden aged 15-72 comprises around 5,178,369 people and has increased by 135,176 people since a year ago.
• Stockholm county has seen the highest increase than Sweden, having a workforce of 1,259,060 people. 
• Trade unions play an active role in the Swedish economy.
• The employers in Sweden have also formed organizations to protect their interests. As a result, strike levels in Sweden are generally low by international standards.

Language of the workforce in Sweden

• The Swedish workforce is highly educated and multilingual.
• Sweden excels in the EF English Proficiency Index every year, which measures the language proficiency of non-native-speaking countries. In 2021, it ranked 8th worldwide in the report. 

Employment Contract

• Employers hiring in Sweden need to take care of the labor law and work-life balance that country offers. 
• An employment contract can be oral. However, employers prefer written documents that include the nature and terms of employment as per the Swedish Employment Protection Act. 

Quality of life in Swedish society

• Sweden is a family-friendly country. Problems in work-life balance are uncommon in Sweden.
• OECD ranks Sweden top in terms of labor force participation rate.
• Sweden is the first country to replace gender-specific maternity leave with parental leave.

The Cost of Hiring an Employee in Sweden

The average hourly cost of hiring people in Sweden is fairly high. For example, working 35 hours or more, employees in Sweden received the highest hourly wage of nearly 1853 SEK/Hour or 17.96 USD/Hour during April-March 2022. 

With the wage growth of 1.9% during February 2022, employees in the Manufacturing sector earned the highest 1984 SEK/Hour or 19.22 USD/Hour as of April 2022. Sweden also recorded the highest non-wage labor costs at 32.0% of total labor costs. 

Additionally, there are indirect costs involved in hiring an employee in Sweden. Here are the major ones:

Business registration

• All forms of business entities have to register with the Swedish Companies Registration Office (Bolagsverket). 
• Sole proprietorships in Sweden are exempted. 
• There may be varying registration and compliance fees based on different legal structures like a sole proprietorship, a private limited company, a commercial partnership, or an economic association.
• Furthermore, employers must register with the Swedish Tax Authority to start hiring in Sweden. 

Collective and tie-in agreements

• Conditions of salaries and employment are determined by a collective agreement between an employer and an employee’s organization during the recruitment process in Sweden.
• Collective and tie-in agreements are part of the employment contract.
• The provisions under the Swedish Contracts Act can modify unreasonable terms in an employment contract or declare it invalid.

Salary, minimum wage & other allowance costs

• Employers have to bear the cost of salary, social security contribution, and holiday pay. 
• Swedish legislation does not provide for a minimum wage. The wages are benchmarked using average hourly earnings.
• Swedish laws allow twenty-five days of paid annual leave.
• The statutory laws allow both parents to claim 480 days of paid parental leave per child.
• Employers are obliged to grant education leave if the employee desires so after having completed at least six months of continuous employment.
• The same provision applies in case the employee intends to start a business. 
• Employers provide 14 days of sick pay at 80% of the employee’s salary upon presenting a medical certificate.
• Furthermore, employees receive vacation pay equal to 12% of their annual salary.

Payroll tax liability

• Employer contributions and employees’ tax deductions must be paid into the company’s tax account by the 12th of the month. 
• The employer contribution is 31.42% in 2022 and is composed of different fees which provide the basic social security cover.  

PAYE form

• Employers must report salaries, employee benefits, deducted tax, and employer contributions using the Pay-As-You-Earn (PAYE) form.
• The Swedish Tax Agency sends out PAYE forms to registered employers every month.

What Does a Company Need to Hire Employees in Sweden?  

Employers in Sweden employ both permanent and temporary staff. 

To hire new employees in Sweden, global employers must establish their company presence and meet taxation & other legal obligations as Swedish employers. Employers must obtain required licenses and permits from the concerned Swedish government. 

Further, the newly formed Swedish subsidiary can start advertising for job positions in the local labor market. Alternatively, a Swedish subsidiary can hire temporary staff through an agency or secondment supplier. 

Various Options for Hiring Employees in Sweden  

Employers usually invest and expand their HR team to hire suitable employees. HR teams are free to advertise and recruit talented and skilled employees in Sweden depending on the market and industry. The entire process requires time and can be expensive.  

Global employers can also employ without establishing an entity in Sweden. Various innovative solutions like an Employer of Record (EOR) act as a primary employer on paper. This eliminates the need to establish a separate subsidiary or open a branch for recruitment and selection in Sweden. 

Typically, an EOR is otherwise an official employer in Sweden on your company’s behalf. It enables all legal compliance like the employment relationship, managing HR tasks like onboarding, payroll, or even termination to be transferred to the contracted EOR solutions provider. 

The Steps to Hiring in Sweden

The hiring process in Sweden is standard. Global employers must only adhere to the Swedish employment law and labor act while hiring employees. Follow these steps to recruit employees in Sweden:

Register as an employer

• Employers must choose & register the required business structure with the Swedish Companies Registration Office and the Sweden Tax Authority. 
• Employers also fulfill all necessary requirements to meet payroll tax obligations.
• However, there are exceptions for posted staff in Sweden.  

Scout for talent

• Even a sole proprietor or single-person business can hire employees in Sweden. 
• Employers may contact the Swedish Public Employment Service, otherwise Arbetsförmedlingen, for hiring employees in Sweden. 
• They may use the EURES portal, a collection of public and private job listings from EU/EEA countries and Switzerland. 
• Among other hiring processes in Sweden, online advertising is the most commonly used strategy to attract remote employees.
• Employers can directly post relevant job posts on top job search sites like Linkedin, Indeed, CareerBuilder, Blocket, Jobbland, Nyteknik, or Netjobs for hiring employees in Sweden. 
• Employers may also engage services from a staffing agency or recruitment companies. 

Conduct interviews and hire employees

• Assess and evaluate the shortlisted candidates and organize interviews for them.
• Candidates who clear interview rounds and fulfill the job requirements are eligible to hire. 

Conduct background screening of prospective candidates

• Most employers conduct background checks when hiring staff in Sweden, including interim personnel, self-employed professionals, temporary staff, interns, and volunteers.
• Employers must oblige to the EU General Data Protection Regulations (GDPR) while conducting a reference check.  

Enter into a contract of employment

• The Swedish Employment Protection Act mandates employers to provide a written contract.
• An employment contract to hire employees in Sweden, usually for more than three weeks, may specify the following.
• Details about the workplace and the commencement date of  employment
• Nature of employment and period of notice
• A detailed description of the employee’s duties
• Details about the pay, employee benefits & allowances, including the intervals at which employees will pay the payment
• Mention the length of the paid annual leave and length of the typical working day or week
• Stat any applicable collective bargaining agreement

Register the identity of employees

• Foreign employers are required to report the hiring of temporary employees. Outside Sweden to the Swedish Work Environment Authority, otherwise, Arbetsmiljöverket in Swedish. 
• Employers need not make social security contributions to employees posted in Sweden for a temporary period. 
• However, they must inform the social security agency in the respective country to whose social security system the employees belong.
• Employers need A1 or E101 certificates for employees in the EU/EEA and Switzerland employees.
• A convention certificate is enough for employees from a country with which Sweden has a social security convention. 

Appoint employee representatives to the board

• Companies with over 25 employees are obliged to have a seat for employee representatives on the board. 
• Respective employee union in Sweden appoints employee representatives.

Let Multiplier be Your EOR Platform in Sweden

Eliminate all the hassles of complying with Swedish employment and tax laws to recruit employees in Sweden with Multiplier. 

Multiplier is a SaaS-based Employer Of Record (EOR) solutions provider. It can employ suitable talent in Sweden without the need to form a Swedish subsidiary or open a branch in Sweden. Multiplier’s integrated services including Professional Employment Organization (PEO) allow automated payroll, contingent workforce management, and seamless employee onboarding, all while strictly adhering to Swedish labor law and tax regulations.  

Multiplier’s EOR & PEO solutions are the leading choices for any global employers who are testing new markets and who wish to expand local teams at a fraction of the cost in over 150+ countries.