Global PEO Services (GPS) helps companies hire employees in Sweden without establishing a legal entity. All human resources, benefits, payroll, and tax needs for the employees are managed by the Global PEO, while the new hires and headquarter teams focus on your business goals.
When hiring employees in Sweden, establishing a subsidiary or branch office is not always the best route, as it’s often a lengthy and expensive process. Hiring via a Professional Employer Organization (PEO), or Employer of Record (EOR), is a faster and often more effective option – especially when starting up in a new country.
Global PEO Services hires the employees on your behalf, legally contracting them through our subsidiary in accordance with Sweden labor laws. As a result, the burden of compliance is on us and the employees can begin work for your company in a matter of days. PEOs/EORs provide you with a streamlined option for hiring employees, testing markets, and responding to growing business needs in Sweden. With Global PEO Services, you get control without taking on legal entity liabilities, contractor risks, or sacrificing on talent or speed to market.
Sweden - Country Overview
Sweden, a Scandinavian nation in Northern Europe, is the third-largest country in the European Union. The Swedish economy is export-oriented and driven by hydropower, timber, and iron ore. Predominant industries are telecommunications, industrial machines, chemical goods, pharmaceuticals, motor vehicles, precision equipment, iron and steel, and home goods and appliances. Swedish economy’s regulatory efficiency combined with open-market policies help sustain competitiveness, flexibility, and large inflows of trade and investment. A conducive industrial environment in Sweden helps setting up businesses in a hassle-free way.
Parliamentary Representative Democratic Constitutional Monarchy
Gothenburg, Malmo, Uppsala, Helsingborg
Employment Contracts in Sweden
An employment contract is considered as established when the party performing the work:
- becomes a part of the organization established by the other party
- provides services to another for monetary reward
- is subject to the control/direction concerning the way in which work is to be performed
A clear distinction between a contract for services and contract of employment is crucial in deciding on applicable legislation related to labor, social security, and taxation. Employment contracts, under the Employment Protection Act, are of indefinite term. Fixed-term employment contracts are permitted under special circumstances such as temporary substitute employment, seasonal employment, under a general fixed-term employment contract, and when employees turn 67. Fixed-term employment contracts are converted into indefinite employment contracts after an employee has worked for 5 years under a fixed-term contract or for more than 2 years as a substitute employee.
Working Hours in Sweden
The 1982 Working Hours Act sets regulations governing work schedules for employees’ protection. Normal work schedule includes an 8-hour workday and 40 hours work week. Overtime is limited to 48 hours in a week but should not exceed 200 hours in a year. Collective bargaining agreements (CBAs) generally set the overtime premium at 50% or 100% of the ordinary hourly wage.
Employee Leave in Sweden
Employees are entitled to the following paid public holidays:
- Jan. 1: New Year’s Day
- Good Friday
- Easter Monday
- May 1: Labor Day
- June 6: National Day
- Whit Sunday
- June 21: Midsummer Day
- Nov. 1: All Saints’ Day
- Dec. 25: Christmas
- Dec. 26: Boxing Day
Public holidays that fall on a weekend are not carried over. There are no provisions on overtime pay for working on a public holiday.
Under the Vacation Act, employees are entitled to 25 days of annual vacation and are given holiday pay accrued during the qualifying year. The qualifying year starts on 1st April and ends on 31st March. Employees can take the vacation even during their first year of employment, but if employment begins after 31st August, they are entitled to 5 days of vacation during the first year. Employers can decide when employees can take annual leave, but they must provide a minimum of continuous 4 weeks during June, July, or August.
Pregnant employees are entitled, under the Parental Leave Act, to 7 weeks of leave before childbirth and 7 weeks after childbirth.
Fathers can take 10 days of paternal leave for childbirth.
Employees are entitled, under the 1991 Sick Pay Act, to sick pay due to an injury/illness/rehabilitation and are protected from dismissal on the grounds of illness. Employees get additional benefits under the National Insurance Act if an illness extends beyond the general sick pay entitlement. Employers are required to notify the Social Insurance Agency in such situations. Employees can receive sickness benefits for a maximum of 364 days in a 15-month period. This period is extended only under special conditions. The extended sickness pay is 75% of the employees’ annual salary up to 550 days.
Employee Benefits in Sweden
The legal retirement age is 65 for employees with 40 years of Swedish residency. Employers must contribute to fund pension and health insurance at a rate of 31.42% for all employees/contractors who earn more than 1,000 krona in a year. Employers make reduced social security contributions for employees aged less than 26. There is no upper limit to employer contributions to the social security system, but employee contributions of 7% of their salaries are capped at an annually adjusted amount. Collective agreements generally have provisions that require employers to provide additional insurance for benefits such as group insurance and supplementary pensions.
Employees who suffer an injury in the workplace receive compensation through their workers’ compensation insurance fund. Employers are required to notify the Work Environment Authority in case of an accident or any situation that results in severe injury or death of an employee (s). Failure to respond to deficiencies or violations of the safety and health-related laws can result in penalties and imprisonment in serious cases.