Hire and pay employees in Sweden quickly and compliantly

Complying with labor and employment laws in Sweden

Sweden is distinguished for its unique approach to economic, social, and employment policies, known as the Swedish model. Emerging in the 1930s, this approach is characterized by a large public sector, robust private industrial sector, and strong trade union protections. Key labor legislation includes the Employment Protection Act (LAS), the Working Hours Act, and the Annual Leave Act, all of which establish guidelines for fair working conditions.

Many industries are governed by collective bargaining agreements (CBAs), which set additional rules on wages, benefits, and termination procedures. Employers must ensure compliance with these regulations, as failure to do so can result in legal disputes, financial penalties, and reputational harm—especially in a country that prioritizes worker well-being.

Hiring employees and managing compliance in Sweden and globally can be more efficient with the support of an employer of record (EOR) like Rippling. Partnering with a trusted EOR allows you to navigate Sweden’s complex labor laws with ease, ensuring compliance with employment regulations and collective bargaining agreements. With expert HR guidance tailored to Swedish employment laws, Rippling helps you streamline global hiring so you can focus on growing your business.

Employment contracts in Sweden

Sweden’s strong employment protections are reflected in the Employment Protection Act (LAS) of 1982, which covers employment contracts and termination rules, among other things. Under the LAS, employment contracts are permanent (or indefinite) by default unless otherwise specified by the parties involved. If an employment relationship is fixed-term, the employer should state this in the written contract since they carry the burden of proof.

While employment contracts can be oral, there are certain elements that employers must define in writing within seven calendar days of the employee’s start date. The mandatory written elements include: 

• Employer’s and employee’s names and addresses
• Start date
• Work location
• Job title/duties
• Employment type (fixed-term or permanent)
• End date (if applicable)
• Probationary period (if applicable)
• Salary and benefits
• Pay periods
• Standard working hours
• Annual leave conditions
• Renting formalities
• Employer training
• Termination procedures
• Collective agreement info (if there is one)
• Social protection (e.g., provision for occupational pension, sick pay, and other employer-covered insurances)
• Duty of loyalty
• Duty of confidentiality (confidentiality clause)
• Non-compete agreement

If your workforce is covered by a collective agreement (which is very common in Sweden), be sure to review the provisions it sets forth—collective agreements determine most employment conditions in the country, and your specific agreement may mandate different employment contract elements than the ones listed above.

Labor unions in Sweden

Sweden has one of the highest unionization rates in the world, with roughly 70% of all workers belonging to a trade union. There are three main confederations employers should be aware of:

• The Swedish Trade Union Confederation (Landsorganisationen i Sverige, LO): Represents primarily blue-collar workers in both public and private sectors
• The Swedish Confederation of Professional Employees (TCO): Organizes white-collar workers and professionals across industries
• The Swedish Confederation of Professional Associations (Sveriges Akademikers Centralorganisation, SACO): Represents highly qualified professionals and academics

These confederations negotiate collective bargaining agreements (CBAs) that set working hours, holidays, minimum wages, overtime, and other working conditions. CBAs apply to all employers and employees who belong to any organization that has concluded that specific agreement. While entering into a CBA is not legally mandatory, it is incredibly common in Sweden—and trade unions are willing to go to great lengths to urge employers to join one, particularly if they have extensive operations in Sweden.

Mitigating permanent establishment risk in Sweden

When expanding your business into Sweden, one critical tax consideration is permanent establishment (PE). In Sweden, a PE is created when a foreign company conducts business activities within the country through a fixed place of business or a dependent agent authorized to conclude contracts on its behalf.

According to the Swedish Income Tax Act, there are general rules for non-Swedish companies conducting business in the country (including building and construction sites) and special rules for companies with a dependent agent. If a tax convention exists, the foreign company will only have to pay corporate income tax if it is deemed to have a permanent establishment under the tax convention regulations and Swedish law.

Typically, if a company has a place of business in Sweden that falls into any of the following categories, it risks triggering permanent establishment:

• A management office
• A home office
• A workplace on another company’s premises
• A workshop
• A factory
• A site for construction, building, or installation work lasting longer than six or 12 months (depending on the tax convention)

The Swedish Tax Agency may consider any of these places of business as “permanent” if they have been operating for at least six months or if the company conducts business activities in Sweden annually (even for less than six months each year). 

Triggering PE status in Sweden—even accidentally—can be costly, subjecting your company to Swedish corporate tax obligations. To minimize this risk, businesses should carefully monitor their employees' activities, decision-making locations, and operational presence in Sweden.

Here are several strategies for global companies looking to mitigate their PE risk in Sweden:

• Limit decision-making authority in Sweden: Ensure that key business decisions and contract approvals take place outside of Sweden to avoid creating a taxable presence.
• Seek local tax expertise: Consulting Swedish tax professionals can help assess your company’s activities and ensure compliance with PE regulations, reducing the risk of unexpected tax liabilities.
• Avoid a fixed place of business: Refrain from maintaining a physical office, warehouse, or other fixed locations in Sweden that could be deemed a permanent establishment.
• Monitor employee activities: Maintain detailed records of work locations, time spent in Sweden, and authority to negotiate contracts.

Protecting company IP in Sweden

​​Intellectual property (IP) refers to creations of the mind, such as inventions, brand identities, creative works, and proprietary designs, that are legally protected from unauthorized use. Many countries, including Sweden, feature robust IP regulations that allow creators to protect their works.

Sweden is known for its strong innovation culture, with globally recognized companies like Ericsson, Spotify, and Volvo leading advancements in technology and design. To maintain your competitive advantage, protecting your company’s intellectual property (IP) is essential.

In Sweden, the Swedish Intellectual Property Office (Patent- och registreringsverket, PRV) oversees and enforces most IP rights. As in many other jurisdictions, copyrights are automatically granted upon the creation of a qualifying work and do not require registration.

The primary IP types you can protect in Sweden include:

• Patents: Valid for up to 20 years, protecting novel technical solutions
• Trademarks: Protects unique symbols, figures, and slogans for up to 10 years and can be renewed
• Designs: Valid for up to 25 years but must be renewed every five years
• Copyrights: Granted automatically and valid for the author’s lifetime plus 70 years after their death

Local laws in Sweden

As we briefly covered above, Sweden’s employment landscape is shaped by a long tradition of employee rights, collective bargaining, and workplace protections. Understanding and complying with Swedish labor laws is essential for employers looking to hire and operate in the country. Respecting these regulations not only ensures compliance but also helps foster a positive reputation as an employer in Sweden.

Here are some critical labor laws and what they cover:

• Employment Protection Act (LAS): Governs employment contracts, job security, and termination rules, including Sweden’s “last in, first out” principle for layoffs
• Co-determination in the Workplace Act (MBL): Regulates collective bargaining and mandates consultations with employee representatives on major workplace decisions
• Discrimination Act: Prohibits discrimination in the workplace based on gender, ethnicity, disability, age, religion, sexual orientation and other protected characteristics
• Working Hours Act (Arbetstidslagen): Regulates working hours, rest periods, and overtime to promote fair working conditions and prevent employee burnout
• Work Environment Act (Arbetsmiljölagen):  Ensures safe and healthy working conditions, covering everything from ergonomic requirements to mental well-being

Worker classification and misclassification in Sweden: Contractors vs. employees 

Properly classifying workers as either employees (anställd) or independent contractors (egenföretagare) is crucial for legal compliance in Sweden. While Swedish labor laws do not have a single, rigid definition of employment versus independent contracting, employers can still be found liable for misclassification. 

Swedish authorities typically assess the nature of a working relationship on a case-by-case basis with several factors in mind. In the event of a dispute, Swedish courts and tax authorities may reclassify a contractor as an employee if the arrangement resembles a traditional employment relationship. Below are some of the key differences between the two.

Worker classification in Sweden: Key differences between contractors and employees

Consequences of misclassification in Sweden

Misclassifying workers in Sweden can lead to significant legal and financial consequences. If the Swedish Tax Agency (Skatteverket) or the Swedish Work Environment Authority (Arbetsmiljöverket) determines that a contractor has been incorrectly classified and should be considered an employee, the employer may have to pay retroactive taxes, social security contributions, and employee benefits such as paid leave and pension contributions.

Additionally, employers found guilty of misclassification may face:

• Fines and penalties: The Swedish Tax Agency can impose fines on the paying entity for failing to withhold the appropriate taxes and contributions.
• Worker claims: Misclassified workers may seek entitlements typically afforded to employees.
• Reputational damage: This can harm a company's reputation, affecting relationships with clients, customers, and potential employees.
• Union and collective bargaining agreement issues: If workers fail to receive the benefits stipulated in their CBAs, employers may have conflicts with unions that impact their current and potential future employees.

Wages and payroll in Sweden

Sweden’s wage and payroll landscape is shaped by collective agreements rather than a government-mandated minimum wage. Many industries have sector-specific CBAs that set minimum salary levels and benefits. Employers should carefully review whether a relevant agreement applies to their workforce, as failing to meet these standards can lead to compliance issues. Dive deeper into wage and payroll standards in Sweden below.

Minimum wage in Sweden

Sweden does not have a national minimum wage and instead negotiates wages in collective bargaining agreements—a key aspect of the Swedish model, or Ghent system. CBAs often set minimum pay levels for specific industries. The baseline wages vary depending on the needs and economic conditions of a sector or industry.

If a sector does not have a CBA, employers are still expected to offer wages that are fair and competitive, aligned with Swedish labor market standards. Paying below industry norms can lead to reputational harm and difficulties attracting qualified talent.

Payroll frequency in Sweden

In Sweden, employees typically receive their salaries on a monthly basis, with payments made at the end of each month. Employers are responsible for withholding income tax (PAYE, "preliminary tax") and social security contributions from employees’ salaries and remitting them to the Swedish Tax Agency (Skatteverket).

Strict payroll compliance is essential, as errors in tax withholding or reporting can lead to penalties and interest charges from Skatteverket.

13th month pay in Sweden

Sweden does not have a statutory requirement for 13th month salary payments. However, some collective bargaining agreements (CBAs) or individual employment contracts may include provisions for holiday bonuses or other forms of extra pay.

While not legally mandated, many employers offer performance-based bonuses. These bonuses vary by industry and employer but can help attract and retain talent in Sweden’s competitive job market.

Run payroll compliantly in Sweden

Managing payroll in Sweden requires strict compliance with tax regulations, social security contributions, and potential collective bargaining agreements (CBAs). To ensure accuracy and compliance, many foreign companies hiring in Sweden choose to work with an EOR. By partnering with an EOR like Rippling, you can simplify payroll and compliance tasks, such as payroll processing, deductions, and local tax requirements—allowing you to hire and pay employees around the globe faster than ever.

Employer and employee taxes in Sweden

Sweden’s tax system is largely funded through progressive income taxes and employer contributions, which support the country’s extensive social welfare programs, including healthcare, education, and social security. As an employer, you are responsible for registering with the Swedish Tax Agency (Skatteverket), withholding the correct amount of tax from employees' wages, and remitting both employer and employee contributions on time. Tax rates and thresholds are updated regularly, so employers should stay informed about changes to ensure compliance. Find key tax obligations for employers and employees below.

Employer taxes in Sweden

When hiring employees in Sweden, employers must withhold and remit payroll taxes to Skatteverket (the Swedish Tax Agency). This includes income tax deductions and employer contributions, which fund Sweden’s social insurance system.

The standard employer contribution rate is 31.42% of an employee’s gross salary and taxable benefits. This contribution covers various social security programs, such as pensions, healthcare, and parental leave. However, the exact rate may vary depending on the employee’s year of birth.

According to Skatteverket, the 2025 rates for specific contributions are as follows: 

Employers are also responsible for paying the corporate tax, which is 20.6%.

Reporting and paying these taxes through monthly employer declarations to the Swedish Tax Agency is mandatory. Notably, if an employee’s total salary—including benefits—does not exceed 1,000 Swedish krona per year, the employer is exempt from paying contributions or withholding tax.

Employee taxes in Sweden

Sweden uses a progressive income tax system, meaning employees' tax rates depend on their earnings. Individual tax rates also depend on an employee’s place of residence, age, and type of income. Employers must withhold the correct amount of tax based on official tax tables. For salaries exceeding SEK 80,000 per month, tax tables indicate specific percentage-based deductions.

Sweden’s income tax consists of the following:

Penalties for not paying taxes in Sweden

Ensuring timely and accurate tax filings is crucial for employers operating in Sweden. Skatteverket oversees tax compliance and conducts audits to verify the accuracy of reported information. Noncompliance, such as late filings or incorrect tax payments, can lead to significant penalties.

If an employer fails to submit the required tax returns by the stipulated deadlines, Skatteverket may impose late filing fees. Additionally, inaccuracies in tax reporting can result in punitive tax increases, where the owed tax amount is raised as a penalty for the discrepancies.

Partnering with a knowledgeable payroll service or employer of record (EOR) can help you navigate Sweden's tax regulations, ensuring accurate and timely filings, and mitigating the risk of incurring penalties.

Employee benefits in Sweden

Sweden’s social welfare system is one of the most comprehensive in the world, ensuring employees have access to essential benefits that support their well-being. Employers are required to provide statutory employee benefits such as health insurance, pensions, and occupational injury coverage, which are primarily funded through employer and employee tax contributions.

Beyond the required benefits, many employers choose to offer additional perks to remain competitive in Sweden’s job market and attract top talent.

Below is an overview of mandatory and commonly offered optional benefits in Sweden.

Mandatory benefits in Sweden

Most of Sweden’s mandatory benefits are covered through the national social security system, though employers and employees contribute to them via taxation. The statutory benefits employers must contribute to include:

• Health insurance: Sweden has a publicly funded healthcare system that all residents, including employees, can access. Employers contribute to the system through social security taxes.
• Pension: Employers must contribute to the national pension system, which includes the income-based pension and premium pension. Employees also contribute a percentage of their salary toward their pension.
• Occupational pension: This benefit supplements the general pension and is considered semi-mandatory, as almost all employees working under a CBA automatically receive an occupational pension plan from their employers. 
• Occupational injury insurance: Employers are also required to pay contributions toward work injury insurance, which covers employees in case of workplace accidents or occupational illnesses.

Keep in mind that the benefits you must provide may vary if you’re covered by a collective bargaining agreement.

Optional benefits in Sweden

Beyond Sweden’s statutory benefits, many employers offer additional perks to attract and retain top talent, particularly in competitive industries like tech, finance, and engineering. Providing optional fringe benefits can enhance employee satisfaction, support work-life balance, and demonstrate a commitment to employee well-being.

The most common optional benefits include: 

• Private health insurance: Helps employees gain quicker access to medical care compared to going through the publicly funded system
• Salary sacrifice: Allows employees to waive a portion of their gross salary for increased pension contributions (also known as lönesväxling), lowering employees’ tax burden and reducing employer contributions to National Insurance
• Life insurance: Offers a lump sum payout to a spouse or registered partner in the event of an employee’s death
• Car allowance: Either a company car or reimbursement for work-related travel on a personal vehicle
• Meal vouchers: Allow employees to purchase subsidized meals at certain restaurants (covered by the employer)
• Wellness allowance: Gives employees a set amount toward wellness activities, gym memberships, dietary counseling, etc., and normally capped at SEK 5,000

Working hours, overtime, and leave in Sweden

Sweden places a strong emphasis on work-life balance and fair labor practices. Regulations on working hours, overtime, and leave entitlements reflect these values, making sure that employees have sufficient time for rest, personal development, and family life. Below is an overview of Sweden’s key labor laws governing standard working hours, overtime limits, rest periods, and various types of leave.

Standard working hours in Sweden

Sweden’s Working Hours Act states that regular working hours may not exceed 40 per week. A standard workweek runs from Monday to Friday, with employees working about eight hours daily. It’s not unusual for collective agreements to stipulate shorter workweeks, so be sure to check the relevant CBA (if applicable) for your industry or sector for an exact number.

Overtime laws in Sweden

Sweden limits overtime to a maximum of 48 hours over a four-week period or 50 hours per calendar month (up to 200 hours per calendar year).

There is no statutory law specifying overtime pay rates in Sweden. Collective bargaining agreements typically determine overtime pay—but in the absence of an agreement, employees are not automatically entitled to a special pay rate. If a CBA exists, employees can choose to receive overtime pay monetarily or as additional leave (provided they have the option of flexible working hours).

Rest period and break laws in Sweden

Swedish employers must offer breaks and rest periods to their employees in accordance with the Working Hours Act and collective agreements. The mandatory breaks include:

• One break for every five consecutive hours of work (the duration of which is determined by the applicable CBA)
• A minimum of 11 consecutive hours of rest for each 24-hour period
• At least 36 consecutive hours of weekly rest (typically falling on weekends)

Ensuring employees receive sufficient breaks is a fundamental aspect of Swedish work culture, where a healthy work-life balance is highly valued.

Leave laws in Sweden

Swedish employees receive generous leave entitlements, including:

• Annual leave: Employees must receive a minimum of 25 days of paid leave annually, according to the Annual Leave Act. They must take 20 of those days each year, with the remainder rolling over into the next year. Leave is allotted every April 1 rather than at the start of the calendar year. Vacation pay is equivalent to 12% of the employee’s gross salary.
• Sick leave: Employers must pay 80% of an employee’s regular salary for the first 14 days of illness. After this period, the employee can apply for sickness benefits through Social Security Services (Försäkringskassan). There is no time limit on sick leave provided through Social Security, meaning an employee receives leave until a doctor confirms they can return to work.
• Parental/adoption leave: Parental leave (which encompasses paternity and maternity leave) is typically shared between both parents. Employees are entitled to take full-time parental leave for up to 18 months. Parental leave benefits are provided for the first 480 days (240 days for each parent). Employees have the flexibility to choose the number of days per month they wish to receive parental leave payments. The right to full-time leave until the child reaches 18 months of age is granted regardless of whether the employee opts to receive parental leave benefits or not. For children born in 2016 or later, each parent has 90 days reserved exclusively for them. If a parent chooses not to use these days, they cannot transfer them to the other parent. In cases of adoption, employees are entitled to the parental leave benefit starting on the date of the adoption.
• Education leave: An employee may take leave for studies (either related or unrelated to their work) if they have been employed for at least six months consecutively or for a total of 12 months over the last two years. This leave is unpaid, and there is no time limit. 
• Public holidays: Sweden has 13 public holidays (often referred to as “red days”), during which employees usually receive paid time off. Most workplaces are closed on these days.

Employee onboarding in Sweden

A thoughtful onboarding process is key to fostering a positive work environment and ensuring long-term employee engagement in Sweden. Beyond the necessary administrative tasks, effective onboarding should help new hires integrate into Sweden’s collaborative and egalitarian workplace culture—where open communication, autonomy, and work-life balance are highly valued.

Completing essential tasks like contract signing, tax registration, and any necessary background checks in advance allows new hires to focus on settling into their role from day one. Using a structured onboarding plan can help employers stay organized and create a seamless experience for new employees in Sweden.

How to onboard employees in Sweden: A simple checklist

Set your new employee up for success with our new hire onboarding checklist:

Running background checks in Sweden

Are background checks legal in Sweden?

Conducting employee background checks is legal in Sweden as long as they comply with the EU’s General Data Protection Regulation (GDPR) and local privacy laws set by the Swedish Authority for Privacy Protection. Before you run a background screening, be sure to inform the candidate about the types of information you’ll collect and what you’ll use it for—and obtain explicit consent.

What types of background checks are illegal in Sweden?

Not all types of background checks are allowed in Sweden. Any screenings relating to union membership, personal political opinions, or religious affiliation are illegal. Credit history and criminal record checks are only permitted if they are directly relevant to the position the candidate is applying for. 

Types of Swedish background checks

Offer letters in Sweden

Offer letters aren’t legally necessary in Sweden. Most employers kick off the hiring process with a verbal job offer before solidifying the details with a written employment contract. However, issuing an offer letter can help clarify key position details, such as pay, benefits, hours, and scope. While an offer letter doesn’t substitute an employment contract, it helps communicate expectations upfront before signing any legally binding paperwork. 

If you opt to send an offer letter, consider including the following details: 

• Employee’s and employer’s names and addresses
• Start date
• Job title and duties
• Workplace location
• Working hours
• Contract type (temporary or permanent)
• Salary and benefits

NDAs and confidentiality agreements in Sweden

Non-disclosure agreements, also known as confidentiality agreements, are commonly used to protect trade secrets and sensitive business information in Sweden. Sweden’s legal framework, including the Trade Secrets Act, provides strong protections against the unauthorized use or disclosure of trade secrets. Under this law, employees and third parties who unlawfully share confidential business information may face both civil and criminal penalties, including damages and fines.

To create an enforceable NDA or confidentiality agreement, clearly define what constitutes confidential information, specify the duration of the confidentiality obligation (typically up to five years post-employment), and avoid overly broad or unreasonable restrictions. Employers can incorporate confidentiality clauses directly into employment contracts or draft separate standalone agreements to ensure the proper protection of business interests.

Probationary period in Sweden

Probationary periods in Sweden are limited to a maximum of six months. If an employer or employee wants to terminate employment during this time, they must typically offer two weeks’ notice (unless stated otherwise in the relevant CBA or individual employment contract). After the six-month period, the employment automatically becomes indefinite.

Work permits in Sweden

Before a new employee can begin working in Sweden, employers must make sure they can legally work there. Citizens of EU/EEA countries and Switzerland can live and work in Sweden without a permit. However, non-EU/EEA nationals typically require a work permit, which must be obtained before entering Sweden.

Who needs a work visa in Sweden?

In Sweden, any employee who is not an EU/EEA or Swiss national typically requires a work permit (the most common being a General Work Permit) to live and work in the country legally. A few exceptions apply, specifically for 18 to 30-year-olds from Australia, Canada, Hong Kong, Japan, New Zealand, and South Korea. They may apply for a special working holiday visa that’s valid for up to one year.

Before recruiting foreign employees, Swedish employers must first advertise the job listing to all Swiss, Swedish, and EU/EEA citizens for at least 10 days via the Swedish Public Employment Service job bank.

How long does it take to get a work visa in Sweden?

Work visa processing times vary significantly in Sweden and depend on several factors, such as application volume and agency resources. The Swedish Migration Agency processes most first-time applications in under four months. However, applicants who miss key information or documents may experience longer processing times, so make sure to complete each step diligently.

Types of work visas in Sweden

Sweden offers several permit types that allow foreign nationals to work in the country. The most common ones include:

• Work permit (Arbetstillstånd): Employer-sponsored work permit for non-EU employees, valid for two years 
• Working holiday visa: A one-year visa for 18 to 30-year-old applicants from Australia, Canada, Hong Kong, Japan, New Zealand, and South Korea
• EU Blue Card: Work and residence permit for highly-skilled employees from outside the EU/EEA
• Intra-company transfer: Allows companies to transfer foreign employees to Sweden for temporary assignments

Termination and redundancy in Sweden

Sweden’s employment laws provide strong protections for workers, making it essential for employers to follow strict legal procedures when terminating employment. Dismissals must be based on valid reasons, such as redundancy due to economic or organizational changes, or causes like serious misconduct or underperformance.

To mitigate legal risks, employers should maintain clear documentation of performance issues or business-related justifications for redundancy. Transparent communication and adherence to collective agreements, where applicable, can help ensure compliance with Swedish labor laws while fostering trust in the workplace.

Does at-will employment exist in Sweden?

At-will employment is an employment model that permits the employer or the employee to terminate employment at any time and for any reason (as long as it is not discriminatory). While this model is common in the United States, it is not recognized in Sweden.

The Swedish Employment Protection Act (LAS) states that employers must have a valid reason in order to terminate an employee (such as redundancy, organizational changes, or the employee’s performance). Wrongful dismissals can result in legal disputes, union involvement, and potential compensation for the employee.

Notice periods in Sweden

Swedish employers and employees must provide notice when ending an employment relationship. The LAS lays out statutory notice periods (which vary depending on the length of service).

Note that some CBAs may extend notice periods. Check your relevant CBA (if applicable) for the most accurate information appropriate to your organization and employees.

Severance pay in Sweden

Sweden does not have legally mandated severance pay. Instead, collective agreements or employment contracts typically specify severance pay requirements. Offering severance can help maintain positive employer-employee relations and reduce the risk of legal disputes.

How to terminate employees compliantly in Sweden

Managing terminations across multiple countries can be challenging, especially when balancing Sweden’s employment protections with the varying requirements of other jurisdictions. Global employment adds another layer of complexity, requiring employers to navigate just-cause termination standards, probationary and notice periods, and potential severance obligations across different legal frameworks.

Partnering with an employer of record (EOR) simplifies the process by handling complex local regulations on your behalf. An EOR ensures that every termination is conducted in compliance with Swedish labor laws, so you can focus on scaling your global workforce without the administrative burden.

FAQs about hiring in Sweden

Can I hire in Sweden without my own entity?

Yes. You can hire employees without establishing your own legal entity by partnering with an EOR in Sweden. Most EORs manage payroll, taxes, benefits, and compliance with Swedish labor laws, allowing you to focus on overseeing your employees’ day-to-day responsibilities without the administrative complexities of setting up a local entity.

What is the difference between an independent contractor and an employee in Sweden?

In Sweden, employees work under their employer’s control and direction, receive mandatory benefits, and have income taxes and social security contributions deducted directly by their employer. Independent contractors, on the other hand, operate their own businesses, create their own schedules, negotiate their own rates, and are responsible for handling their own taxes. Misclassifying an employee as a contractor can lead to significant consequences, including back payments, tax penalties, and potential legal fees.

What does a company need to hire employees in Sweden?

To hire employees in Sweden, a company must have a registered legal entity or work with an EOR. Employers need to register with the Swedish Tax Agency to obtain a corporate identity number and handle tax withholdings and employer contributions. They must also comply with Sweden’s employment laws, which often involve collective bargaining agreements, and ensure proper payroll processing, benefits administration, and workplace protections. Partnering with an EOR can simplify compliance, allowing companies to hire in Sweden more swiftly.

What is the annual leave entitlement in Sweden?

Employees in Sweden are entitled to a minimum of 25 days of paid annual leave per year under the Annual Leave Act, but may be entitled to more under their individual contracts or CBAs. Employers must ensure that employees take at least 20 of these days each year, while the remaining five can roll over. Unlike many countries, Sweden’s vacation year runs from April 1 to March 31 rather than following the calendar year.

How much does it cost to hire an employee in Sweden?

In Sweden, the cost of hiring an employee goes beyond just their salary. Employers are required to pay an additional 31.42% in social security contributions, which fund benefits like pensions, health insurance, and unemployment coverage. Depending on the industry, CBAs may also mandate extra costs, such as holiday pay or supplementary pensions. These factors should be considered when budgeting for new hires in Sweden.

What is always required when an employer terminates an employee in Sweden?

Swedish employers must have a valid reason for termination, such as redundancy or serious misconduct, and must follow the required notice periods outlined in the Employment Protection Act or applicable collective bargaining agreements (CBAs). You must also communicate dismissals in writing, and in some cases, consult with trade unions before proceeding.

How does a US company pay a foreign employee in Sweden?

A US company can pay employees in Sweden through several different methods, each with its own compliance obligations. One option is to establish a legal entity in Sweden, which allows the company to run payroll locally and handle all tax withholdings and employer contributions directly.

Alternatively, a US company can work with an employer of record or a global payroll provider to manage Swedish payroll and compliance on their behalf. An EOR acts as the legal employer, handling payroll, tax filings, and social security contributions while the US company retains control over day-to-day operations. A global payroll provider, on the other hand, can help facilitate payments while ensuring compliance with Swedish tax and labor laws.

Disclaimer: Rippling and its affiliates do not provide tax, legal, or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal, or accounting advice. You should consult your own tax, legal, and accounting advisors before engaging in any related activities or transactions.