Our guide to Payroll in Sweden

Doing Business in Sweden

Sweden offers a stable business environment, strong legal protections, and an innovation-driven economy. Its competitive labor force and robust infrastructure make it an attractive location for foreign investors.

Basic Facts about Sweden

General Information:

Full Name: Kingdom of Sweden

Population: 10.23 million (Eurostat, 2021)

Capital: Stockholm

Major Language: Swedish

Major Religion: Christianity

Monetary Unit: 1 Swedish krona = 100 ore

Main Exports: Machinery and transport equipment, paper products, chemicals

Internet Domain: .se

International Dialling Code: +46

How to say:

Hello: Hej

Good morning: God morgon

Good evening: God kväll

Do you speak English? Talar du engelska?

Goodbye: Adjö

Thank you: Tack

See you later: Vi ses senare

Registrations and Establishing an Entity

An employer must be registered at the Swedish Tax Office. The company is not considered as a legal entity until it is registered with the Swedish Companies Registration Office. It usually takes two to four weeks to register a new company.

Company formation in Sweden follows this 3-stage process:

• Obtain certification from a Swedish bank that the total cash amount for shares has been deposited into an account. This takes 1 day.
• Submit an online application to the Swedish Companies Registration Office and obtain a Registration Certificate. This takes 14 days and costs approximately SEK 2,000.
• Registration with the Swedish Tax Agency. This takes 1 day and can be done at the same time as stage 2.
• If the company is only applying to become an employer in Sweden with the Swedish Tax Office (and not with the Swedish Companies Registration Office) it can take up to 15 weeks for the application to be processed.

Banking

It is not mandatory to make payments to both employees and the authorities from an in-country bank account.

Working Week

The working week in Sweden is normally Monday to Friday.

Normal working hours cannot exceed 40 hours per week. No more than 48 hours overtime over a period of four weeks, or 50 hours over a calendar month, is permissible. Maximum overtime is 200 hours per calendar year.

Employment Law

In Sweden, Collective Agreements will often be in place between unions and employers. Collective Agreements regulate wages and working conditions, including health and accident insurance. They will also guarantee that the same rules apply to everyone and establish the minimum acceptable terms of employment in that sector.

Holiday Accruals

The vacation regulations in Sweden are regulated in the Annual Leave Act and all companies are obliged to follow this law.

Due to this, we as a vendor always needs to receive information about when the employees are using their vacation days, so we can register this in the payroll and on the payslips each month.

• Vacation days that are not used, will be saved for next year.
• You can save a maximum of 5 days per year.
• It is the employers responsibility to make sure the employees use their vacation.
• Unused days will be paid out before the new vacation year starts.

Basic Principles

In Sweden, all employees are entitled to 25 vacation days per year. This means you get five weeks of leave to rest and recuperate.

1. Vacation year runs from April 1 to March 31 of the following year.

• Earning year is the period from April 1 to March 31 of the year before the vacation year. During the earning year, you accumulate the right to paid vacation.
• The vacation year shift is done after April payroll run
• The new vacation days are visible on May payslip

2. Vacation year can also be calendar year, from January to December

• Earning year is then the same period, which means you earn the vacation while you are working.
• The vacation year shift is done after January payroll run
• The new vacation days are visible on February payslip

Paid and Unpaid Vacation

• Paid vacation: You receive your regular salary plus a vacation supplement when you take vacation/are on annual leave.
• Unpaid vacation: If you haven't earned enough paid vacation, you still have the right to unpaid leave up to 25 days.

Vacation Pay and Vacation Supplement

• Vacation pay consists of your regular monthly salary plus a vacation supplement of 0.43% or 0,8% (depending on company policy) of the monthly salary per vacation day.
• For hourly employees, vacation pay is calculated as 12% or 13% of the earned salary during the earning year.

Vacation Scheduling

The employer decides when the vacation can be taken but should try to accommodate the employees preferences. You have the right to take at least four consecutive weeks of vacation during the period from June to August, known as the main vacation.

Care of Sick Child (VAB): Absence for care of a sick child with temporary parental benefits is basis up to 120 days per earning year.

Parental Leave

Parental leave with parental benefits from Försäkringskassan is basis up to 120 days per child and earning year. For single parents, it is up to 180 days.

Sickness

If you are ill and receive sickness benefits from the Swedish Social Insurance Agency (Försäkringskassan), this time counts as basis up to 180 days per earning year for a maximum of 2 years.

Vacation Scheduling

The employer decides when the vacation can be taken but should try to accommodate the employees preferences. You have the right to take at least four consecutive weeks of vacation during the period from June to August, known as the main vacation.

Special Rules and Exceptions

• Agreements and collective agreements: There may be specific agreements or collective agreements that differ from the vacation law – But! These rules can never be worse than what the law says, only better conditions, for example more vacation days then 25.
• Advance vacation: New employees can sometimes receive advance vacation, which means they can take paid vacation before earning the right to it.
• Saved vacation: You can save up to five vacation days per year to be taken within five years.

Vacation During Illness or Parental Leave

If you become ill during your vacation, you have the right to interrupt the vacation and instead take sick days. The same applies to parental leave; vacation days are not affected by the leave and can be taken when you return to work.

Tax & Social Security

The tax year runs from 1st January to 31st December.

Income Tax

Taxation on salaries for an employee involves contributing to three different levels of government: The Municipality, The County Council and The Central Government.

Employer with Permanent Establishment:

• Preliminary Income Tax shall be deducted from the payslip and paid by the employer to the authorities. The tax tables used for the calculation vary depending on where the employee lives, age and the employees’ total economic situation.
• All the residents are liable to pay National and Municipal Swedish Tax on their worldwide income; non-tax residents in Sweden are liable to pay tax on income derived from work performed in Sweden. Individuals will be regarded as tax residents if they are present in Sweden for a period of more than 6 months.
• If the employee is not a Swedish citizen, but has worked for a Swedish company for less than 6 months, they will have to apply for SINK at the Swedish Tax Office. SINK is always 25%, and the employer makes the tax deduction.
• If the employee has worked for more than 6 months at a Swedish company, they have to apply for and pay general taxes (A-skatt) or have a decision from the Tax Office for adjustment. They will also have to make an income tax return.
• Monthly contributions must be paid to the local authorities by the 12th one week later in January and August of the following month.

Social Security

• All employers in Sweden pay the social security contributions consisting of charges for pensions, health insurance and other social benefits. These contributions amount to 31.42% of the gross salary. 10.21% of this represents pension contributions.
• All Swedish residents are entitled to a state-financed guaranteed minimum pension of approximately SEK 7,500 per month. State-financed guaranteed for single persons SEK 8,779, for married persons SEK 7,853.
• Employees pay 7% of their income to pension contributions, up to a maximum of 8,07 income base amount. However, this contribution is neutralised by a corresponding income tax reduction for the employee.
• For employees born from 1938 to 1957, employers only pay a contribution of 10,21%. For employees born in 1937 or earlier, no contributions are paid.
• Pension contributions are tax deductible for the employer, and a tax of 24.26% is levied on the amount of the contribution. The tax of 24,26% is not on the statutory contributions, it´s on the occupational pension.

The monthly amount depends on the:

• Size of pension contributions made entitling a person to a pension.
• General employment income development in the country.
• Accrued value of the part (2.5%) of the pension entitlement invested according to individual choice (premium pension).
• Current average life expectancy

Reporting

Yearly

Processing of statutory year end (tax year end)

• An annual reconciliation of payroll transactions
• The tax files (FOS) are updated via the payroll system. The files are retrieved from the Swedish Tax Authority (Skatteverket) and are instantly uploaded to the payroll system. The tax files include all tax information for the following year.
• Due to changes in tax policies, maintenance of the employer’s system is completed as required.

From January 2019, PAYE tax returns per employee are reported every month instead of the yearly annual income statement.

Filing of Tax Declarations

• Filing can be made manually (paper form) or via the internet. An application form must be completed for the payroll processor to be authorized to file for the client.
• Additional client specific reports can be produced on request (audit, Annual Report etc.). The form is sent to the client for signature and then sent to the Swedish Tax Office and this process takes around 2-3 weeks.

Payroll

It is legally acceptable in Sweden to provide employees with online payslips as long as it’s GDPR-secure.

Reports

By law, payroll reports must be kept for at least 7 years.

Payslip Example

New Employees

The employment contract can be written or verbal. Even if there is no requirement of a written contract, the employer is obliged to provide written information stating all of the terms & conditions that are of material relevance to the employment relationship. This must be done within one month after the commencement of work by the employee. This information is provided using the form mentioned above.

The details required when setting up a new start include:

• Employment contract in Swedish or English.
• Tax information - information about tax table and tax adjustment is sent to the employee from the Swedish Tax Agency (STA) upon request.

If a new employee is a non-Swedish citizen:

• Tax information - the employee must visit a Tax Office and ask for a social security number and fill out an application form for SA-tax registration. After processing, the Tax Agency sends the decision to the employee and depending on their decision the social security percentage is decided.
• A1 form (if applicable)

Leavers

Payment for leavers must be made in the month after termination day. No notifications have to be made to the local authorities when there is a leaver.

Employee Benefits

Expenses

A net payment does not have to be registered on the payslip if it does not include any meals. If there are meals to be reimbursed it must be calculated as a benefit.

Car benefit is calculated via payroll and shown on the payslip.

Sometimes the employer also pays for travel allowance which is tax free up to a certain amount for each country. It must be clearly stated on the payslip.

Health care allowance (Friskvårdsbidrag) is very common and it is tax free up to SEK 5,000. It means that the employer pays for gym cards or massages etc. and no reports are needed. If the health care allowance exceeds SEK 5,000 the entire amount becomes taxable. A health care allowance must not exceed SEK 1,000 per occasion.

Visas & Work Permits

The rule of moving to Sweden depends on the Nationality and the length of time the employee needs to be spending in Sweden. Any employee wishing to stay longer than 6 months can bring their family along. The employees who are Non-EU citizens will need an entry clearance obtained in the appropriate category to be legally permitted to work in Sweden.

Apart from EU and EES citizens there are several groups who do not need a work permit in order to be allowed to work in Sweden. It’s prudent to visit the Swedish Migration Board’s website. Employees are required to apply for a Work Permit and Residence Visa in order to gain full authorisation to live and take up employment in Sweden. Swedish work permits will be applied for by the Applicants Sponsor (Swedish employer) on their behalf while the applicant remains in their country of domicile. Only after approval of the work permit can the applicant actually move to Sweden and begin employment.

Sweden’s Work Permit requirements are regulated by the Foreign Nationals Act 1989 which stipulates that all Foreign Nationals intending to reside in Sweden on a long term basis for the purpose of taking up a job offer must obtain a work permit before they can commence wor

There are two kinds of Swedish Work Visas. These are

Working Holiday Visa

Sweden has entered into a reciprocal agreement with Australia, New Zealand, Canada Argentina, Chile, Hong Kong South Korea and Uruguay, to allow citizens of those countries to come to Sweden and take up temporary employment under a Swedish ‘Working Holiday Visa’. Once the applicant has been approved for a working holiday they are permitted to enter Sweden and look for work.

The Working Holiday Visa has certain conditions which must be met in order for the applicant to be approved. Such conditions include;

• The Applicant must be between 18-30 years of age
• The main purpose of the Applicant’s stay in Sweden is for a holiday
• The Applicant’s job must be of a temporary nature and only taken as a means to support the stay in Sweden
• The Applicant should apply for this visa at least 6 weeks prior to flying to Sweden as the application process may take up to 6 weeks for a decision is given.
• The Working Holiday Visa is valid for a maximum of 1 year

Passport

• SEK 15,000 to buy a ticket back home at the end of the stay, or a ticket already bought.
• Full insurance for hospital care in Sweden (not Australia)
• No children are allowed to follow

Sweden Work Permit

A Swedish Work Permit requires a number of mandatory conditions, which must be satisfied for approval. The type of work an applicant is intending to engage in is a deciding factor when administering the work permit application.

In order to work in Sweden it is essential to receive a formal job offer in the form of a legal contract. Once employees have received the job offer it is important to be able to prove that they have sufficient funds to support their stay while in Sweden.

The Applicant is entitled to include Spouse and Dependents (who are less than 21) on Residence and Work Permit for employment purposes if the main applicant has taken on a job contract which is for a period longer than 6 months.

• Health care benefit limits: SEK 5,000/year, SEK 1,000/instance
• Collective agreements dictate specific employment terms
• Variable pay (e.g., bonuses) affects vacation pay calculations

Further Information

For more information, or assistance with Sweden tax enquiries please contact: gi@activpayroll.com

About This Payroll and Tax Overview

Please note that this document gives general guidance only and should not be regarded as an authoritative or complete statement of the law, regulations or tax position in any country. You should always seek specific advice for each specific situation. This document should not be relied upon as professional advice and activpayroll accepts no liability for reliance on its contents.