Understanding Payroll in Sweden: What Global Companies Need to Know About Sweden Payroll
Dec 25, 2016
For a country only about the size of California, Sweden displays remarkably solid economic growth, a robust education system, and a high standard of living for its near 10 million citizens. This dynamic European country has a $493 billion economy (growing at 4.1 percent in 2016) and is well known for its generous work state, labor force stability, internationally integrated and strong labor unions – helping it rank as one of the top nations for international business.
Sweden is also making strides toward becoming a leading voice on European employment and foreign policy issues – offering up a strong input on improving work and life across the continent. With a current flat tax rate of 22 percent, Sweden’s corporate tax rate is also significantly lower than in many other European countries. A large number of multinational companies have offices in Sweden, using it as a gateway to business in Scandinavia, the Baltic Sea Region, or the European Union.
Though consumer debt is rising in the country, Sweden remains an attractive location for foreign entities to seek partnerships or to develop new markets. As global business stakeholders launch or maintain Sweden operations, they should familiarize themselves with the fundamentals of Sweden payroll outlined below.
For companies expanding into Sweden, doing business properly and legally requires registering the company, business name, and employee counts with the Swedish government, which usually takes two to four weeks. Organizations need to obtain certification from a Swedish bank that a cash amount (for the payment of company shares) has been deposited into an account. However, it is not mandatory for companies to make payments to employees or tax authorities from an in-country bank account.
From there, the entity will need to register with the Swedish tax office Skatteverket. A foreign enterprise is required to submit a tax application (form SKV 4632) in order to apply for:
- an approval for Swedish F tax
- a Swedish VAT registration
- a Swedish employers´ registration
- a registration for income tax purposes as a non-Swedish enterprise with a permanent establishment in Sweden.
Employment & Compensation Considerations
Laws protecting employees are strong in Sweden, and are administered under the country’s Employee Protection Act, the Annual Leave Act, and the Working Hours Act. Sweden’s laws stipulate a 40-hour standard workweek and place caps on the amount of overtime allowable. No more 50 hours’ overtime over a calendar month is permissible and the absolute maximum overtime is 200 hours per calendar year. Overtime is usually paid at a rate of 50-100% more than the normal wage.
Unemployment is low in Sweden and contracts between employees and employers are not required. Since Sweden has a well-educated workforce and provides generous benefits to its workers (which attract many international job seekers), employers rarely have trouble recruiting qualified talent from inside or outside Sweden’s borders. There is no legal minimum wage in the country, though salaries are often negotiated by collective bargaining between trade unions and employers.
Tax & Social Security Considerations
Income tax should be deducted from every employee’s paycheck and paid to tax authorities, but the withholding amounts vary depending on the individual’s location and wages. One-time payments, such as bonuses, receive one-time tax deductions of 30-58 percent depending on income. All Sweden residents are liable to pay National and Municipal Swedish Tax on their worldwide income, and there is a 25 percent expatriate flat tax rate for non-residents.
All employers in Sweden pay the Social Security contributions consisting of charges for pensions, health insurance and other social benefits, which amount to 31.42% of the gross salary. Employees pay 7% of their income to pension contributions, up to a maximum of SEK29,400 a year.
Annual filings are due in May following the completed year. Notably, Sweden is one of a handful of countries that is already reporting monthly income levels for employees, rather than annual reporting. By 2018, the country’s organizations will all follow suit and start reporting monthly reporting, according to the Association of Swedish Accounting. (Monthly contributions must be paid to the Local Authorities by the 12th of the following month.)
Leave & Holiday Considerations
Swedish employees enjoy generous work leaves, due to the strong protections for Swedish employees and foreign nationals working in Sweden. For example, maternity leave for women can range from 2-7 weeks, while men are afforded ten days in connection with a birth or adoption.
Employees enjoy a high annual paid leave of a minimum five weeks, and that can rise for older or more senior workers. Besides the 25 days of paid holiday for employees, companies are also under law to offer 16 public holidays, and an additional six half-days for employees’ personal needs.
|Date||Sweden's Public Holiday Schedule|
|January 1st||New Year's Day|
|January 6th||Epiphany Day|
|Friday before Easter Sunday||Good Friday|
|Monday after Easter Sunday||Easter Monday|
|May 1st||Labor Day|
|40 Days after Easter||Ascension Day|
|June 6th||National Day|
|June 23rd||Midsummer Eve|
|June 24th||Midsummer Day|
|Saturday between October 31st and November 6th||All Saints Day|
|December 24th||Christmas Eve|
|December 25th||Christmas Day|
|December 26th||Second Day of Christmas|
|December 31st||New Year's Eve|
Managing Payroll in Sweden
Conducting business in Sweden can be hugely beneficial to a multinational organization, but managing the moderate complexity of the company’s payroll guidelines can add unnecessary administrative burden. To ensure your company complies with Sweden’s laws and expectations, considering outsourcing your global payroll operations to a trusted managed services provider.
This article is for informational purposes only and not intended to convey or constitute legal or any other advice. It is not a substitute for advice from a qualified professional.