SWEDEN: An Introduction to Employment
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 a higher degree of co-determination regarding the employer’s business.
Contrary to systems in other European countries, there is however no system in Sweden for making CBAs generally applicable (ie, 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 legislator 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 are 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 otherwise is applicable on the employment relationship. The core obligations include, inter alia, regulations on the number of paid vacation days, parental leave and working hours. Further, the foreign employer is obligated to ensure that the posted employee receives, as a minimum, the same basic work and employment conditions as those that would have applied if the posted employee was employed directly by the Swedish recipient to occupy the same job (the so-called “principle of equal treatment”). The principle of equal treatment applies on certain categories of conditions, such as pay.
If the foreign employer does not comply with the core obligations or the principle of equal treatment regarding pay in the PWA, 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. 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 having 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
The EU Whistle-blowing Directive has been implemented in Sweden by means of a new legislation, the Swedish Whistle-blowing Act (SWA), which entered into force in 2021. The SWA 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 reports the information. The protection consists 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.
Reporting shall primarily be made through the employer’s internal whistle-blowing system or the competent authorities’ external reporting channels. Under certain circumstances, reporting can also be made by public disclosure of the information. All companies with 50 or more employees are obligated to implement an internal whistle-blowing system. Breaches of the SWA may entail an obligation for the employer to pay damages or fines.
For foreign groups with a subsidiary in Sweden, there are several issues that need to be considered and managed with regard to the new rules. For example, it is not possible for the Swedish subsidiary and another group company to have a fully joint whistle-blowing system. This entails that a whistle-blowing system will have to be established individually for the Swedish subsidiary, however certain functions can be shared. Further, the SWA has a broader scope than the EU Whistle-blowing Directive. In addition to being applicable on reporting of breaches of Union law, the SWA is also applicable on reporting of serious irregularities that are in the public interest that they come to light. Therefore, complex assessments will in many cases have to be made to determine if a report falls under the SWA.
Swedish employment legislation has during 2022 been subject to reform. The reform has mainly entailed changes to the Swedish Employment Protection Act (EPA), which is one of the most fundamental pieces of legislation in Swedish employment law. The more major changes include, inter alia, a higher flexibility regarding termination of employment, a new form of fixed-term employment and that an employment agreement is presumed to be for full time (40 hours per week). Further, the employer is now obligated to provide extensive written information on the essential conditions of the employment, including for CEO. This entails a higher administrative burden for the employer. For several reasons, it is not suitable to include the information in the employment agreement. Instead, it is recommended that the information be provided in another form, such as in an appendix to the employment agreement.