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Hiring in Sweden
Sweden, officially known as the Kingdom of Sweden, is a Scandinavian country in Northern Europe. Stockholm is the capital and the largest city of Sweden. Swedish is the official language and Swedish Krone is the official currency. Sweden is rich in timber, hydropower and iron ore. Engineering, telecommunication, automotive, and pharmaceuticals are some of the main industries of Sweden. Sweden’s main trading partners are Germany, Denmark, Norway, Finland, Netherlands and the US. Global PEO or Employer of Record (EOR) play a pivotal role in providing companies with services related to hiring employees, and ensuring compliance with Sweden’s legal and tax regulations. The Labor Code stipulates that employees are entitled to 25 days of annual leave. Residents are taxed on their worldwide income; non-residents are taxed on their Sweden-source income only. Global PEO’s or Employer of Record (EOR) facilitate companies by ensuring compliance with Sweden’s Labor Code and tax laws.
statutory labor requirements
Probation Period
- The probationary period can last a maximum of six months making it possible for the employer to see if the employee fits into the company, or to see if they can perform the duties of the job
Annual Leave
- According to the Annual Leave Act, employees are entitled to 25 full days of vacation every year regardless of their age or type of employment
Public Holidays
- New Year’s Day (1st January)
- Epiphany (6th January)
- Good Friday (10th April)
- Easter Sunday (12th April)
- Easter Monday (13th April)
- Labor Day (1st May)
- Ascension Day (21st May)
- Whitsun (31st May)
- National Day of Sweden (6th June)
- Midsummer’s Day (20th June)
- All Saints’ Day (31st October)
- Christmas Day (25th December)
- St. Stephen’s Day (26th December)
- New Year’s Eve (31st December)
Maternity Leave
- The Swedish government says that parents of both sexes are entitled to 480 days (16 months) of paid parental leave at about 80% of their salary (with a cap), plus bonus days for twins
- The days don't expire until the child is 8 years old.
- Parental leave must be shared between mothers and fathers
Paternity Leave
- The Swedish government says that parents of both sexes are entitled to 480 days (16 months) of paid parental leave at about 80% of their salary (with a cap), plus bonus days for twins — Swedish dads must take at least some of those 16 months.
- The days don't expire until the child is 8 years old.
- Parental leave must be shared between mothers and fathers
Sick Leave
- By law, employees are entitled to 80 percent of your salary up to a ceiling of 774 kronor per day (for 2019), which is usually paid by the employer during the first 14 days of illness.
Work Hours
- The ordinary weekly working hours in Sweden are stated to equal 40 hours.
- However, the actual average reported weekly working hours in Sweden fluctuated between 30 and 30.9 hours per week during the period from 2009 to 2019.
- In 2019, an actual working week amounted to 30.2 hours on average.
Overtime
- No more 50 hours' overtime over a calendar month is permissible and the absolute maximum overtime is 200 hours per calendar year.
- Overtime is usually paid at a rate of 50-100% more than the normal wage.
Notice Period
- Notice periods in Sweden are determined by employment contracts, collective agreements, or by the Employment Protection Act.
- With a collective agreement - Notice periods should be agreed upon between employer and employee and stated in the employment contract. The most common notice period is one month.
- Without a collective agreement -
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- Less than 2 years - 1 month
- 2 years but less than 4 years -2 months
- 4 years but less than 6 years - 3 months
- 6 years but less than 8 years - 4 months
- 8 years but less than 10 years - 5 months
- 10 years or more - 6 months
- Employers may dismiss employees without notice if they have grossly misbehaved
Severance
- Companies have no obligation to pay any severance pay but it may be included in an employment agreement.
13th / 14th Month Pay
- No
- There is no statutory requirement to pay the 13th or the 14th month salary.
- Employees are entitled to 25 days annual leave.
- The annual leave payment accumulates at 12% of their gross salary.
- In some instances, depending on the collective agreement, the employee may receive some holiday pay increments.
income tax
- Residents are subject to Swedish taxes on their worldwide income.
- Nonresident individuals are taxed on salary earned from work performed in Sweden, on certain pensions and on other income sourced in Sweden.
- Individuals who are present in Sweden for six months or more and regularly stay overnight are generally considered resident for tax purposes.
- Income from employment includes wage and salary income, directors’ fees, pensions, fringe benefits and most allowances.
- Special valuation rules apply to housing and car benefits.
- Education allowances provided by employers to their employees’ children are taxable for income tax and social security purposes unless they are exempt under the foreign key personnel rules
- Employment income is taxed on a cash basis when the income is available to the employee. As a result, taxation occurs when the income becomes available and not when it is actually received or earned.
- Non-residents working in Sweden for a Swedish employer or a foreign employer with a permanent establishment (PE) in Sweden are taxed a flat rate of 25% at source. The same rate applies when a pension is paid by a Swedish source to a person not tax-resident in Sweden.
- Non-residents working in Sweden for a non-Swedish employer without a PE in Sweden are not taxed in Sweden, provided that the individual does not spend more than 183 days in Sweden in a 12-month period.
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Income Tax Rates for Residents |
||
|
Taxable income (SEK) |
National income tax (%) |
Municipal income tax (%) |
|
From 0 to 490,700 |
0 |
32 |
|
Over 509,300 |
20 |
32 |
deductible expenses
- The principal deductions allowed are interest expense, expenses for travel between home and work and for business, and alimony payments.
Employment Deductions
- Interest expenses may be deducted from investment income.
- If the expenses exceed investment income, 30% of the expenses up to SEK100,000 may be credited against taxes payable.
- For expenses exceeding SEK100,000, the percentage of the tax credit is reduced to 21%. Under certain conditions, travel costs between home and work that exceed SEK11,000 are deductible.
- An employee is also entitled to a deduction of SEK1.85 for each kilometer traveled in a private automobile to carry out the employer’s business.
- Mandatory individual social security charges in other EU member states can be deductible in Sweden.
Personal deductions
- A basic deduction is allowed for both local and state tax purposes.
- For 2019, the amount of the basic local and state deduction ranges from SEK14,500 to SEK35,900.
- However, this does not imply that all income in excess of SEK14,500 is taxed because no tax is payable if total income does not exceed SEK19,700 (for 2019).
- Accordingly, up to this level of income, the personal deduction does not apply. Beyond an income level of SEK19,700, the personal deduction supersedes the exemption rule.
- The personal deduction is subject to proration if individuals are part-year residents.
- Alimony paid to a former spouse is deductible, subject to certain limitations.
Business deductions
-
- For expenses to be deductible, they must be included in the financial accounts.
- In principle, all expenses incurred to obtain, secure and maintain business income are deductible.
- Exceptions are made for certain items, including penalties, fines, objects of art, expensive entertainment, and wine and liquor
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Deductible Expenses |
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Employment Deductions |
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Personal Deductions |
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Business Deductions |
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immigration
- Citizens of EU/EEA member countries and Switzerland are treated in accordance with EU rules and do not need work permits to work in Sweden.
- Sweden also has an agreement with the other Nordic countries (Denmark, Finland, Iceland and Norway) that allows citizens of these countries to live and work in Sweden without residence or work permits.
- Foreign nationals from other countries who wish to work in Sweden must obtain work permits before entering Sweden.
- An application for a work permit must be accompanied by an offer of employment form issued by the Swedish employer or “end user” (the company for which the individual performs work in Sweden if not the legal employer) in Sweden.
- In situations in which the foreign (non-EU/EEA or Swiss) national is a new local hire (by the formal employer), the position must be posted on the EU job exchange (EURES) network before a job offer is issued to the foreign national.
- The terms of the offer of employment must comply with current collective bargaining agreements concerning wages, mandatory insurance and other benefits or, if no collective agreements exist, with market practice for the specific industry.
- An opinion must be obtained from the relevant union body as part of the application process.
- Certain exemptions exist with respect to the requirement to apply for a work permit, such as for employees who enter Sweden for the purpose of undertaking internal training for up to three months with the Swedish entity of an international group of companies.
- Work permits are granted for a maximum period of two years and can be extended for another two years. After 48 months’ work in Sweden, a permanent residence permit can be applied for.
- High skilled foreign nationals can apply for the EU Blue Card to reside and work in Sweden
- When applying for an EU Blue Card, it must be proven that: the salary, working conditions and other terms of employment are at least equal to persons already residing in Sweden.
- For 2019, the salary threshold is SEK 50,550 per month.
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Type of Visa/ Permit |
Documentation |
Validity |
Eligibility |
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Work Permit |
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2 years |
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EU Blue Card |
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2 years |
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value added tax
- The Swedish VAT system is harmonized with the European Union (EU) rules.
- The general VAT rate of 25% is chargeable on most goods and services.
- Reduced rates apply to a few goods and services, such as foodstuffs, restaurant meals, and non or low alcoholic drinks (12%), as well as to transport of passengers (6%).
- Certain financial and insurance services are exempt from VAT.
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VAT Rates |
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Standard Rate |
25% |
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Reduced Rate |
12% |
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Reduced Rate |
6% |
withholding tax
Dividends
- Dividends paid to a nonresident company are subject to a 30% withholding tax unless the rate is reduced or an exemption applies under a tax treaty, Swedish domestic legislation or the EU parent-subsidiary directive
- A specific anti-avoidance rule applies for withholding tax purposes
Interest
- Sweden does not levy withholding tax on interest payments
Royalties
- There is no withholding tax on royalty payments
- However, a foreign recipient of Swedish-source royalties is deemed to have a Swedish PE and is subject to Swedish income tax on the royalties received
Technical Service Fees
- There is no withholding tax on technical service fee
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WHT |
|
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Dividends |
30% |
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Interest |
N/A |
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Royalties |
N/A |
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Technical Service Fees |
N/A |
termination
- In Sweden, there are rules on the rights of an employer in relation to terminating an employee. The rules for termination are determined by the law in the “Employment Protection Act” (Lagen om anställningsskydd - LAS).
- Termination must always be in writing and it must be objectively justified. The employer must state the reason for termination upon request of the employee.
- Contracts of employment can be terminated in the following ways: -
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- Notice of termination of employment from the employer or the employee
- The fixed term runs out
- Summary dismissal
- An employee’s immediate resignation where the employer in a fundamental respect has failed to fulfil his obligations to the employee
- An agreement to the effect that the employment ceases to exist
- The length of the notice period depends on how long you have been employed. If you have been employed less than two years, the notice period is one month. If you have been employed for two to four years, you have a notice period of two months. Then one additional month is added for each two-year period up to six months.
- Companies have no obligation to pay any severance pay but it may be included in an employment agreement.
statutory benefits
- These are mandatory benefits as postulated by law
- These include probationary period, public holidays, annual leave, sick leave, maternity leave, paternity leave, notice period, and severance pay
- Statutory benefits also include social security benefits
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Statutory Benefits |
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Probationary Period |
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Public Holidays |
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Annual Leave |
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Sick Leave |
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Maternity Leave |
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Paternity Leave |
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Notice Period |
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Social Security Benefits |
payments and invoicing
- Tax is assessed on taxable income for each fiscal year, which is generally the calendar year.
- Married persons are taxed separately, not jointly, on all types of income.
- Annual tax returns must generally be filed by 2 May of the year following the year in which the income is earned.
- Extensions to file returns may be obtained.
- Tax on salaries, wages and other remuneration, including benefits in kind, is withheld by employers. Individuals who are self-employed or who have business income as well as other non-employment income may register as self-employed taxpayers.
- Preliminary tax is then computed according to a preliminary tax return.
- The preliminary tax is payable monthly, beginning in February of the fiscal year and ending in January of the following year
ease of doing business
- The ease of doing business index is an index created by Simeon Djankov, an economist at the Central and Eastern Europe sector of the World Bank Group.
- Higher rankings (a low numerical value) indicate better, usually simpler, regulations for businesses and stronger protections of property rights.
- According to the World Bank Sweden ranked 10th in the World in 2019 in terms of ease of doing business.
employee accruals
| Christmas Bonus% |
0% |
| Christmas Bonus Over Vacations % |
0% |
| Severance per Year % |
Paid bt insurance so does not come from employer |
| Vacations % | Employees are entitled to 25 days of annual leave (6.86% of annual salary) |
| Notice % |
Employees are entitled to a 1 month of notice period for one year of service or more (8.33%) |
| Christmas Bonus Over Notifications% | 0% |
| Vacations Plus% |
0%
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Total percentage of Salary (yearly)
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The total employment accruals as a percentage of salary per anum are equal to 15.19%
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employer accruals
Additional information (Country Accruals)
| Social security | 31.42% |
| Sick leave | 14 days |
| Maternity | 14 weeks |
| Vacations | 9.32% |
| Description | Swedish social security contributions for employed personnel are payable by the employer at a rate of 31.42 percent of the gross salary. There are no upper limits in respect of employer contributions. Swedish social security contributions are payable by the employee at the rate of 7 percent of the net earned income with a cap at an annual income of SEK538,700 (maximum contribution SEK37,700). One hundred percent is allowed as a credit against income taxes. Sweden has concluded a number of conventions on social security with different countries, mostly within Europe but also including non-European countries such as Morocco, Canada, Quebec, Turkey, Israel, and the United States. Since Sweden is a member of the EU, the provisions in Council Regulations 1408/71 and 883/2004 will apply for intra-community transfers. Where an employee is assigned from a non-treaty country/jurisdiction to perform work in Sweden, different rules apply depending on the length of stay. If the intended length of the stay does not exceed 12 months, no social security levies are payable. If the length of the stay exceeds 12 months, levies are payable in full from the first day. If the employer has a permanent establishment in Sweden full charges are payable from the first day. As a main rule, Swedish social security contributions are always payable by a Swedish employer or a foreign employer if the work is performed in Sweden. This applies irrespective of the nationality of the employee. For foreign employers with no permanent establishment, the liability to pay social security contributions could be transferred to the employee by an agreement between the employer and the employee.
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Employer Accruals Additional information
| Employment Accruals | ||
| Annual Leave | According to the Annual Leave Act, employees are entitled to 25 full days of vacation every year regardless of their age or type of employment | This equals 6.84% (25/365 days) of annual income |
| Parental Leave | The Swedish government says that parents of both sexes are entitled to 480 days (16 months) of paid parental leave at about 80% of their salary (with a cap), plus bonus days for twins | This equals 80% of 1.31% (480/365 days) of annual income |
| Sick Leave | By law, employees are entitled to 80 percent of your salary up to a ceiling of 774 kronor per day (for 2019), which is usually paid by the employer during the first 14 days of illness. | This equals 80% of 3.83% (14/365 days) of annual income |
| Overtime | No more 50 hours' overtime over a calendar month is permissible and the absolute maximum overtime is 200 hours per calendar year. Overtime is usually paid at a rate of 50-100% more than the normal wage. |
Normal hourly rate is around 280 SEK. Overtime is paid at an additional 140 SEK |
| Social Security | Social security taxes are levied on salaries, wages and the assessed value of benefits in kind and are paid primarily by the employer (however, see Employees). Payments are made to several programs, including general sickness insurance, basic old-age pension insurance and supplementary pension insurance. Contributions to these various programs are assessed and administered by a single authority. For 2019, the total average rate for most employers is 31.42%. In addition, the rate is 10.21% for individuals born between 1938 and 1953 (both years inclusive). The rate is 0% for individuals born in 1937 or earlier. |
This equals 31.42% of annual income |
