Employer of Record (EOR) Sweden

Mercans serves as the trusted Employer of Record (EOR) in Sweden, acting as the official employer for workers in the country. As a leading Global Professional Employer Organization (Global PEO), our comprehensive services encompass vital aspects of employment. This includes meticulous compliance with local labor laws, proficient management of payroll, handling taxes, provision of mandatory benefits, and crafting detailed employment agreements.

EOR Solutions in Sweden

• EOR for Prospective Employees: Mercans offers seamless Employer of Record (EOR) solutions for businesses that have already identified their ideal candidates in Sweden. Our services encompass every aspect of the employee lifecycle, ensuring compliance with Sweden labor laws and regulations.
• EOR + Recruitment: For those seeking assistance in talent acquisition, our EOR and recruitment services provide a holistic solution. We tap into our extensive network and expertise to help you find, onboard, and retain top talent, streamlining your expansion into the Sweden market.
• Visa Sponsorship and Global Mobility: Navigating the intricacies of expatriate employment is simplified through our visa sponsorship and global mobility services. We facilitate the relocation of your international workforce, ensuring compliance with Sweden immigration and employment laws.
• AOR for Contractor Payments: Businesses grappling with contractor payments can leverage our Assistance on Record (AOR) services. We handle the complexities of contractor payments, guaranteeing accuracy and compliance.
• Converting Freelancers to Employees: Mercans supports the transition from independent contractors to permanent employees in Sweden. Our expertise ensures smooth conversions while adhering to legal requirements.
• HCM Integration: Integrate Mercans’ EOR services seamlessly with your HCM system in Sweden for real-time data exchange, enhanced compliance, and cost-efficiency. Trust our expertise for a unified, compliant, and efficient approach, elevating your workforce management and payroll operations.

Things you need to know before hiring in Sweden

Employment Contracts in Sweden

Within one month of an employee’s commencement of employment, a Swedish employer must provide written information about the applicable conditions. This requirement specifically pertains to EU citizens.

Key concepts related to employment contracts in Sweden:

Working Hours: 

In Sweden, the standard work week typically spans 40 hours, with common work timings from 9 AM to 5 PM. The concept of a four-day workweek has gained traction as a progressive approach to enhance work-life balance and overall employee well-being.

Probation Period

In Sweden, it is customary for permanent appointments to begin with a probationary period, lasting a maximum of six months. This period allows employers to assess an employee’s fit within the company and their ability to fulfill job responsibilities.

Employees vs Independent Contractor Compliance

In Sweden, the classification of an individual as an employee or an independent contractor hinges on factors outlined by the Employment Protection Act, influencing tax treatment, and benefit entitlements. This comprehensive assessment considers aspects like work autonomy, equipment provision, directive adherence, and more.

Payroll in Sweden

A foreign employer can hire employees in Sweden without a permanent establishment. Yet, if the work is performed in Sweden, the employer is usually required to pay taxes, register as an employer, and cover social security contributions for local hires. Alternatively, an agreement can be made for the employee to handle social security contributions. If an employee acts as a dependent representative, the foreign employer may be considered to have a permanent establishment, requiring registration in Sweden. Minimum salary isn’t legally mandated, but collective bargaining agreements often include such provisions.

Additionally, employees must receive a payslip on each pay date, and payroll records must be maintained for at least 7 years.

Minimum Wages

In Sweden, the average wage is currently 193 SEK per hour, equivalent to 2832.482 USD per month as of July 2023. This figure represents a decrease compared to previous months. The wage growth rate in June 2023 was 3.1%. Wages in the manufacturing sector are slightly higher, at 208 SEK per hour or 3052.623 USD per month.

Historically, the average wage has fluctuated, reaching 194 SEK per hour in June 2023 and 188 SEK per hour in November 2022. The maximum average wage was 194 SEK per hour, while the minimum was 134 SEK per hour.

It’s important to note that these figures are based on monthly data published by Statistics Sweden, and the historical chart provides insights into the wage trends over the past months. The data reflects the dynamics of wages in Sweden, indicating variations over time.

Payroll Cycle 

In Sweden, payroll processing is typically carried out monthly, with a common practice of disbursing employee payments for the entire month on the 25th. Employees have the option to receive their salary in either the local currency, Swedish Krona (SEK), or in a foreign currency.

Mercans’ Payroll Capabilities in Sweden

Payroll management in Sweden demands meticulous attention and comprehensive solutions. Mercans’ employer of record services simplify the process, ensuring precision, compliance, and operational efficiency.

Mercans’ expertise in Employer Of Record services extends to multi-country payroll management, providing accurate and streamlined payroll operations across various locations.

Social Security and Income Tax in Sweden

In Sweden, employers are obligated to pay social security contributions on compensation for employees covered by the Swedish social security system. This includes considerations such as pension fees and consumption taxes. Here is an overview of the key financial aspects employers should be aware of:

Overview of Financial Obligations in Sweden

Employers and employees alike in Sweden actively participate in the country’s social security system. Notably, employers bear the majority of the contribution burden, accounting for 31.42% of employee salary amounts. Employees, on the other hand, contribute 7% toward their pensions, a portion often offset by tax reductions. The comprehensive social security system in Sweden encompasses essential benefits such as parental leave, sick pay, healthcare, accident insurance, and pensions, showcasing the country’s commitment to social well-being. Despite higher social security contributions compared to some Western European counterparts, Sweden’s robust social safety nets contribute to a healthy, well-educated population, making it an attractive employment destination.

Importance of PAYE

Social Security Contributions (Established businesses)

Navigating the employment landscape in Sweden involves considerations of social security contributions, corporate and personal income taxes, and various aspects of the Swedish tax system. Below is a detailed breakdown of key elements, including employer social security contributions, employee pension contributions, covered social security benefits, corporate income tax rates, personal income tax rates, tax implications for non-residents, criteria for tax residence, pension premiums, income tax administration, and employee insurances.

Employer Payroll Contributions

Employee Payroll Contributions

This comprehensive guide provides insights into the intricate landscape of employment and taxation in Sweden, offering a detailed understanding of key components that employers and employees need to navigate for compliance and efficiency.

Social Security Contributions (Non Established businesses)

Foreign employers lacking a permanent establishment in Sweden are required to contribute to Swedish social security for their locally employed personnel. These employers are subject to a slightly reduced rate compared to other entities. Additionally, foreign employers without a permanent establishment must withhold Swedish preliminary income tax on wages paid to their employees.

Sweden Employee Hiring Cost

To calculate the cost of employing someone in Sweden, you need to consider both the gross annual salary and the associated employer costs. In this example, with a gross annual salary of SEK 9,999.96, the total annual employer costs, which include contributions such as social security, are SEK 8,961.96.

The comprehensive total annual cost is derived by adding the gross annual salary and the total annual employer costs. Therefore, for this example, the total cost of employing an individual in Sweden would be approximately SEK 18,961.92.

It’s essential to account for all relevant expenses associated with employment to get a holistic understanding of the financial commitment for the employer. This includes not only the salary paid to the employee but also the additional costs related to employer contributions and statutory obligations.

Personal Income Tax

Employment income is taxed at the following rounded taxable income amounts (2023):

*Swedish kronor

**This rate equals the average municipal tax rate.

For non-residents:

Regarding capital tax:

• Capital income is generally taxed at a flat rate of 30%. Refer to the “Capital gains and investment income” section in the “Income determination” for more information.

Employee Benefits in Sweden

Here’s the information on statutory leaves in Sweden:

Annual Leave

Vacation entitlement in Sweden is governed by the Annual Leave Act, distinguishing between paid and unpaid vacation. The entitlement accrues during the “qualifying year” (12 months preceding the vacation year) and can be utilized during the “vacation year” (1 April to 31 March). The basic vacation entitlement is 25 paid days per year. Collective bargaining agreements or employment contracts may extend this for certain employees. A continuous four-week vacation is typically allowed from June to August. Employees with a notice of termination of less than six months are not obliged to take their vacation during the notice period unless agreed otherwise. It’s possible to carry over paid vacation days to the next year under specific conditions.

Maternity & Paternity Leave

Parents in Sweden are entitled to parental leave until the child turns 18 months, with compensation from the state. Mothers can start parental allowance 60 days before the expected birth. Fathers can take paternity leave for ten working days after the child’s birth. Compensation is provided for a total of 480 days per child, with entitlements divided equally between parents. Parents can transfer entitlements, except for 90 days, which will be forfeited if not transferred. Compensation is capped at 80% of the employee’s salary for 390 days, and for the remaining 90 days, it is SEK 180 per day. Collective bargaining agreements may offer additional compensation from the employer.

Sick Leave

Employees are entitled to mandatory sick pay from the employer if the employment is expected to continue for more than one month or if the employee has worked for more than 14 consecutive days. From January 1, 2019, sick pay is at 80% of the salary for days 1-14, with a deduction of approximately 20%. Prior to 2019, there is no compensation for day 1 and 80% for days 2-14. Compensation payable by the state may apply from day 15, determined by the Swedish Social Insurance Agency. Employers are not obligated to provide supplementary sick pay unless specified in a collective bargaining agreement.

Disability Leave

Disability leave is not distinct from sickness leave. Partial or full disability may entitle individuals to activity compensation or sickness compensation paid by the state.

Overtime

Overtime refers to working hours beyond regular work hours and on-call periods. When extra hours are necessary, overtime must not exceed 48 hours over a four-week period or 50 hours within a calendar month, with a maximum limit of 200 hours per calendar year.

The statutory framework lacks specific regulations on overtime pay. Typically, overtime pay is outlined in collective bargaining agreements. Employees generally have the option to receive overtime compensation either in monetary form or as compensatory leave. In the absence of a collective bargaining agreement, entitlement to overtime pay is not automatic unless mutually agreed upon. Collective bargaining agreements may include provisions allowing employees to forgo overtime pay in favor of compensatory leave, typically applicable to those with flexible working hours or under special circumstances.

Termination, Severance Pay and Notice Period

Termination

Employers have the authority to terminate employees with or without notice. A termination with notice must be grounded in objective reasons, which can either be objective, such as redundancy or reorganization, or subjective personal reasons related to the employee’s conduct or performance.

An overall assessment of various factors is crucial in determining the presence of objective grounds for dismissal. Dismissing an employee with notice won’t be considered objective if alternative solutions, like relocating the employee within the company, were available. Before issuing a notice of termination, employers must explore potential vacant positions within the business for the affected employee. Discriminatory dismissals under the Discrimination Act are prohibited, and additional regulations protect employees from unfair terminations, such as those related to parental leave or educational leave.

Collective Dismissal

The Co-Determination Act doesn’t recognize the term “collective redundancies.” Unlike many other European countries, where collective consultation obligations arise with multiple redundancies, the Co-Determination Act applies even if the redundancy concerns a single employee.

If at least five employees are affected by termination due to redundancy, a notification to the Swedish Public Employment Service is required. This also applies if the total number of termination notices is expected to reach 20 or more within a 90-day period.

When redundancies occur for objective reasons, the “last in, first out” principle applies, favoring employees with the longest aggregate period of employment. Dismissal procedures are outlined in the Employment Protection Act, with variations based on whether termination results from objective or subjective reasons. Consultations under the Co-Determination Act may be mandatory in cases of objective terminations, especially if the employer is bound by a collective bargaining agreement or the employee is a union member.

Individual Dismissal

Negligent performance, serious misconduct, theft, disloyalty, or other serious circumstances may warrant termination for subjective personal reasons. The burden of proof rests with the employer, and evidence supporting termination for personal reasons can be challenging to present. Employers must support employees in improving their performance through education or performance improvement plans. Dismissal without notice is lawful only in cases of fundamental breaches, such as gross misconduct, and should be an exceptional measure.

Before terminating an employment agreement for subjective personal reasons, the employer must provide written notice to the concerned employee and, if applicable, the trade union, two weeks in advance. If a summary dismissal without notice is desired, information must be provided one week before the dismissal. The employee or trade union may request consultations within one week of receiving the information. Swedish law doesn’t mandate prior government agency approval for employee dismissals.

Severance

There are no statutory provisions for severance pay. However, entitlement to severance pay may arise through employment agreements, collective bargaining agreements, or separation agreements.

Work Permit

In general, individuals from non-EU countries must obtain a work permit to work in Sweden. To secure such a permit, the employer must present a job offer, advertise the position in Sweden and the EU for 10 days (for new recruitments), and ensure that the terms of employment meet or exceed those outlined in a Swedish collective bargaining agreement or are customary for the occupation or sector. The employee must earn a gross salary of at least 13,000 Swedish kronor per month, and the relevant trade union must have the opportunity to express an opinion on the terms of employment.

EU and EEA citizens, on the other hand, do not require a visa and have the right to work in Sweden without work and residence permits. Non-EU citizens with a residence permit in an EU country can apply for long-term resident status, granting rights similar to those of EU citizens. The Posting of Workers Act is applicable to posted workers in Sweden.

Work Permit Requirements:

For detailed information on the residency permit application process, visit the Swedish Migration Agency website

What Sets Mercans Apart: