Swedish law and collective bargaining agreements provide a comprehensive legal framework. For example, mandatory laws provide, strong employment protections for employees, but terms and conditions of employment as well as co-determination procedures, are mainly regulated through collective bargaining agreements. Although employers are not obliged to enter into collective bargaining agreements, they must negotiate with any trade union that requires such an agreement. However, it is important to note that employers have certain consultation and information obligations towards trade unions, even if they are not bound by a collective bargaining agreement.

Issues arising on hiring individuals

Immigration

European Economic Area (EEA) citizens are entitled to work in Sweden without obtaining a work permit or residence permit. For Swiss citizens, a residence permit, but not a work permit, is required. Non-EU and EEA citizens must have a work permit, as well as a residence permit, before entering Sweden to work.

However, experts and some other employee categories may work in Sweden under certain circumstances without a work permit. Depending on the length of the work conducted in Sweden, tax issues will arise. For example, the employer may have to pay social security contributions.

Employment structuring and documentation

The Employment Protection Act provides and governs the different types of employment that are permissible in Sweden. As a general rule, employment agreements are entered into for an indefinite term (open-ended contracts), but in certain circumstances fixed- term employment is acceptable.

A fixed-term contract generally terminates automatically when the agreed employment term lapses, unless otherwise agreed. However, if explicitly agreed, fixed-term employment may be terminated in advance provided there are objective grounds to justify termination.

Under the Employment Protection Act, employers must provide employees with certain information in writing within one month of their start date. The following information must be included: (1) information about the employer and employee; (2) the date of commencement of employment and place of work; (3) information about the position; (4) the duration of the employment; (5) the notice period; (6) salary and other benefits; (7) the number of days' annual leave; (8) working hours; (9) the collective bargaining agreement, if applicable.

Issues arising during the employment relationship

Wages, annual leave and working time

There are no legislative provisions regarding minimum wages. So employers and employees are free to agree on any salary level. However, collective bargaining agreements normally contain provisions regarding a minimum salary level as well as minimum annual salary increases.

Working time is regulated in the Swedish Working Hours Act but these provisions may be deviated from by collective bargaining agreements. Under the Act, the statutory ordinary working time is limited to a maximum of 40 hours per week. However, in certain circumstances, ordinary working time can instead be an average of 40 hours per week over a reference period of a maximum of four weeks. Ordinary working hours together with overtime hours in each seven day period must not exceed an average of 48 hours over a period of a maximum of four months. During each 24 hour period, employees are generally entitled to 11 hours rest. Normally, the period between midnight and 8am must be included in the rest period.

Employees are entitled to paid annual leave and compensation in lieu of annual leave. The minimum entitlement is 25 days' leave per year.

The leave qualifying year runs from 1 April to 31 March and the following 12 months is the vacation year, when leave may be taken. During annual leave, employees have a right to be paid to the extent that they have qualified for that. So their vacation may consist of both paid and unpaid days. Employees may carry over days not taken in excess of 20. Generally, any saved paid annual leave must be used within five years.

Most collective bargaining agreements contain different provisions from the Annual Leave Act, in particular in relation to calculating paid annual leave and accruing leave.

Trade unions

The Swedish labour system is based on the principles that law and collective bargaining agreements together provide a comprehensive framework.

There are approximately 110 parties on the Swedish labour market, of which 60 are trade unions, and 50 are employers' organisations. The parties have agreed on more than 650 collective bargaining agreements regarding salary and general employment terms and conditions.

Almost 90% of all employers in Sweden are members of an employers' organisation. A significant proportion of employees working in Sweden, approximately 70%, are members of a trade union.

Through membership of an employers' organisation, employers are bound by the collective bargaining agreements applicable to that organisation. Employers must also apply the terms and conditions in collective bargaining agreements to employees who are not members of a trade union.

Social insurance

There is no obligation in law for employers to provide employees with different insurance cover (except insurance included in the statutory employer social security contributions), such as group, life insurance, or work injury insurance. However, employers who are bound by collective bargaining agreements must take out certain insurance, in addition to that to the employer social security contributions.

Generally, employer social security contributions for 2017 are 31.42% of the employee's gross salary (paid in addition to salary). These contributions are statutory and include specific charges, such as old-age pension, survivor's pension, fees for health insurance and work injury.

Issues arising on termination of the employment relationship

Business transfers

In Sweden, the EU Acquired Rights Directive is implemented by the Employment Protection Act. The Act stipulates that in conjunction with a transfer of business, or part of a business, from one employer to another, the employees will automatically be transferred to the acquiring company on the same terms and conditions. The transferring company may not terminate employment contracts solely on account of the business transfer.

Although, dismissals pre-transfer may result in damages or even a ruling of invalidity, post-transfer, the acquiring company is free to initiate a redundancy programme in accordance with Swedish law.

The employees may refuse to transfer and in that case, they remain employed by the transferring company. Where the transferring company has no business left, these employees will be made redundant.

Terminating employment

Under Swedish law, severance payments are not mandatory but the individual contract may provide for such a payment to be made.

According to the Swedish Employment Protection Act, employment may only be terminated by the employer on objective grounds - either shortage of work (redundancies), or personal reasons (serious misconduct or disloyalty). However, the employer and employee are free to enter into a settlement under which the employee receives compensation, and the employment may then be terminated without breaching the strict rules of the Act.

If the employee's misconduct or disloyalty is extremely serious, the employer may summarily dismiss the employee (i.e. immediate dismissal without notice).

In the case of wrongful termination, the employee may challenge this and the dismissal may be declared invalid by the court. The employer may be obliged to pay salary and benefits during the court proceedings, punitive damages (normally not exceeding SEK 100,000), compensation for economic loss (which is normally between 16 and 32 months' salary) and litigation costs for both parties.

Published in collaboration with L&E Global an alliance of employers’ counsel worldwide

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