Sweden has a strong and skilled workforce. In this country, unions and collective agreements shape most workplace rules, but national laws and agencies still set key limits. 

To avoid penalties, any business paying Swedish workers must comply with labor laws, like the Employment Protection Act, Work Environment Act, and Co-Determination Act, which are overseen by the Ministry of Employment and the Swedish Work Environment Authority. 

Global firms may partner with Payoneer Workforce Management for assistance with Sweden payroll, employment contracts, taxes, benefits, and more. 

Sweden payroll: Wages and other payments

In Sweden, the Tax Agency (Skatteverket) and Social Insurance Agency (Försäkringskassan) typically oversee payroll, tax withholding, and social contributions. If you’re a company based outside of Sweden and want to pay employees working there, you usually have to register with Skatteverket as an employer. 

Payroll cycle

In Sweden, most people receive their paychecks once a month. The usual payday is the 25th, but it can vary depending on the company, industry, or independent contracting. 

Employers must calculate the total earnings of each employee for that month, subtract the income tax, and remit the remaining amount to the Skatteverket. At the same time, they also have to pay additional charges, such as social fees, to the government.

Minimum wage

Sweden doesn’t have a national minimum wage set by the government. Instead, wages are decided through agreements between trade unions and employer associations. These are called collective bargaining agreements. They cover a wide range of industries, including healthcare, construction, and retail. 

Sick pay

An employee gets 80% of their salary/wages for the first 14 days of sickness. From the 15th day onward, the employee can apply to the Swedish Social Insurance Agency for their sick leave benefits.

Maternity pay

Sweden is generous when it comes to parental leave. Employers don’t pay this directly; instead, Försäkringskassan (the government agency) handles it.  Here’s what parents can expect:

• 240 days of paid leave (each parent per child). If there is sole custody of a child, then the single parent can use all 480 leave days.
• Parents receive 80% of their income funded by the state for the first 390 days.
• The mother gets a total of 14 weeks of continuous leave, seven weeks before and seven weeks after the child is born. 

Severance packages

Sweden doesn’t have a fixed law that allocates severance pay for employees. Employees are entitled to a notice period based on how long they’ve worked, between 1 and 6 months. During this notice period, you still pay their regular salary. However, if the contract or a union agreement includes severance, then you’ll have to follow that.

Payroll in Sweden: Contributions and deductions

When you pay employees in Sweden, there are extra costs for the employer and some deductions from the employee’s paycheck. These payments contribute to taxes, social insurance, and other public funds.

The employer contribution rate usually ranges from 29% to 36%.

Let’s break it down step by step.

Salary tax in Sweden

For the payroll tax in Sweden, Skatteverket sends a pre-filled tax return (Inkomstdeklaration 1) in March/April, which employees can review and approve. 

Social security

In Sweden, employers must pay social security contributions on top of the employee’s salary. These contributions fund things like public healthcare, pensions, sick leave, parental leave, and unemployment benefits.

Sweden employee benefits

• Overtime pay: Swedish law splits overtime into two types:
• General overtime: This can be used when there’s a temporary need to increase working hours. The limits are:
  • Up to 48 hours over a 4-week period, or
  • Up to 50 hours in a calendar month
  • But no more than 200 hours per year for each employee.

• Vacation and paid leave: By law, every employee gets 25 paid vacation days per year. If their sector is covered by a union, they may get more. These leaves may be counted on the basis of fiscal years in a company.

How to pay employees in Sweden

If your business wants to hire someone in Sweden, you have three main options. Each one has different rules, costs, and responsibilities. Let’s break them down so you can understand what works best for your situation.

• Setting up a local entity: This means registering your company in Sweden and becoming a local employer. To do this, you’ll need to:

• Register with the Swedish Companies Registration Office, also known as Bolagsverket.
• Get a Swedish tax ID from the Swedish Tax Agency (Skatteverket)
• Register as an employer to handle payroll taxes and social contributions
• Follow Swedish labour laws, collective agreements (if applicable), and reporting rules

Once set up, you can hire full-time employees directly, manage their contracts, pay taxes, and provide benefits.

• Hiring contractors, not employees: If you don’t want to open a Swedish office, you might consider hiring independent contractors. Contractors handle their own taxes and social contributions, so you have to pay no benefits, sick leave, or pension responsibilities on your end.

If the contractor works only for you, follows your hours, uses your tools, and takes direction like an employee, Swedish authorities may classify them as a misclassified employee.

• Partnering with Payoneer Workforce Management: Our unified platform can help facilitate payroll without setting up an entity in Sweden. Get expert guidance to navigate local regulations, income tax, social security contributions, and even assistance with onboarding and legal documentation.

Book a demo today!

FAQs

1) What’s the standard workweek in Sweden?

A full-time workweek is generally 40 hours, Monday through Friday. Collective agreements may reduce this or offer flexible scheduling options, depending on the sectors.

2) How do terminations work for poor performance?

Terminations must follow a fair process, including issuing warnings and maintaining proper documentation. Immediate dismissal without notice is only permitted in cases of serious misconduct. Otherwise, standard notice periods must be honored.

3) Do employees get paid for public holidays in Sweden?

Yes, full-time employees are usually paid for public holidays. If a holiday falls on a workday, it’s considered a paid day off, unless the employee is hourly-based and does not have such coverage.