Benefits in Sweden: Clear Guide for US Employers

The US led the world in hiring remote workers in 2023.¹ For US businesses considering expanding into international markets, Sweden offers a highly educated and skilled talent pool, which has a high proportion of fluent English speakers. Effective communication is key when hiring remote workers, so the lack of language barriers is a strong advantage.

Employees based in Sweden are likely to have an advanced technological background and bring innovative ideas that can help your business grow in the competitive global digital market.

If you employ or are considering employing remote workers in Sweden or elsewhere, a Wise Business account allows you to pay them on time in their local currency at low cost. Wise processes payments at the mid-market exchange rate, saving your business on markup fees and hidden costs.

Who Should Receive Employee Benefits in Sweden?

Swedish labor law differentiates between employees and independent contractors or freelancers. Most employment law in the country applies only to permanent or full-time employees. It requires employers to provide them with certain benefits that you may not be familiar with providing to US-based employees.

Sweden reached an all-time employment rate of 72.8% in July 2023 and has been no lower than 62.4% in January 2010, making it a highly competitive labor market.² By comparison, the all-time high in the US was 64.7% in April 2020.³ This means your company will need to offer an attractive benefits package to compete with Swedish employers.

And while you may not be required by law to provide certain benefits to independent contractors, doing so can help you to attract and retain the most talented workers. Whether you’re looking to hire full employees or contractors to work remotely in Sweden, offering benefits above the minimum requirements will help your company to stand out from the crowd.

Types of Statutory Employee Benefits in Sweden

Before you start hiring remote employees in Sweden, it’s essential to understand the benefits that Swedish employment law requires you to provide. This will ensure that your business complies with the law from the start and avoids any legal problems down the line.

It’s important to note that in addition to the Swedish Labor Law, the country has a strong labor union culture – with membership rates around 70% – which plays an important role in determining benefits such as wages, overtime pay, working hours, vacations, and health benefits.

Sweden has a right to association, so all employees can voluntarily join any trade union they choose. Employers cannot ask employees which trade union they want to join or prevent them from joining the union of their choice.

There are three large central organizations for trade unions in the country: The Swedish Trade Union Confederation (LO), The Swedish Confederation of Professional Employees (TCO), and The Swedish Confederation of Professional Associations (SACO).

The LO organizes professionals in the public and private sectors such as factory workers, mechanics, and restaurant workers. The TCO organizes private and public sector professionals such as accountants, engineers, nurses, journalists, and police officers. SACO organizes academics such as financial professionals, lawyers, physiotherapists, and teachers.⁴

The Swedish Constitution and the Employment (Co-Determination in the Workplace) Act of 1977 sets out the constitutional and legal grounds for collective agreements between employers and employees, which regulate benefits.⁵

The Swedish government does not get involved in the collective agreements that trade unions negotiate.

Employers – whether based in Sweden or overseas – pay a National Insurance payroll contribution of 31.42% of an employee’s total taxable remuneration to cover health insurance, pensions, parental benefits, and workplace injury insurance. Employees do not make contributions.⁶

Vacation time

According to the Swedish Annual Leave Act, employees are entitled to at least 25 days of paid vacation each year, starting in April. Employees’ annual leave should be scheduled so that they have a continuous four-week vacation between June and August, unless they agree otherwise. If an employee starts work after 31 August, they are only entitled to five days that year.⁷

Employees are entitled to a holiday supplement, or bonus, of 1.82% if they are paid weekly or 0.43% if they are paid monthly. This is in addition to their regular pay.

Temporary employees who are contracted to work for three months or less may agree not to receive annual vacation. Instead, they can receive compensation in lieu.

Employees can also negotiate collectively for more vacation time. If an employee takes unpaid vacation in addition to their paid allowance, the paid vacation should be counted first.

Overtime

The Swedish Working Hours Act states that employees’ regular working time may not exceed 40 hours per week. Above this limit, overtime pay applies. Overtime is capped at a maximum of 48 hours over a period of four weeks or 50 hours per calendar month. General overtime is limited to 200 hours per year, although if there are special grounds, employees can work an extra 150 hours over a calendar year in excess of general overtime.⁸

Overtime pay varies based on collective agreements. It can be a percentage of an employee’s regular pay or a set amount per hour. In some cases, employees can receive time off in lieu.

Parental Leave

Female employees can take a total of 14 weeks of leave, split between seven weeks before and seven weeks after delivery. Fathers can take 10 days of paternity leave within 60 days of the birth. Both parents are entitled to a total of 480 days of paid parental leave. One partner can take up to 390 days if the other parent transfers their leave.

Parental benefits are paid by the Swedish Social Insurance Administration (Försäkringskassan). A parent is entitled to full-time leave for the care of a child until the child reaches 18 months.⁹

Health Insurance and Sick Leave

Sweden’s social security system provides benefits including healthcare through National Insurance contributions. The national healthcare program covers the cost of treatment for all employees in Sweden, including expats.

According to the Swedish Sick Pay Act of 1991, employers are required to provide employees with sickness benefits from the second of illness up to the 14th day. After that, employees can apply for benefits from Försäkringskassan to cover up to 80% of their wages if they provide medical certificates.¹⁰

Pensions

The Swedish Pensions Agency administers and pays out the national public pension in Sweden, which comprises several parts:

• a national state pension,
• a premium pension that is invested in funds,
• an employer pension,
• and any personal pension savings.

The national pension is based an employee’s total earned income from working and paying taxes. There is a minimum guaranteed pension for individuals with a low income who may not have accrued enough pension to live on.¹¹

Employees receive occupational pensions from the age of 65. If they worked for multiple employers, they are entitled to receive payment from each one. Self-employed workers, the unemployed, and students do not receive occupational pensions and are responsible for their own pension savings.

Minimum Wage

Unlike in many countries, Swedish labor law does not specify a statutory minimum wage. Instead, trade unions negotiate minimum pay for the sectors in which they operate through collective bargaining. This aims to ensure that wages and salaries are flexible and reflect the skills required and demand for workers in specific industries.

The result is that average pay in Sweden is higher than in many other European countries.¹²

Additional Employee Benefits in Sweden You May Offer to Attract Talent

As Swedish law provides a generous social safety net, employers need to offer extra compensation and benefits when hiring to stand out. To come up with a competitive package, research what rival employers provide as well as the standard offerings in your industry. These additional benefits can be monetary or non-monetary, although you should be aware of which benefits are taxable.

Offering extra perks can help your employees feel valued, increasing their job satisfaction and improving your staff retention.

Benefits to consider include:

• Extra insurance: While Sweden’s public health insurance system provides adequate care, offering private health insurance to employees for faster access to premium services can be an attractive option. You might also want to consider providing life insurance, dental and/or optical insurance.

• Flexible working: Remote work, flexible working hours, extra annual leave, or unlimited paid time off have all become increasingly popular perks since the start of the Covid-19 pandemic to attract and retain employees.

• Expenses: Covering expenses for employees such as childcare, a company car or car allowance, mobile phone, home office setup, and so on, can help to sweeten the deal when a potential employee is considering accepting a role.

Discover Wise Business: The easy and low-cost way to pay international employees

If you intend to hire remote workers in Sweden, you’ll need a low-cost and efficient way to pay them in their local bank account in Swedish kroner on time.

Wise is not a bank, but a Money Services Business (MSB) provider and a smart alternative to banks. Opening a business account with Wise takes the hassle out of making international payments to multiple employees. There are no hidden fees leading to unexpected coats that eat into your profits.

Features of a Wise Business account include:

• International payments at the mid-market rate
• Easy batch payments
• Connect to QuickBooks to track bill payments
• Designed to manage multiple currencies all in one place
• Hold & manage over 40 currencies
• No monthly fees

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Sources:

¹ State of Global Hiring Report 2023-2024 | Deel
² Sweden Employment Rate
³ United States Employment Rate
⁴ Trade unions in Sweden | Nordic cooperation
⁵ 1976:580 Employment (Co-Determination in the Workplace) Act (Lag om medbestämmande i arbetslivet)
⁶ Employer contributions | Skatteverket
⁷ Annual Leave Act (1977:480)
⁸ Working Hours Act (1982:673)
⁹ Parental Leave Act (1995:584) - Government.se
¹⁰ Sick pay - Försäkringskassan
¹¹ The Swedish pension system | Pensionsmyndigheten
¹² Which European countries have the highest and lowest salaries? | Euronews

All sources checked May 2024.