SWEDEN: An Introduction to Employment

EMPLOYMENT PRACTICE AREA OVERVIEW 2022  

The Swedish labour law model 

Almost 90% of all employers in Sweden are members of an employers’ organisation, and thereby covered by the terms and conditions in various collective bargaining agreements (CBAs). Given that most of the larger companies are members in an employers’ organisation, almost 90% of all employees in Sweden are also covered by various CBAs. This entails that the greater part of Swedish labour and employment law consists of regulations established through CBAs. Hence, the Swedish labour law model is characterised by self-regulation by the parties on the market, where CBAs play an important role.

A CBA is binding on all employers and employees who are members of any of the organisations which have concluded the specific CBA. Further, an employer bound by a CBA is required to apply the regulations in that CBA on all employees occupied by the work covered by the CBA. The CBAs contain regulations regarding generally all key terms and conditions of employment, such as form of employment, salary, working hours, vacation, pension and other insurances, notice periods etc. In addition, a CBA provides employees and trade unions with a higher degree of co-determination regarding the employer’s business.

Contrary to systems in other European countries, there is no system in Sweden for making CBAs generally applicable (i.e. there is no procedure for the government to enhance a CBA to law). Further, there is no legal obligation for an employer to enter into a CBA. However, a trade union that wishes to enter into a CBA with an employer has under certain circumstances a right to take industrial actions against the employer in order to conclude a CBA.

Due to the long-standing tradition of self-regulation by the parties on the labour market through CBAs, the Swedish legislature is only responsible for a minor part of the regulations on the labour market. Another significant feature of the Swedish labour law model is that the statutory regulations almost exclusively consist of civil rules for which there is no regulatory oversight, except in the areas of work environment and working hours.

Issues related to conducting business activities in Sweden and the posting of workers in Sweden

When conducting business activities in Sweden, a foreign company must – as a main rule – conduct its business through a branch office or a Swedish subsidiary. If that obligation is not observed, fines may be imposed. Further, the Swedish branch or subsidiary has a duty to comply with Swedish accounting and financial reporting legislation.

A foreign company established within the EU can post employees in Sweden on a temporary basis. A posting is conducted when a foreign employer is sending one or several employees to Sweden to perform services for a recipient in Sweden, usually a customer or a group company. The Swedish Posting of Workers Act (PWA) is then applicable, which incorporates an EU Directive concerning posting of workers.

A foreign employer has to report the posting of employees in Sweden, along with certain information concerning the posting, and provide details for a contact person in Sweden to the Swedish Work Environment Authority. If that obligation is not observed, the Work Environment Authority could impose a fine on the employer.

If a foreign employee is posted in Sweden, the PWA lists a number of Swedish statutory provisions (the so-called “core obligations”), which the foreign employer must comply with, irrespective of which country’s law is otherwise applicable on the employment relationship. The core obligations include, inter alia, regulations on number of paid vacation days, parental leave and working hours.

The PWA does not regulate the salary level for a posted employee. However, if the foreign employer does not pay salary corresponding to the salary levels in a CBA applicable for the industry in question, a Swedish trade union may have the right to take industrial actions against such employer in order to conclude a CBA for the posted employees. This also applies if the foreign employer does not comply with the core obligations in the PWA. However, a trade union’s right to take industrial actions against a company based within the EU is only permitted as long as the actions are not in interference with fundamental EU principles regarding free movement.

Further, conducting business in Sweden gives rise to several tax issues for a foreign company. A foreign employer paying compensation to employees for work conducted in Sweden must generally be registered as an employer in Sweden and pay employer’s contribution on the salary. If the foreign company is considered to have a permanent establishment in Sweden, additional obligations are imposed on the company. The foreign company is hereby, for example, liable for paying business income tax in Sweden and is subject to different tax administration obligations.

News within Swedish labour and employment law 

In 2019, the EU Whistleblowing Directive (EU) 2019/1937 on the protection of individuals who report breaches of Union law was adopted. Sweden has implemented the Directive by means of a new legislation, the Swedish Whistleblowing Act, which entered into force on 17 December 2021. The Whistleblowing Act provides a high level of protection for persons, for example employees, who in a work-related context have received or obtained information regarding irregularities and report the information. The Act is applicable on reporting of irregularities that are in the public interest that they come to light as well as breaches of Union law.

The Act provides protection for the whistleblower in the form of immunity from liability in the event of a breach of confidentiality and a prohibition of any form of retaliation, such as unfair treatment, reprimand or dismissal. For the whistleblower to be afforded protection, certain requirements need to be fulfilled. For example, the whistleblower must have had reasonable cause to assume that the information was true, and the reporting of the information must have been done correctly. Reporting should primarily be made through the employer’s internal whistleblowing system or the competent authorities’ external reporting channels. Under certain circumstances, reporting can also be made by public disclosure of the information. All companies and organisations with 50 or more employees are obligated to implement an internal whistleblowing system. For foreign groups with a subsidiary in Sweden it is not possible to have a fully joint whistleblowing system, however certain functions can be shared. Breaches of the Act may entail an obligation for the employer to pay damages or fines.

Swedish employment legislation is currently subject to reform. The reform aims to adapt employment protection to the changes and developments in the labour market. The proposed new legislation, which is based on an agreement concluded between a majority of the Swedish labour market organisations, is expected to enter into force on 30 June 2022 and be applied for the first time on 1 October 2022. The proposed legislation entails amendments regarding mainly employment protection and will involve changes to the Swedish Employment Protection Act (EPA), which is one of the most fundamental pieces of legislation in Swedish employment law. The proposal includes, inter alia, changes regarding termination of employment, form of employment and that employment agreement is presumed to be for full-time (40 hours per week) etc.

In 2019, the EU adopted a new Directive on transparent and predictable working conditions (Directive (EU) 2019/1152). The Directive will bring about additional changes in the EPA, which will enter into force on 29 June 2022. The changes will entail an obligation for the employer to provide more complete written information on the essential aspects of the employment, including for CEO and very short employments. Hence, the employment process will become more formalistic.