Employment and employee benefits in Sweden: overview
A Q&A guide to employment and employee benefits law in Sweden.
The Q&A gives a high level overview of the key practical issues including: employment status; background checks; permissions to work; contractual and implied terms of employment; minimum wages; restrictions on working time; illness and injury; rights of parents and carers; data protection; discrimination and harassment; dismissals; redundancies; taxation; employer and parent company liability; employee representation and consultation; consequence of business transfers; intellectual property; restraint of trade agreements and proposals for reform.
To compare answers across multiple jurisdictions, visit the Employment and Employee Benefits: Country Q&A tool.
The Q&A is part of the global guide to employment and employee benefits law. For a full list of jurisdictional Q&As visit www.practicallaw.com/employment-guide.
Scope of employment regulation
Foreign nationals working in your jurisdiction?
Nationals of your jurisdiction working abroad?
Laws applicable to foreign nationals
A distinction is made between posted workers and foreign workers that permanently work in Sweden. A posted worker is someone employed in another country but sent by his employer on a temporary basis to carry out work in Sweden. Directive 96/71/EC concerning the posting of workers (Posted Workers Directive) sets out standards for posted workers and covers a wide range of issues such as:
Maximum work periods.
Minimum paid annual leave.
Safety at work.
This applies to all posted employees. Posted workers are guaranteed a minimum level of protection under the Foreign Posting of Employees Act (1999:678) and most of the laws applicable to employees that work in Sweden permanently apply to posted employees.
Swedish employment rules and regulations are applicable in their entirety if the worker is not a posted employee but is considered to work in Sweden permanently. The main laws in this area are the:
Employment Protection Act (1982:80).
Work Environment Act (1977:1160).
Employment (Co-Determination in the Workplace) Act (1976:580).
Annual Leave Act (1977:480).
Parental Leave Act (1995:584).
Discrimination Act (2008:567).
Working Hours Act (1982:673).
Laws applicable to nationals working abroad
The Posted Workers Directive applies to Swedish nationals working abroad within the EEA or in Switzerland. In addition, as a result of the conflict of laws regulations, Swedish employment law can apply in its entirety to nationals working abroad if the employment relationship has a strong connection with Sweden (for example if the national is employed by a Swedish legal entity).
Categories of worker
Swedish law does not categorise workers. However, agreements to perform work fall into two major categories:
Employment work agreements.
Contract work agreements.
Labour law applies only to employees. Swedish law offers no definition of the categories and the labelling of the contract is irrelevant. The categories are distinguished by the degree of independence of the party performing work for the opposite party, employees being heavily dependent, whereas contract workers are much more independent. Independent contractors are generally individuals living by selling their labour to private and public employers, while a worker is anyone who performs remunerated work personally in accordance with the continuous instructions of the employer.
Entitlement to statutory employment rights
See above Categories of worker. The distinction between employment work and contract work is also decisive in determining the applicable legislation in other areas, such as taxation and social security.
Generally, an employee cannot be employed on a temporary basis for more than two years, after which the temporary employment automatically converts to a continuous employment, under the Employment Protection Act (1982:80).
Grants or incentives
There are currently several employment incentive programmes, administrated by the Public Employment Agency. These are limited in time depending on, among other things, the type of the programme and on the age of the employee. For example, these programmes include financial support for:
Employers that employ people with disabilities impairing their ability to work.
Employers that employ persons who have been unemployed for a longer period, persons that have been in prison, newly arrived immigrants or persons that participate in certain work programmes.
Employing people under the age of 25 who have been unemployed for at least three months or do not have relevant work experience.
Employing persons for a trainee period.
Information must be filed beforehand for an employer to benefit from these programmes.
Written information to new employees
Within one month from the commencement of the employment, the employer must provide written information to the employee regarding the essential terms and conditions of the employment (see Question 7, Written employment contract)
An employer who hires employees for the first time must register as an employer with the Swedish Tax Agency.
There is no prohibition on carrying out background checks in relation to applicants.
However, employers are generally not entitled to an applicant's criminal record. There are some exceptions applicable, such as for child-related work and insurance intermediaries. In such cases, the employer is required to check the applicant's criminal record. It is common that employers ask applicants to show extracts from criminal records on a voluntary basis in connection with an interview (that is, extracts that the applicants have themselves requested from the police authority).
Generally, an employer cannot process personal data regarding an applicant's criminal records. The Swedish Personal Data Act (1998:204) specifically prohibits bodies other than authorities from processing personal data concerning:
Violations of laws involving crimes.
Judgments in criminal cases.
Penal procedural coercive measures.
Administrative deprivations of liberty.
An employer's possibility to carry out background checks is to some extent also limited by the Discrimination Act (2008:567). For example, if the background check contains questions or information regarding the applicant's pregnancy or expected pregnancy, a decision to reject the applicant based on such information may be considered discriminatory. A third party acting on behalf of the employer, such as when using a recruitment firm, is limited to the same extent.
Permission to work
Visas for business visits
Procedure for obtaining a visa. Citizens of the EU and EEA member states and citizens of visa-exempted countries can travel to Sweden for business purposes without a visa. Other foreign nationals need a visa, for which an application can be filed with a Swedish embassy or consulate abroad.
Cost. The application fee for a visa is EUR60.
Time frame. The processing time for a visa application is normally 14 days, but it can in some cases be longer.
Requirements. EU/EEA citizens and Swiss citizens can work in Sweden without a work or residence permit. Citizens of countries outside the EU/EEA and non-Swiss citizens must, however, obtain a work permit. The work permit must normally be obtained before the individual enters the country. The work permit requirements are as follows.
The individual must hold a valid passport.
The prospective employer in Sweden must issue an offer of employment with a salary and other terms of employment that are at least equivalent to those of the relevant Swedish collective bargaining agreement or such terms that are customary in the relevant occupation or industry. This means that, among other things, the employer is required to supply an occupational pension and a number of other standard employee benefits.
The employer must have advertised the position for at least ten days on the Swedish Public Employment Agency's website prior to the application being filed. This requirement does not apply if the employee is transferred to Sweden within a group of companies.
A trade union must be offered the opportunity to comment on the offer of employment and state whether or not the salary and other terms fulfil the requirements listed above.
For certain work such as work within the construction, restaurant, hotel and cleaning services sectors, the employer must also prove its capacity to pay a salary to the employee through the disclosure of bank statements and other documents.
A residence permit is required for an employee who will be working in Sweden for more than three months. An individual obtaining a working permit for a time period exceeding three months will also be granted a residence permit. If the employment is for a period less than three months, citizens of certain countries must apply for a visa in addition to the work permit.
Applications for work and residence permits are filed electronically with the Swedish Migration Board. An application for an extension of the work permit must be submitted before the existing permit expires. The employee can continue to work while waiting for a decision.
Cost. The application fee for a work and residence permit is SEK2,000.
Time frame. The processing time for a work and resident permit varies. Where the application is complete, a decision can often be reached within two to four months. The processing time for an extension application is usually longer.
After a work permit has been granted. An employer hiring an individual who is not a citizen of an EU/EEA member state or a Swiss citizen is required to report the hiring to the Swedish Tax Agency by filing form SKV 1160 to the Agency. The report must be made by the 12th of the month following the month when the employee started to work. A failure to observe this obligation can result in liability to pay a fine or, where there are aggravating circumstances, imprisonment of up to six months.
The employer must also verify that the employee holds a valid work and residence permit and keep a copy of the relevant documents for 12 months after the termination of the employment.
Sanctions. An employer that employs individuals who do not hold the required work or residence permits can be liable for a fine or, in aggravating circumstances, imprisonment for up to one year. The employer can also be liable to a fine of up to SEK44,300 (for 2016) per employee without the required work or residence permits, regardless of whether criminal charges have been brought.
Restrictions on managers and directors
Managing directors or board members must be at least 18 years old.
The following persons linked to a company must reside within the EU/EEA:
The managing director.
At least half of the board members.
At least half of the deputy board members.
At least one of the persons that holds special signatory power.
However, it is possible to file for an exemption from these restrictions at the Swedish Companies Registration Office.
Managing directors and board members must not:
Be declared bankrupt.
Be banned from trade activity.
Have a legal custodian.
Regulation of the employment relationship
Written employment contract
There are no formal requirements for employment contracts. An employment contract can be entered into both orally and in writing. However, oral employment contracts are very rare and a written contract is usual. If the employment lasts for more than three weeks, the employer must provide the employee with written information on the essential terms of employment at the latest one month after the starting date of the employment. Such information must as a minimum contain the following:
The employer's and the employee's name and address, commencement date and work place.
A short description of the duties and the employee's occupational title.
Information relating to whether the employment is for an indefinite term, fixed term or is a probationary form of employment. If the employment is:
for an indefinite term, the applicable notice periods must be provided;
for a fixed term, the termination date and the form of fixed term employment must be provided;
probationary, the length of the probationary period must be provided.
Starting salary, other salary benefits and how often the salary is paid.
The length of the employee's paid holiday and the normal working hours per day or per week.
Applicable collective bargaining agreement, if any.
An exception to this rule applies for employments that are shorter than three weeks.
A provision in an individual agreement is invalid if it excludes or limits employees' rights under mandatory labour law.
The rate of unionisation is just over 70% of the Swedish working force and is fairly evenly distributed among private, local government and state sectors. Collective agreements are common in all industries. Employers are also highly organised and the vast majority of Swedish workplaces are bound by collective agreements.
It is not possible for an employer to unilaterally change the essential terms and conditions of an employment. Both parties must agree to such changes. The employer can unilaterally change non-essential terms of employment based on the employer's right to direct work.
The employer can terminate employment and then re-employ the employee on new terms and conditions. However, this termination of employment requires objective grounds (see Question 20).
Restrictions on working time
The Working Hours Act (1982:673) regulates working hours. Normal working hours cannot exceed 40 hours per week. For a period of four weeks, the maximum overtime is 48 hours, or for a calendar month, a maximum of 50 hours overtime. The maximum amount of overtime work in one year is 200 hours. However, extra overtime of 150 hours per year is permitted if there are special reasons for it and the situation cannot be solved in any other reasonable manner.
The Working Hours Act can be modified or set aside in its entirety through collective agreements. Special rules apply for employees under the age of 18.
The Working Hours Act entitles an employee to rest breaks after five hours of work. In addition, an employee must generally have at least 11 hours of break in every period of 24 hours (the daily rest period) and this must include the hours between 12.00 midnight and 5.00 am. An employee is also entitled to 36 hours of consecutive rest during every seven-day period (weekly rest period).
The Working Hours Act contains special regulations for night work, that is, work performed between 10.00 pm and 6.00 am. However, the Act can be modified or set aside in its entirety through collective agreements and, therefore, certain categories of employment involving shift work often have regulations on working hours in collective agreements.
Minimum paid holiday entitlement
The Annual Leave Act (1977:480) regulates minimum holiday entitlement and holiday pay, and applies to all employees. Under the Act, employees are entitled to 25 days of paid holiday per year. Regarding employments lasting up to three months, it is possible to agree that the employee will not be entitled to any holiday. The employee will still, however, be entitled to holiday pay.
The Act can be replaced by rules in collective agreements. In some categories of employment, it is common to negotiate additional paid holiday or be compensated for overtime by additional paid holiday.
There are 12 public holidays in Sweden during which employees are generally entitled to have paid time off. In addition, Midsummer Eve, Christmas Eve and New Year's Eve are considered and generally treated as public holidays. These days are not included in the minimum holiday entitlement. Many employees are also entitled to half-days the day before a public holiday. However, it is common for the employer to have a policy for public holidays or for collective agreements to regulate this.
Illness and injury of employees
Entitlement to paid time off
Generally, no wages or sick pay are paid for the first day of absence due to illness (qualification period). The employee is entitled to sick pay from the employer from day two to day 14 of each period of absence. The sick pay amounts to 80% of the employee's salary. Employees must notify the employer immediately of their condition in order to receive sick pay.
Entitlement to unpaid time off
Employees who are prevented from performing their work due to illness or injuries are entitled to time off.
An employee who is unable to perform work for a period longer than seven days must present a doctor's certificate. Otherwise, the employer is not obliged to pay sick pay. The employer can under certain circumstances request a doctor's certificate during the first seven days of absence, for example, if an employee has repeated short-term absence without any apparent medical cause.
An employee is also entitled to time off for rehabilitation and dental appointments.
Recovery of sick pay from the state
Sickness benefit is paid by the state to the employee after 14 days. Sickness benefits amount to approximately 80% of the annual income. However, it is capped at an annual income of SEK332,200 (for 2016), resulting in a maximum compensation of SEK706 per day. Collective agreements usually have other and more beneficial terms for compensation during sick leave and individual employment agreements can also include more beneficial terms.
There is an additional safety net against high sick pay costs for employers. The employer may receive from the state compensation for annual sick pay costs that exceed a certain level.
Statutory rights of parents and carers
Parents (including maternity, paternity, surrogacy, adoption and parental rights, where applicable)?
Carers (including those of disabled children and adult dependants)?
The Parental Leave Act (1995:584) stipulates parents' right to leave. Both parents have an equal right to leave. The right to leave includes:
The right to full leave in connection with childbirth for female employees. This includes at least seven weeks before the calculated date of delivery and seven weeks after the delivery. A female employee is also entitled to leave for breast-feeding.
Full time off for a parent until the child is 18 months or, provided that the parent then has full parental benefits, for the time thereafter. It is possible to take out parental benefit up to and including the day the child turns 12 years old or when the child finishes form/grade 5 in compulsory school. However, after the child has turned four years old, it is only possible to save 96 days (parental benefit is paid out for 480 days in total).
Parents also have the right to shorten their working hours by up to a quarter of the normal hours until the child reaches the age of eight.
Leave for temporary care of children.
The statute does not provide for pay during time off but social security legislation entitles parents to compensation for lost income in many situations, including parental leave, amounting to approximately 80% of wages. Parental benefit is paid for 480 days for each child. The days can be divided freely by the parents, but a minimum of 90 of the 480 days are allocated for each parent. The first 390 days the compensation is based on the employee's income, the following 90 days the compensation amounts to SEK180 per day (days on the lowest level).
Under the Social Insurance Code (2010:110), the father has a right to leave for ten working days in connection with childbirth. This right stretches 60 days from the child's birth.
Surrogacy is not legal in Sweden.
The same right to leave is applicable to parents of adopted children. This right is also given to:
Legal custodians and others that have a child and/or are responsible for permanent care or fosterage.
Someone who lives together with a parent of a child, and:
has or has had other children with the parent;
is or has been married to the parent; or
is or has been a registered partner of the parent.
See above, Maternity rights.
The Care for Related Persons Act (1988:1465) provides a right to leave for employees in connection with seriously ill relatives. Carers are entitled to leave for as long as they are eligible for compensation from the social insurance system. A carer is compensated for up to 100 full working days in relation to each person that is cared for, under the Social Insurance Code (2010:110). The 100 days are tied to the person being cared for and if more than one relative are caring for them the days must be shared. The employee can choose either leave for full-time care, or can choose a reduction of normal working hours by one-half or one-quarter.
Continuous periods of employment
Statutory rights created
The notice period for termination is tied to the length of service and the length of service gives the employee advantage in redundancy situations. Ranking is based on the length of service (last-in, first-out).
Consequences of a transfer of employee
The Employment Protection Act (1982:80) allows an employee who is transferred to a new employer to take account of the foregoing period of employment if, at the time of the transfer, both employers belong to the same group of companies.
An employee is also entitled to be credited with the period of employment with the former employer, if the employment is transferred to a new employer as a consequence of a transfer of undertaking in accordance with section 6b of the Employment Protection Act.
Fixed term, part-time and agency workers
The Act against Discrimination of Part-time Employees and Employees on Fixed-term Employment (2002:293) prevents employers from disfavouring part-time employees or employees on fixed term employment contracts. The employment cannot provide for less favourable employment conditions than the employer gives or would have given employees that work full-time or have an employment for an indefinite period. The Act covers both direct and indirect discrimination. However, the Act does not prohibit less favourable terms and conditions when these are justified on reasonable grounds.
Agency workers have their employment contract with their agency and are paid by their agency. Agency workers are not considered as employees with the company for which they are providing services. However, the courts may find an agency worker to be a de facto employee of the company in certain circumstances.
Under the Agency Work Act (2012:854), the agency will guarantee the agency worker at least the same basic working and employment conditions that would apply if they had been recruited directly by the employer using the agency for recruitment (customer) to carry out the same job for the duration of the agency worker's assignment with a customer. Deviations from this equal treatment rule can be made through collective agreement. The equal treatment rule does not apply to the salary level for agency workers that are employed for an indefinite term and who also receive salary from the agency between customer assignments.
The Act against Discrimination of Part-time Employees and Employees on Fixed-term Employment (2002:293) also applies to part-time workers. See above Temporary workers.
Employees' data protection rights
The Personal Data Act (1998:204), based on Directive 95/46/EC on data protection (Data Protection Directive), stipulates how and when personal data relating to employees (any and all kinds of information which may directly or indirectly refer to an employee) can be processed lawfully by an employer. It is always required that the employer has informed the employee of the retention and other processing of personal data and often it is required that the employee has given consent (see below). The Swedish Data Protection Authority supervises compliance with the Act.
Employers' data protection obligations
The employer's processing of personal data relating to its employees requires that the processing is based on a legally valid consent from the employee or that any other legal ground in the Personal Data Act is present. Other legal grounds where the employer can process personal data include instances when the:
Processing of personal data is necessary for the performance of the employment contract or any other contract between the employer and the employee (which must have been entered into by the employee). Therefore, a contract between the employer and a legal entity (such as a staffing agency) does not entitle the employer to process personal data relating to employees of the staffing agency.
Processing of personal data is necessary to comply with a legal obligation (for example, to report taxes and social security payments relating to employees).
Employer is entitled to do so on the balance of interests. The result of the balance of interests depends, among other things, on the:
circumstances at the relevant place of work;
kind of business that the employer runs;
purpose of the processing of personal data;
rules and guidelines issued by the employer; and
information that the employer has provided to the employees.
The employer can retain personal data relating to its employees only while the employment still exists, and for a certain time after the employment's termination (in accordance with the purposes listed above).
If the employer wants to transfer personal data to a country outside of the EU/EEA, the employees must be informed. Additionally, the employer must satisfy the requirement that any of the specific legal grounds for such transfer under the Personal Data Act must be present (for example, the EU standard contractual clauses).
Discrimination and harassment
Protection from discrimination
Under the Discrimination Act (2008:567), an employer cannot (directly or indirectly) discriminate against an employee or a job applicant (or a member of another protected category (see below) on the basis of:
Transgender identity or expression.
Religion or other system of belief.
The Discrimination Act defines harassment and sexual harassment as forms of discrimination. Harassment is defined as conduct that violates the dignity of an individual on the grounds listed above. Sexual harassment is defined as conduct of a sexual nature that violates the dignity of an individual.
The Discrimination Act also defines inadequate accessibility as a form of discrimination. This is when a person with a disability is disadvantaged through a failure to take reasonable accessibility measures to put him/her in a comparable position to people without such a disability.
An employer is prohibited from engaging in discrimination against:
Persons who are on standby to carry out or who carry out work as hired or borrowed manpower.
In principle, the prohibitions on discrimination apply to all aspects of recruitment and employment, including the employer's selection of applicants for interviews and the employer's decisions relation to promotions, salaries and other terms and conditions of employment. The prohibitions also apply when the employer gives notice of termination, or dismisses or takes any other action against an employee.
However, there are some exceptions to these prohibitions. For example, positive discrimination on the basis of gender is permitted if it is suitable and necessary to achieve certain public policy goals, such as equality between women and men. However, positive discrimination cannot be implemented in connection with conditions of salaries or employment.
Under the Discrimination Act, an employer is also obliged to take active measures to:
Prevent harassment and investigate alleged acts of harassment.
The Equality Ombudsman is responsible for compliance with the Discrimination Act. Damages may apply, which aim to operate as both deterrence and as compensation. Damages normally ranges between SEK10,000 to SEK150,000.
Protection from harassment
See above for harassment protection under the Discrimination Act.
Additionally, the Work Environment Act (1977:1160) establishes an employer's obligations in relation to the working environment. This includes a responsibility to prevent all kinds of harassment.
Currently, there is no specific protection for whistleblowers. However, a new legislation protecting whistleblowers from reprisals from their employer will enter into force on 1 January 2017. This legislation will protect employees who report serious wrongdoings in the employer's business. An employer who acts in breach of the legislation can be liable for damages to the employee.
Additionally, whistleblowers are protected under the Constitution and the Freedom of the Press Act (1949:105), which stipulates a right to provide information to the media without the risk of repercussions.
Employees in the public sector have a more extensive right to provide information to the media, which includes a right to anonymity and a prohibition on authorities and other public agencies investigating who has provided information. Those same rules of anonymity do not apply in the private sector.
Many employers in Sweden have report systems for whistleblowing. It is possible for employers to process personal data in these systems without having to apply for a special permission from the Data Inspection Board. However, the employer must comply with the requirements in the Personal Data Act, meaning that the employer must fulfil the fundamental requirements in the Act, have a legal ground for the processing and provide sufficient information to the data subjects.
Termination of employment
The statutory notice periods to be observed by the employer vary in accordance with the employee's length of service and range from one to six months as follows:
Employed for less than two years: one month's notice period.
Employed for at least two years but less than four years: two months' notice period.
Employed for at least four years but less than six years: three months' notice period.
Employed for at least six years but less than eight years: four months' notice period.
Employed for at least eight years but less than ten years: five months' notice period.
Employed for at least ten years: six months' notice period.
However, individual employment agreement or collective agreements may provide for longer notice periods. In general, employees adhere to notice periods of one to three months.
There are no statutory rights to severance payments. The employee is entitled to normal wages during the notice period.
However, individual agreements can stipulate a right to a severance payment. Collective agreements can also provide for supplementary unemployment benefit (AGE) to employees dismissed due to redundancy. This compensation (referred to as severance compensation) is provided by an insurance system which is collectively financed by the employer community and, therefore, not paid directly by the employer.
Procedural requirements for dismissal
Under the Employment Protection Act (1982:80), a notice of termination must be in writing and must contain some specific information, including instructions for appeal and, in redundancy situations, whether the employee has a priority right to be re-employed. A notice of termination must also, as a general rule, be delivered in person to the employee.
A dismissal is never dependent on approval by the union, but employers must consult with the union in many situations, including in redundancy situations. If the employer does not consult with the relevant trade unions when required, the employer may be liable to pay damages to the trade unions concerned.
An employer that gives a notice of termination due to personal reasons (see Question 20) must inform the employee and the relevant trade union of this at least two weeks in advance. For cases of dismissal without notice it is one week in advance.
An employer who wants to terminate a probationary employment during or at the end of the probationary period must notify the employee and the relevant trade union at least two weeks in advance.
Employees with a fixed-term employment must leave at the end of the period. However, these employees are often entitled to a formal notice of termination.
Dismissals that breach the procedural rules (see above) are still valid. However, the employer may be liable for punitive damages.
Protection against dismissal
The Employment Protection Act (1982:80) regulates the circumstances under which an employer can terminate employment. Under the Act, the employer must have objective grounds (just cause) for terminating employment, that is, either redundancy or personal reasons. The Act states that there is no just cause when it is reasonable to require the employer to provide other work for the employee. This obligation is far reaching. In most cases, dismissal for personal reasons is connected to misconduct, such as disciplinary dismissal. The employer has a far-reaching duty to correct any improprieties or wrongdoings by pointing them out in advance to the employee, so that the employee can adjust and have a chance to remedy the situation. The employer also has a responsibility to provide for rehabilitation if the employee is suffering from a physical and/or mental condition that affects the working ability. The employer must accept performances that are not exemplary. Dismissal is only considered based on just cause if these attempts fail.
There is a distinction between dismissal with or without notice. Dismissal without notice is only permitted if the employee has grossly neglected their obligations towards the employer.
Employees employed for a fixed term can be given notice of termination during the term of employment only if this has been agreed on and if the employer has just cause for termination. Otherwise, such employment will terminate at the end of the employment period.
The termination of a probationary employment does not require objective grounds. Therefore, employees within their probationary period do not have any protection against dismissal. However, a termination must not be based on discriminatory reasons. Such a termination may be declared invalid by a court and the employer can be liable for damages.
The right to dismiss safety delegates and trade union representatives is limited by law and is often further limited by collective agreement.
Definition of redundancy/layoff
An employer must have just cause (objective grounds) for giving notice of termination (see Question 20). Redundancy is normally constituted by a closedown of business, re-organisation, downsizing, relocation or introduction of labour-saving technology.
The employer must observe a special ranking order of priority, as laid down by law or applicable collective agreement. Ranking is based on length of service (seniority or last–in-first-out). A right for re-employment may apply. The employer must consult with relevant trade unions before terminating any employments due to redundancy.
A requirement for terminating an employment contract on the basis of redundancy is that the employee cannot reasonably be repositioned or retrained within the company.
Employees are entitled to salary and other benefits from the employer during the entire notice period.
All redundancies in Sweden are treated the same way regardless of the number of employees involved. Therefore, there is no threshold for considering when it is a collective redundancy.
However, a redundancy affecting five or more employees within the same county requires the employer to provide written notice to the Public Employment Agency before the reduction in operations:
If no more than 25 workers are affected: two months before.
If more than 25 but not more than 100 workers are affected: four months before.
If more than 100 workers are affected: six months before.
Employee representation and consultation
In companies with at least 25 employees, the employees have the right to be represented on the board of directors by two representatives and two deputy officers if the company is bound by a collective agreement. If the company has at least 1,000 employees and is engaged in different industries, the employees have the right to three representatives and three deputy officers. The decision to appoint employee representatives is made by the union(s) that have entered into a collective agreement with the employer. The employee representatives have the same rights and obligations as the other directors of the board.
Under the Employment (Co-Determination in the Workplace) Act (1976:580), an employer bound by a collective agreement must consult with the relevant trade union on all important decisions concerning the business or important change of employment for any employee belonging to a trade union. This is called the duty of primary negotiation. Important decisions include, but are not limited to:
Closedown of the business.
Transfer of undertaking.
Outsourcing of business.
Use of contractors.
Appointment of business leaders.
Major investment decisions.
If the employer is not bound by a collective agreement, consultation takes place with all trade unions affected. However, this duty only covers transfers of undertaking and terminations due to redundancy. In addition, consultations must take place when the terms and conditions of an individual employment contract are changed.
The consultations do not need to result in any agreement with the trade unions. Therefore, the employer is free to reach any decision (within the confines of the law) once the consultations have been concluded.
Transfers of undertakings always constitute an obligation to consult (under the primary duty of negotiation).
A share transfer constitutes an obligation to consult with the relevant trade unions for the selling and the buying company. The target company does not normally have an obligation to consult. However, the employer must always consult with relevant trade unions if the transfer involves re-organisation, business leader appointments or other important changes within the company.
The employer may be liable to pay punitive damages to the different trade unions concerned, if the employer does not consult with the relevant trade unions when required.
Employees who are bound by a collective agreement cannot initiate or participate in industrial action such as strikes, blockades, boycotts or other comparable industrial action for the duration of the collective agreement.
Consequences of a business transfer
Automatic transfer of employees
If the business transfer qualifies as a transfer of business by law, certain rules apply. Directive 2001/23/EC on safeguarding employees' rights on transfers of undertakings, businesses or parts of businesses (Transfer of Undertakings Directive), has been implemented in Sweden, as follows:
All employees belonging to the concerned business are automatically transferred to the acquirer of the business. The terms and conditions of each transferred employment remain unchanged and must be respected by the new employer. Therefore, the new employer has the same rights and obligations towards the employees as the former employer.
If the transferor is bound by at least one collective bargaining agreement (CBA), the CBAs will generally be transferred to the acquiring employer if the acquirer is not already bound by a CBA that is applicable to the type of work in question. This can be avoided if the transferor terminates the CBA at least 60 days before the transfer.
If the transferor's CBA is not transferred, the acquirer will still generally be obligated to apply the terms and conditions of the CBA to the transferred employees (without being bound by the actual CBA) for one year after the transfer.
The employees affected can oppose the transfer and will, in that case, remain employed by the transferor (which naturally often results in a redundancy situation).
Protection against dismissal
Employment contracts cannot be terminated merely because of the transfer of business. Termination of employment contracts must be based on just cause. A transfer of business does not in itself constitute a just cause.
Employees that are transferred to a new employer carry forward their continuous period of employment with the former employer for the purposes of calculating their notice period under the Employment Protection Act (1982:80) and for establishing the order of priority in a redundancy situation with the new employer.
Both the transferor and the acquiring employer are normally required to consult trade unions before carrying out a transfer of business (see Question 22).
Employer and parent company liability
An employer can be liable for the acts of its employees?
A parent company can be liable for the acts of a subsidiary company's employees?
Under Chapter 3, section 1 of the Tort Liability Act (1972:207), employers are liable for personal injuries and property damage caused by their employees' fault or negligence within the scope of their employment. The employer is also required to compensate pure economic losses caused by the employee to a third party through the commission of a crime. An important restriction is the requirement that the damage must have been caused within the scope of the employment. For example, damage caused by an employee outside of work or unrelated to their employment falls outside this rule. Also, Chapter 4, section 1 of the Act reduces the employee's own liability to cases where there are compelling reasons for imposing such a liability, taking into account the nature of the act, the employee's position, the injured party's interest and other circumstances.
Parent company liability
In general, a parent company is not held liable for the acts of its subsidiary companies' employees.
Employee rights on insolvency
The Wage Guarantee Act (1992:497) ensures payment of employees' claims arising from their employment in the event of the employer's insolvency. The wage guarantee covers salary claims that have priority in the bankruptcy under the Rights of Priority Act (1970:979). Therefore, the salary must refer to the three-month period preceding the filing of the application for bankruptcy or one month thereafter. Wage guarantee can also be paid for salary due during an employee's notice period if the notice period extends beyond the one-month period following the bankruptcy decision.
The wage guarantee is capped at four times the applicable price base amount per employee and cannot be paid for a longer period of employment than eight months. For 2016, the applicable price base is SEK44,300, therefore the wage guarantee cap is SEK 177,200.
The employee must give notice of the compensation claim to the bankruptcy administrator, who then decides whether payments under the guarantee will be made. The local County Administrative Board is responsible for the payments to the employees.
State guarantee fund
The state funds the payments under the Wage Guarantee Act. See above, Employee rights on insolvency.
Health and safety obligations
The employer has a primary responsibility to ensure a good working environment and has a general duty to take all necessary measures to prevent the occurrence of illness (both physical and mental illness) or accidents among the employees. The Work Environment Act (1977:1160) and the number of regulations issued by the Work Environment Authority for different types of work regulate this obligation to prevent illness and accidents at work. The most important aspects of the Act are as follows:
Anything that can result in illness or accidents must be changed or replaced to eliminate the risk that an illness or accident occurs.
Employers and employees must work together towards creating a satisfactory work environment.
Efforts to provide a satisfactory working environment must be carried out in a systematic manner. Continuous risk assessments, routines (including allocations of work environment tasks), action plans and follow-up procedures are required.
Employers are responsible for the rehabilitation of employees with health problems.
The work should be future-oriented.
Workplaces that have more than five employees working on a regular basis must have at least one safety delegate that is appointed from among the employees. Safety delegates represent the employees in work environment matters and must work together with the employer on such matters. A safety committee with representatives of both the employer and the employees must be appointed at workplaces with 50 or more employees.
Taxation of employment income
Foreign nationals working in your jurisdiction?
Nationals of your jurisdiction working abroad?
Foreign nationals working in Sweden for less than six months must pay tax in accordance with the Special Income Tax for Non-Residents Act (1991:586) (SINK), unless a tax treaty with the country in question limits the Swedish taxation.
The income of posted employees who are only going to work for a maximum of 183 days during one year is exempted from taxation if the foreign employer does not have a fixed operating base in Sweden.
A foreign national working in Sweden for at least six months is subject to an unlimited tax liability and must submit an income tax return. An unlimited tax liability may also apply when it comes to repeated periods of residence in Sweden.
Nationals working abroad
Nationals working abroad for less than six months must pay tax in Sweden on their overseas income, with the foreign tax paid deducted. Nationals working for at least six months and paying tax in the country of employment may be exempt from paying tax in Sweden.
In Nordic countries, tax is generally paid in the country of work from the first day.
Rate of taxation on employment income
Swedish income tax comprises municipal tax and state tax:
Municipal tax is on average 32% (the tax rate varies with place of residence in Sweden and ranges from about 29% to 35%).
There is an additional 20% state tax for taxable incomes ranging from SEK430,200 to SEK625,800.
An extra 5% state tax (that is, a total of 25% state tax) is due on taxable income over SEK625,800.
This means that the effective rate of income tax can be as high as 60%.
Special income tax (SINK) can apply for employees working in Sweden but residing abroad. The rate of special income tax is 20%.
Social security contributions
An employer must pay social security contributions for the work their employees perform in Sweden. The liability to pay social security contributions applies to both Swedish and foreign companies (regardless of whether the employer operates from a permanent establishment in Sweden or not). Social security contributions are 31.42%, and are paid on top of the employee's gross salary.
There are exceptions to this rule, for example, employees employed by a foreign company and posted to Sweden to work on the foreign employer's behalf for less than 12 months may remain in the social security system of their country of residence (less than 24 months for EU/EEA citizens). Membership of the other country's national insurance system must be verified by a certificate.
It is common to reward key employees or management employees with bonus payments. These can either be contractual or discretionary.
There are no generally applicable restrictions on the payment of bonuses. The Swedish Financial Supervisory Authority has issued regulations concerning banks and other credit institutions that require these companies to (among other things) have a remuneration policy that does not encourage short-term profits and excessive risk-taking.
Intellectual property (IP)
The principle of "works made for hire" is unknown under Swedish law. It may therefore be necessary to clearly state in the employment agreement that all intellectual property created by the employees in the course of company business is the company's property and the right to intellectual property created by employees is often regulated in collective agreements. Regardless of whether the issue is regulated in the applicable collective agreement or individual employment agreement, there are no formal requirements for the transition of rights to the employer and this may in some circumstances be implied by the nature of the employment relationship.
The right to employees' patentable inventions are regulated by the Right to the Inventions of Employees Act (SFS 1949:345). Where research or invention activities constitute the primary work duties and an invention has arisen as a result of these activities, the employer is entitled to apply for patent rights in the invention, provided the use of the invention falls within the scope of the employer's business activity. For other types of patentable inventions that fall within the scope of the employer's business activity, the employer obtains a right to acquire a non-exclusive licence to use the invention in his business activity and/or a priority right to acquire a more extensive right to the invention. If the employer applies for the patent, the employee becomes entitled to reasonable compensation.
The Act is largely non-mandatory and a more extensive right for the employer can be agreed in the employment agreement. However, an employee cannot contract out of the right to reasonable compensation.
Sweden does not have special regulations concerning copyright created in employment, except regarding computer programmes, which are presumed to belong to the employer. According to the Swedish Copyright Act (1960:729) the creator of a work owns the copyright, unless otherwise agreed. The employer is allowed to use copyrighted works that are the result of the employee's normal duties within the employer's regular business operation. In some cases, the circumstances of an assignment of copyright imply that the author waives his moral rights, and this especially applies to certain employment relationships.
Restraint of trade
Restriction of activities
Employees have a far-reaching duty to be loyal to their employer and must refrain from competing with the employer or prepare for such activities while being employed. Collective agreements may include provisions regarding the restriction of activities during employment, such as stipulating that employees must consult with their employers before undertaking secondary employment. Activities may also be restricted in the individual employment contract.
Post-employment restrictive covenants
Restrictive covenants are permitted under Swedish law, although only to the extent considered reasonable under the Contracts Act (SFS 1915:218). For a restrictive covenant to be reasonable and enforceable post-employment, the employer must compensate the employee for any loss of income occurring as a result of the restrictive covenant (however, the compensation does not need to exceed 60% of the employee's previous salary with the employer). Restrictive covenants can only be imposed on employees holding positions where they typically gain knowledge about the company's business with a high level of competitive value, and the employee must also have the necessary education and experience to use that information with a competitor. Therefore, restrictive covenants cannot be routinely imposed on all employees in a company. Restrictions longer than 18 months are generally not considered reasonable.
Proposals for reform
New legislation protecting whistleblowers from reprisals from their employer will enter into force on 1 January 2017 (see Question 18). This legislation will protect employees that report serious wrongdoings in the employer's business. An employer who acts in breach of the legislation can be liable for damages to the employee.
As of 1 January 2017, more stringent rules will enter into force in the Discrimination Act regarding the employer's obligation to take active measures in order to prevent discrimination and promote equal treatment. These new rules will impose an obligation on the employer to systematically consider such issues and increase the employer's obligation to draw up written plans and salary surveys (among other things).
Regulation (EU) 2016/679 on the protection of natural persons with regard to the processing of personal data and on the free movement of such data (General Data Protection Regulation) will enter into force on 25 May 2018 and replace the Data Protection Act (1998:204). The General Data Protection Regulation will introduce stricter requirements for processing of personal data and, therefore, a stricter liability for the personal data controller (for example, for employers processing personal data relating to their employees).
Description. Official website of the Swedish parliament. Provides access to official legislation (in Swedish).
Description. Official website of the Swedish government. Contains translations of certain acts (in English).
Fredrik Nordlöf, Partner
Delphi Law Firm
Professional qualifications. Lawyer, Sweden
Areas of practice. Dispute resolution, employment and labour.
Languages. Swedish and English
Professional associations/memberships. IBA; WSG; EELA; International Referral; Swedish Bar Association
- Construction Company Wins Protracted Dispute on Illegal Industrial Action, ILO Employment & Labour Newsletter, January 2010.
- A company's commission policy could be a time bomb, 2009.
Magnus Berterud, Counsel
Delphi Law Firm
Professional qualifications. Lawyer, Sweden
Areas of practice. Dispute resolution, employment and labour.
Languages. Swedish and English
Professional associations/memberships. WSG; EELA; Swedish Bar Association