Private and public sector
The Swedish labor market is divided into private and public sector. Approximately 70 percent of all employees work in the private sector – in businesses, shops, restaurants, industries and service companies. Approximately 30 percent work in the public sector – state authorities, regions and municipalities.
Social partners
One of the most distinctive features of the Swedish labor market model is that wages and working conditions are determined through negotiations between employers and trade unions - not by the state. The state enacts framework laws but does not normally intervene in salary negotiations.
- Unions (employee side):
- – LO (Landsorganisationen): approx. 1.5 million members; organizes i.a. industrial, transport and service workers
- – TCO (Central Organization of Servants): civil servants; teachers, nurses, etc.
- – SACO (Sweden's Central Organization of Graduates): graduates with university degrees
- Employer side:
- - Swedish Business: private employers
- - The Swedish Employers' Agency: state authorities
- – SKR (Sweden's municipalities and regions): municipalities and regions
Collective agreement – the cornerstone
Collective agreements are agreements between a trade union and an employer's organization (or an individual employer) on wages, working hours, overtime, holidays and other employment conditions. Collective agreements cover approximately 90 percent of all employees in Sweden.
Sweden has no statutory minimum wage. Instead, minimum wages are set by collective agreements, which provides flexibility for different industries and regions.
Forms of employment
There are several types of employment in Sweden. It is important to know the differences in order to understand your rights as an employee.
- Permanent employment (permanent employment): applies until further notice; the employer must have a factual basis for termination
- Fixed-term employment: time-limited employment for a specific task or period
- Probationary employment: maximum 6 months; may be terminated without reason; normally transitions to permanent employment
- Need employment: called in when needed; uncertain conditions
LAS – The Employment Protection Act
LAS (The Employment Protection Act, 1982) regulates which rules apply to resigning or dismissing an employee. The law must protect workers from arbitrary dismissals.
- Termination requires a factual basis: either personal reasons (misconduct) or lack of work
- Last in – first out (the first-come, first-served rule): in the event of operating restrictions, those with the longest tenure have priority to keep the job
- Notice period: usually 1-6 months depending on length of employment
- Relocation obligation: the employer must try to offer other work before dismissal
Working hours and holidays
A standard working week in Sweden is often 40 hours. The Annual Leave Act generally gives employees 25 vacation days per year. The number of paid days depends on how much leave the employee has earned. Collective agreements may provide more days.
Taxes in Sweden
Sweden has a progressive tax system – those who earn more pay a higher proportion in tax. The taxes finance the welfare society's services.
- Municipal tax: approx. 30–35% of salary; paid to the municipality and the region for care, school and care
- State income tax: is added to income over approx. SEK 540,000/year (approx. 20% on that part)
- VAT: 25% normal rate; 12% on food and hotel; 6% on books, public transport, culture
- Employer contributions: the employer pays approx. 31.4% on top of the salary to social contributions (pension, health insurance, etc.)
The A-fund and unemployment
A-kassan (Arbetslöhetskassan) is voluntary unemployment insurance administered by independent unemployment insurance funds linked to trade unions. The state subsidizes the system.
- To receive compensation, you must have worked for at least 6 months (at least 80 hours per month)
- You must be an active job seeker and accept jobs offered
- Compensation: up to 80% of previous salary (with ceiling amount)
- The employment service helps you look for work and can offer training
The enforcement agency and debts
The enforcement agency is the government authority that handles debt collection and helps the over-indebted with debt restructuring. If a person does not pay a debt, the creditor can turn to the Bailiff to collect the debt.
Starting a business in Sweden
It is relatively easy to start a company in Sweden. You register with the Swedish Companies Registration Office and the Swedish Tax Agency. The most common is to start a limited liability company or a sole proprietorship.
- Sole proprietorship: easiest to start; the owner is personally liable for debts
- Trading company: two or more owners; personal responsibility
- Aktiebolag (AB): requires SEK 25,000 in share capital; limited personal liability; most common for growth companies
- Economic association: cooperative form; for example condominium associations
- Registration: at the Swedish Companies Registration Office; VAT registration with the Swedish Tax Agency