Expand your organization into Sweden, without a Swedish entity
The Northern European country of Sweden is a popular place to do business, with a stable economy and a well-educated workforce. But navigating the complex legal and cultural climate can be difficult for foreign organizations.
At Horizons, we provide a full range of outsourcing services to assist businesses with their Sweden expansion. Our employer of record, professional employer organization (Sweden PEO), and payroll services give you everything you need to build and expand your business in Sweden, even if you don’t have an in-country entity. Our in-house recruitment team can even find, recruit, and onboard your local workforce, as well as handling all ongoing HR administration.
Horizons provides everything you need to expand into Sweden quickly and effectively while potentially saving you thousands in setup costs.
Our Sweden PEO simplifies your expansion
Horizons enables your business to expand its operations into Sweden, without setting up a legal subsidiary.
Employment and Labour Laws in Sweden
📝 Employment contracts in Sweden
Sweden’s employment law can be complex, so it is crucial that you always understand the regulations when trying to expand and hire in the country.
In Sweden, employers are required to provide written employment contracts for all employees. These contracts need to clearly include all related information, such as wage/salary, vacation and other benefits, working hours, and more.
Furthermore, all contracts issued in the country should be provided in the Swedish language and use the local Swedish krona currency.
By partnering with our Sweden PEO, Horizons’ team of local experts can provide assistance for drafting strong employment contracts that are compliant with local regulations.
⏰ Working hours in Sweden
Normal working weeks are 40 hours in Sweden. In addition, employees are required to have 11 hours off between shifts and a minimum of 36 hours of time off every seven days.
48 hours is the legal limit of a working week, after which overtime must be paid. Overtime is limited to 200 hours per year, and is generally paid at a rate of 1.5 to 2 x normal payment. Alternatively, it can be accrued as time off work in the future.
📅 Public holidays in Sweden
Swedish employees generally receive 13 days of public holidays every year. Some employers choose to offer further annual holidays, but it is not necessary and can be negotiated on a case-by-case basis.
The following days are commonly celebrated nationally:
New Year’s Day
The Friday after Ascension Day
Pentecost Sunday, Mother’s Day
All Saints’ Day
Second Day of Christmas
New Year’s Eve
🏖 Sweden vacation leave
Employees in Sweden are entitled to at least 25 days of paid holiday each year. Many employers offer more, and employees may request a larger allowance. Usually, vacation days are ‘earned’ one year in advance, so there is no law requiring employers to offer vacation leave in the first year of employment. However, many still do. Up to five days can be carried over if not used one year, for as many as five years into the future.
😷 Sweden sick leave
In Sweden, employees are not paid for their first day of sick leave, but are paid a rate of 80% of usual salary/wage for the next two weeks of absence. Beyond this, employers will need to refer the case to the Försäkringkassan (a government office) to assume responsibility of sick pay. Parents who need to take time off to care for a child (under 12 years old) can also access sick pay support.
Employees who are absent for more than seven days need to provide a medical note as proof of sickness.
👶 Maternity and paternity leave in Sweden
Employees in Sweden can access up to 16 months (480 days) of parental leave, with mothers entitled to at least seven weeks before and after birth. The partner of the mother can take ten days of leave for the birth. The 480-day allowance can be shared between either parent, but 60 days of it are reserved for each parent specifically.
In terms of remuneration, employers are not required to cover parental leave payments (but many do), and parents can usually access government-funded support of 80% of normal salary. This is limited depending on the type of leave being taken, and is reduced to a significantly lower payment after 390 days of leave.
A further form of parental support allows parents with children under the age of eight to work part time at 3/4 hours (or more).
💰 Terminations and severance payments in Sweden
In Sweden, employers must inform employees of termination two weeks in advance of giving notice. Employees can then enter negotiations, where reasons are provided and may be requested in writing.
Notice periods depend on the length of employment, with employees of less than two years requiring one month of notice. This increases by one month for every additional two years of employment, with a maximum of six months after ten years. Employees are entitled to normal payment and full benefits throughout the notice period in most cases.
Employees who think they have been terminated wrongfully can sue, and may be entitled to damages of 1.5 to 2.5 years of salary. In many cases, employers also need to speak with an employee’s union.
Severance payments are not required in Sweden, but many employment contracts will include agreements to pay them.
Navigating employee terminations and handling severance packages can be complicated for companies expanding overseas for the first time. Horizons’ Sweden PEO can mitigate risk for foreign companies and provide guidance through this process.
🏦 Taxation in Sweden
In Sweden’s progressive taxation system, taxes are deducted by employers before salaries are paid. There is a municipal income tax of 32% (the average across municipalities) which applies to all employees regardless of income, and a national income tax of either 0% or 20%, dependent on income level.
As of 2020, the corporate tax rate in Sweden is 21.4%, but this is set to fall slightly in 2021.
Social benefits are funded in part by employers. Employers are required to pay around 30% of salary in contributions to a social insurance fund, which covers several social benefits like pension funds and sick leave payments.
🏥 Health coverage in Sweden
The healthcare system in Sweden is universally available and funded by the government, so employers are not expected to offer private health insurance. However, some employers may choose to offer it as part of a benefits package to attract employees.
💳 Sweden compensations & benefits
Compensation Laws in Sweden
Sweden has a different minimum wage system to most countries, as there is no universal minimum rate. Instead, unions work to establish minimums on an industry or job-type-basis. For jobs that aren’t covered in this way by unions, an agreed wage should be established and written into the employment contract.
Benefit management in Sweden
Establishing a Swedish benefits system for employees can be difficult. With a different language and a unique set of employment laws, building a comprehensive and compliant benefits system can take a long time and come at significant cost.
At Horizons, we specialize in building and running Swedish employee benefits systems. We’ll handle everything, using our experience to ensure you are ready to commence your Sweden operation as quickly as possible.