Sweden is considered to be one of the most lucrative business destinations and one of the most populous countries, with more than 10 million residents. Sweden has skilled youth, a growing economy, and other beneficial resources needed to start a new company. Also, thousands of expats travel to Sweden every year in search of employment, and you can leverage this opportunity to hire some of the best talents.
The employment rate in Sweden is quite decent. In 2021, 70.1% of men and 64.4% of women were employed in the country. Also, the GDP of Sweden is currently at SEK 5,457 billion. Several industries like automobiles, pharmaceuticals, electronics, etc., have seen considerable growth, paving the way for other companies to establish their branches or subsidiaries in Sweden.
Sweden has a labor law code that is put into effect, just like any other country, outlining how to hire people and what benefits they get. Under Sweden’s labor law, there are legal rights, responsibilities, and restrictions for employees, employers, and workers’ committees. The Sweden labor legislation should be followed by all parties involved.
All companies looking forward to onboarding resources from Sweden must thoroughly understand Sweden’s employment law before hiring any person in the organization set up in Sweden.
Who is Covered by the Employment Act?
The Employment Act protects all kinds of employees working in Sweden irrespective of the nature of their employment. The labor act rules in Sweden cover both full-time and part-time employees. Even expats are covered under the Swedish Employment Act.
There is no legal difference between blue-collar and white-collar jobs. However, employees hired in managerial positions do not enjoy the protection provided by the Employment Act.
Under the Sweden Labor Law, all companies are entitled to provide several benefits and rights to employees irrespective of the nature of the contract. These company-specific rights include minimum wages, overtime payments, sick leaves, yearly bonuses, etc. There might be some categories of workers who might not be entitled to some of these benefits. However, an employer cannot discriminate between two employees based on their relationship with the company.
Every company registered in Sweden is covered under the Sweden labor code. Therefore, employers must abide by every law under the labor code and treat all employees fairly. Employers must comprehend Sweden labor laws to manage employees without any hassle.
Employment Contract
An employment contract is a signed agreement between an employee and employer based on the official Employment Act. It states the rights and responsibilities an employee and employer has to furnish.
In Sweden, it is not mandatory to provide written employment contracts. However, employers usually offer written agreements to employees mentioning all the work responsibilities, salary, and rules and regulations of employment.
An employment contract need not follow any particular format. Sweden, however, has put into effect the rule requiring employers to make employees aware of the terms of the agreement or employment relationship. As a result, the employer must give the employee-specific written information about the main terms of the employment. The employers must provide this information to the employees within a month of beginning their job.
Language and format
- All employment contracts should be drafted in English, and both the employee and the employer should have a copy.
- If the contract is formulated in any other foreign language, it must be translated to English to maintain a uniform system for all employees.
- The contracts might have some by-laws. Both the parties must read these by-laws before signing the contracts to avoid any ambiguity in the future.
Mandatory information
Under the Sweden employment law, some information should be mandatorily present on employment contracts. This information includes:
- The company’s details, including its name, address of the registered office, registration number of the company, etc.
- The details of the employee include their date of birth, current address, nationality, the designation given to the employee, etc.
- Start date of work
- Nature of the employment
- Duties of employee
- Duration of the employment in case of determinate contracts
- The payroll cycle and the date for disbursing monthly salaries
- The compensation structures
- Length of the probation period, if applicable
- Details about the leaves
- Notice period
- The applicable collective bargaining agreements
Probation period
A probationary period is allowed under the Employment Protection Act for a maximum of six months. The employment will automatically turn into one for an indeterminate period if it is not terminated before the probationary period expires.
The employer or the employee may terminate the employment contract during or after the probationary period. In any case, the other party receives a termination notice before the termination date.
Working conditions
Employment contracts have several provisions that ensure the working conditions are good during the employee’s association with the company. Some of the requirements are:
- All the employees must be treated fairly irrespective of their designations, nature of work, and the salary structure.
- The employees should not work beyond 48 hours a week.
- To help them meet their goals without encountering any bottlenecks, the employer must train staff members to carry out duties outside their job descriptions.
Key Provisions of the Act
There are several provisions under the Sweden labor laws. The laws ensure that the organization’s employees are accorded respect and benefits. These benefits include sick leaves, overtime compensation, fixed working hours, etc.
Let’s look at some of the critical provisions of the Sweden labor laws:
Minimum wages
Sweden does not have a pre-decided minimum salary like other developed European countries. Employees can negotiate the minimum pay with their employers. They can decide these terms through collective bargaining or other means of negotiations that ensure a fair wage that will help them meet all of their living expenses.
In Sweden, several industries are governed by national collective agreements, and they have different rules for minimum wages that differ from industry to industry. Also, in some sectors, the minimum wage rate is decided based on age and the employee’s experience. For example, the minimum wage for an employee working in the hotel and restaurant industry is 23,854 SEK.
All signatory employers’ organizations and trade unions must abide by the terms of industry-level collective agreements. Firms covered by such contracts must pay minimum wages to all employees, even if they are not union members.
Taxation
The tax rates in Sweden range from 0% to 20%. Employees earning more than SEK 540,700 are liable to pay state income tax at a 20% rate. This stratum limit applies to the employee’s taxable income (income after deductions).
However, the local rates contributing to the municipal corporation and the country council can go up to 52%. Sweden follows a progressive tax system where the income level decides the applicable tax rate. The tax deducted from the employee’s salary gets credited to three government levels: the municipality, the country council, and the central government.
Notice period
The employee and the employer must give a one-month notice before terminating the contract. However, if the employee has been fired from the organization, the duration of the notice period depends on the number of years the employee has served the company. For instance, if an employee has been with the company for at least two years, they will have to serve a notice period of 2 months; this increases to 3 months if the duration of service is more than four years, and so on.
If the employee is on parental leave, the notice period will only start when they return to work.
Sick leaves
Employees can avail sick leaves if they are unwell or have met with an accident. On the first day of sick leave, employees get no pay. The Sick Pay Act applies to 14 days of sick leaves when employers need to pay their employees at 80% of their regular wage rate. Employees must inform their employers about the sick leave on the first day of illness. They must also provide a medical certificate to substantiate their condition after seven days of absence.
Post 14 days of sick leaves, the employee will be paid through the social security sickness benefits. Employees are paid 77.6% of their regular pay from the sickness benefits, which cannot go beyond SEK 774 for a day. However, some collective agreements have a provision where employees receive more than 77.6% of their regular pay.
Holidays and other leaves
Employees are entitled to avail of leaves. Also, the offices are generally closed during some essential public holidays.
Holidays
In Sweden, the employees are entitled to avail of 13 public holidays. These holidays include:
- New Year’s Day
- Epiphany
- Good Friday
- Easter Sunday
- Easter Monday
- 1st May
- Ascension
- Whit Sunday
- National Day
- Midsummer Day
- All Saints’ Day
- Christmas Day
- Boxing Day
If these holidays fall on a weekend, there is no mandate to provide an extra holiday. However, it depends on the company.
Annual leaves
Under the Annual Leave Act or Semesterlag, the employees can take up to 25 days as annual leaves while employed with the organization. However, the number of days might increase if stated in the collective agreements. The number of yearly leaves that get credited to an employee depends upon the number of working days and the date on which the employment begins.
Their job history determines employees’ eligibility for pay during annual leave in the qualifying year, the year before the annual leave. A worker is entitled to 25 days of paid annual leave throughout the leave year if they worked the entire qualifying year. If the employee was unemployed or absent without pay during the qualifying year, the 25-day entitlement is decreased correspondingly.
Maternity leaves
Under the Sweden Labor Laws, employees can take a maternity leave of 14 weeks if pregnant. Women employees can take a 7-week leave before the baby’s delivery and a 7-week leave after. Employees do not have a legal right to be paid by their employer during maternity leave, nor do they automatically qualify for public social security benefits. However, starting 60 days before the projected due date, they may opt to apply for social security parental benefits. Male parents are also entitled to 10 days of paternity leave.
Working hours
In Sweden, the weekly average working hours are 40, which can go up to 48 hours. When an employee is expected to work to carry out necessary tasks, the on-call hours should not exceed 40 hours a week over four weeks or 50 hours over a month.
Overtime
Overtime refers to work hours that an employee works for in addition to the ordinary working and on-call hours. Overtime is limited to 48 hours per employee over four weeks or 50 hours over the calendar month. An employee can work 200 additional hours as overtime in one calendar year.
If there are unique circumstances, employees may go above the standard overtime policy for 150 hours per year. On top of the employee’s standard compensation rate, overtime is typically compensated with an additional 50–100% pay.
Penalties
The employees have the right to contact the district courts if they feel discriminated against or if the company is not adhering to the Sweden labor law. District courts then handle all these complaints. After this, the defendant gets a chance to respond to the employee’s demands. The preparatory hearing takes place orally, followed by the main hearing. Generally, the possibility of settlement is explored during the process.
Moreover, the plaintiff must pay EUR 280 if they submit any claims to the district courts.
Compliance Strategies for Employers
To comply with Sweden’s Federal Labor Regulations and employment laws, employers must stay updated about the numerous rules set forth by HR. Managerial training allows a company’s personnel to remain informed about Swedish labor laws and regulations. Employers must also implement industry-recognized HR procedures to prevent and minimize legal employment concerns. Companies also prefer to outsource to firms specializing in complying with the labor laws while onboarding skilled employees.
How Can Multiplier Help?
Sweden has rigorous labor rules; thus, setting up a team of experts to comprehend and explain these laws would assist businesses in adhering to all standards. Creating standardized employment contracts is an excellent safeguard for the company and its workers.
Multiplier makes it simple to automate the creation of employment contracts. Your Swedish subsidiary will always adhere to the country’s regulations because our personnel are knowledgeable about Swedish labor legislation.