Payroll in Sweden

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  • Leverage our experience and ensure in-country Payroll compliance.

  • A single, centrally managed payroll system that delivers a fluid and consistent service to you and your employees.

  • A dedicated team and account manager so that you always have a central point of contact.

  • Pay every employee accurately and on time.

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Guide to becoming an Employer in Sweden

It may not be the first European country that springs to mind for international businesses, but there’s plenty to like about expanding into Sweden.

For starters, it’s part of the European Union, which brings obvious benefits around free trade and movement of workers. Then consider the fact that its corporate tax rate is relatively low for a western European economy, making it particularly attractive for incoming businesses from overseas. Add in the nearly 90% of Swedes that can speak English, and an extremely high standard of education, and businesses can take advantage of a highly capable workforce ready for the challenges of global commerce.

Sweden has developed into a service-heavy economy, although much of its traditional industry around raw materials and manufacturing remains strong, so there are opportunities for all types of businesses. In this guide, we’ll explore the key basics to doing business in Sweden from a payroll perspective.

Establishing your business in Sweden

The key organisation to deal with when setting up a Swedish operation is the Bolagsverket, the government business registration office. Basic registration with them takes 2-4 weeks.

A Swedish bank account is not necessarily required; however, a Swedish bank must certify that you have at least SEK 25,000 in share capital deposited in an account.

Registration with the Skatteverket, the Swedish tax office, is required to get approval for Swedish F tax, VAT registration, employer registration, and income tax registration. It’s worth noting, however, that companies who don’t have permanent premises in Sweden don’t have to pay tax on business income generated there.

Sweden’s tax and financial year runs according to the calendar year and most businesses align their dates similarly. Those that do must file their tax returns by 1 July the following year.

Employment Law in Sweden

As defined by the Working Hours Act, the standard working week in Sweden is 40 hours. Overtime is limited to 50 hours per calendar month and 200 hours per calendar year, and is paid at 1.5 times to double the standard rate.

Companies should familiarize themselves with Sweden’s Employee Protection Act to check for any specific regulations that might concern them. Sweden is, however, relatively liberal in its employment laws: for example, written contracts between employees and employers are not required by law. And because Sweden is a member of the EU, companies operating there have easy access to workers from across the continent.

Collective bargaining by trade unions and organized groups of workers is common in Sweden, and negotiations often help set rates of pay, especially among larger operations.

Probation periods in Sweden can run for up to six months, with a two-week notice period on the employer’s side during this time. Standard notice periods start at one month for those employees with less than two years’ experience, with an extra month added after every two years, to a maximum of six months’ notice after ten years.

What is the Minimum Wage in Sweden?

Sweden does not have a legally mandated minimum wage. However, rates of pay in the country are among some of Europe’s highest, with an annual average salary of around SEK 550,000 – that’s around $60,000 / £45,000. Employees in Sweden are generally paid monthly.

Neither does Sweden have any regulations about awarding bonuses (unless your company operates in the finance industry), although these are taxed at normal rates.

Similarly, severance pay is also free of legal regulation, save for a commitment for employers to continue paying all the contractually defined wages and benefits throughout the full duration of any notice period served.

Minimum Wage inSweden

What are the Social Taxes in Sweden?

Income tax rules in Sweden are relatively simple, although individual tax rates are high. Taxes should be withheld by employers and remitted to the Skatteverket.

For residents, all earnings above SEK 523,200 per year are taxed at 20%. In addition, municipal taxes must be paid on all earnings, at a rate usually varying between 30% and 35%, depending on the municipality. Income tax on non-residents is levied at a flat rate of 25%. 

Corporation tax is levied on all business income at a relatively generous 20.6%. The standard VAT rate in Sweden is 25%, although some discounted rates are applied to certain goods and services at 0%, 6% and 12%.

Social security contributions are made by employers at 31.42% of an employee’s gross salary, while employees pay 7% into their pension (although this is tax-deductible).

Annual reporting to the Swedish tax agency is not required because it’s covered in monthly filing which is due on 12th of very next month.

Income Tax inSweden

Sweden National Holidays & Annual Leave

As you’d expect for such a liberal country, Sweden is generous when it comes to employee time off. Paid leave is a minimum of 25 days, although this mostly consists of a four-week block taken in June, July or August at a time of the employer’s choosing.

There are 13 days of national holiday in Sweden each year, most of which are based around the Christian faith:

  • New Year’s Day
  • Epiphany (6 January)
  • Good Friday
  • Easter Friday
  • Easter Monday
  • May Day (1 May)
  • Ascension Day
  • White Sunday
  • National Day (6 June)
  • Midsummer Day (last Saturday in June)
  • All Saints’ Day (first Saturday in November)
  • Christmas Day
  • 2nd Day of Christmas (Boxing Day)

Employers should cover sick pay at 80% of salary for the first two weeks of absence, except the first day. After this, the social security authorities decide if the employee is entitled to any cover from the state on an individual basis.

Maternity Leave in Sweden

Parental, maternity and paternity leave are rolled together as far as state compensation is concerned: a maximum of 480 days can be taken in total (no more than 420 by one parent), paid at 80% of normal salary. Guaranteed maternity time off is 14 weeks (seven weeks on either side of the due date), and paternity leave is ten days in total and can be before or after the birth.

Why become an Employer in Sweden

Compared to many countries, Sweden is a relatively straightforward place to do business and run payroll. However, that doesn’t mean that companies shouldn’t do everything in their power to maximize payroll efficiency and maintain continuous compliance. This combined with the access to a plethora of talented and qualified service experienced professionals can give you a stable footing for further Scandinavian growth.

TopSource Worldwide, as an expert in international payroll, can streamline your back office to enable you to focus on the issues that matter. To find out more, get in touch with our expert team today.

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Published date: 11th Feb 2022
Review date: 11th Feb 2023