Payroll in Sweden

Comprehensive guide – Payroll in Sweden

Navigating the complexities of payroll in Sweden can be a daunting task. With numerous labour laws, tax regulations, and social security programs to consider, ensuring compliance and accurate compensation for employees is of utmost importance.

In this comprehensive guide, we explore the Swedish tax regulations, employment landscape, labour laws, and social security programs. Additionally, we discuss the benefits of outsourcing payroll services and how we can assist you in managing your Swedish payroll needs.

Swedish Tax Regulations

Understanding tax regulations in Sweden is vital for both employers and employees. Tax residency, income tax rates, and the process of withholding and reporting taxes are all critical aspects that businesses must navigate.

For example, an employer of foreigners living outside of Sweden but working in Sweden will need to deduct tax on salaries either according to preliminary A-tax or according to SINK (special income tax for non-residents).

It is also important to understand that rules and obligations differ between foreign companies without permanent establishment in Sweden and foreign companies with permanent establishment in Sweden.

The 183-day rule (Tax Residency and Obligations)

The 183-day rule means that in certain circumstances when a person living abroad comes to Sweden to work during a limited period (up to 183 days), this person may be exempt from paying taxes in Sweden. For this to occur all of the following criteria’s must be met:

• The individual stays in Sweden for no more than 183 days within a 12-month period.
• Their compensation is provided by a non-Swedish employer.
• The compensation is not borne by a permanent establishment that the employer has in Sweden.

Note that the 183-day rule does not apply when a non-Swedish employer outsources employees (with some exceptions for short-term assignments, read more here Those who receive payment from a non-Swedish employer | Skatteverket)

What is SINK?

SINK is short for Special Income Tax for Foreign Residents and both the employer, and the employee can apply for SINK at the Swedish Tax Agency. If the application is approved, you will receive a SINK decision that specifies the tax to be paid.

SINK taxation means that the salary will be taxed at the rate of 25%. You do not need to file an income tax return, and can therefore not make any claims for deductions.

It is also possible to choose to be taxed in accordance with standard regulations instead of SINK.

The 183-day rule is part of the special income tax for non-residents (SINK). You can read more about SINK here. (SINK – special income tax for foreign residents | Skatteverket)

Unlimited tax liability

If an employee live in Sweden for at least six months, the employee is subject to unlimited tax liability.

In the same way as if the employee was living in Sweden permanently.

Withholding and Reporting Taxes

Employers must submit a monthly PAYE tax return (arbetsgivardeklaration) to the Swedish Tax Agency, declaring payments and deducted preliminary tax for each employee. Adherence and understanding of the withholding and reporting tax requirements ensures compliance with Swedish tax regulations.

Employers in Sweden are responsible for:

• Withholding and reporting taxes using the Pay As You Earn (PAYE) system
• Reporting salaries and employee benefits to the Swedish Tax Agency monthly.

Most employers should submit their PAYE tax returns no later than the 12^th day of the following month. For example the salary paid in February must be reported in the PAYE tax return by 12 March.

Labor Laws and Collective Bargaining Agreements

Labor laws and collective bargaining agreements in Sweden play a significant role in regulating working hours, overtime pay and employee leave entitlements. These agreements are negotiated between employers and trade unions or independent worker groups, helping to establish fair working conditions and compensation for employees.

Laws regarding for example holidays and working hours apply to all that are employed or stationed in Sweden, with some exceptions. Read more at the Swedish Work Environment Authority (Start – Arbetsmiljöverket).

Minimum Wage in Sweden

While there is no law related to minimum wage in Sweden, the minimum wage is decided by various collective agreements. This means that different sectors can have different minimum wages.

You can find out more minimum wage in specific sectors by contacting the employer or employee organisation listen on the website of the Swedish Work Environment Authority ( Start – Arbetsmiljöverket), to ensure adequate compensation.

Minimum Wage to obtain a Work Permit in Sweden

Please note that in respect of minimum wage and obtaining a work permit in Sweden there are minimum salary prerequisites.

Effective from November 1st, 2023, the minimum salary prerequisite for work permits in Sweden was adjusted from a gross monthly salary of SEK 13,000 to 80% of the gross median salary at the application submission date.

Based on current data, this signifies that a work permit application will only be eligible for approval if the gross salary amounts to a minimum of SEK 28,480, irrespective of whether the employee is engaged in full-time or part-time employment.

Work Permit in Sweden

Citizens of an EU/EEA country are entitled to work in Sweden without a work permit. This also means that they can start working immediately upon arrival in Sweden and they are also entitled to come to Sweden to search for work. But remember that if you work in Sweden for more than 6 months you are obliged to register to pay tax in Sweden and submit an Income tax return.

Citizens of a non-EU country who wants to work in Sweden must in most cases obtain a work permit and cannot enter Sweden until the permit has been granted.

Working Hours and Overtime Regulations

In Sweden, the customary working week consists of 40 hours. Overtime is limited to 48 hours per four-week period or 50 hours per calendar month but cannot exceed 200 hours per twelve-month period.

Employers must adhere to these working hours and overtime regulations to ensure compliance with Swedish labour laws and collective bargaining agreements. Comprehending and adhering to these guidelines can help businesses maintain a healthy work environment and circumvent potential legal issues.

Employee Leave Entitlements

Employee leave entitlements in Sweden include a generous allocation of 25 days of paid vacation per year.

In addition, Sweden offers extensive paid parental leave policies. If you are insured in Sweden and your child lives in Sweden, you are entitled to 480 days of parental leave per child. For 390 days, the compensation is based on your income (called sickness benefit level days). The remaining 90 days are referred to as minimum level days and the compensation is set at SEK 180 per day.

Sick Leave

The first two weeks that you are sick, it is common that your employer pays you sick pay instead of your regular salary.

But if you are still sick after the two weeks, you can apply for something called sickness benefit from the Social Insurance Agency (Försäkringskassan).

In some cases, the employer does not pay sick pay. If so, you can instead apply for sickness benefit from the Social Insurance Agency. To find out if you are entitled to sick pay, contact your employer.

Businesses can ensure they provide fair and adequate benefits to their employees in Sweden by understanding and adhering to these employee leave entitlements.

Social Insurance in Sweden

Sweden has a social insurance system that is publicly funded through taxes and dues. The purpose is to provide financial security during the different stages of life. For example, social insurance benefits for families with children, the elderly or people with disability or illness. The system provides compensation for sick leave or care of children (called vab in Swedish).

The social insurance system is administered by the Social Insurance Agency (Försäkringskassan).

For businesses employing individuals in Sweden, comprehending these social security and insurance programs is pivotal as they significantly contribute to employee compensation and well-being.

Pension Plans

The Swedish Pensions Agency (Pensionsmyndigheten) manages the national public pension.

Pension plans in Sweden include a multi-layered system with mandatory contributions from both employers and employees, as well as optional private pension plans.

Private pension plans, such as the income pension, premium pension, and voluntary pension, can be established through banks or pension companies. These pension plans offer additional financial security for employees during their retirement years, ensuring they are well taken care of after their working years.

Key Takeaways

• Understanding Swedish payroll requires knowledge of taxes, regulations, and social security programs.
• Employers must comply with taxation systems, labor laws, and collective bargaining agreements to ensure fair working conditions for employees.
• Outsourcing payroll is an effective strategy to remain compliant while streamlining employee compensation & benefits management.

Key Aspects of Swedish Payroll

• Wage negotiations
• Working hours
• Overtime
• Sick pay

Comprehending these key aspects, as well as the various labour laws and collective bargaining agreements, is indispensable for businesses operating in Sweden.

Outsourcing Payroll in Sweden:

Outsourcing payroll in Sweden can be a valuable strategy for businesses looking to navigate the complexities of the country’s payroll system. Businesses can minimize the risk of penalties and legal issues and ensure compliance with local labor laws and tax regulations by partnering with local payroll providers.

Outsourcing payroll services offers several benefits for businesses, including:

• Allowing businesses to focus on their core operations
• Leaving the intricacies of payroll management to experienced professionals
• Increasing efficiency and streamlining the approach to managing employee compensation and benefits.

Partnering with Revideco for Payroll Services

Revideco is a reputable payroll service provider in Sweden, offering vast experience in supporting local and international clients with payroll, accounting, and audit services. Partnering with Revideco ensures not only prompt service, but also high quality, and reasonable pricing.

Engaging the services of Revideco gives businesses the peace of mind that their payroll needs are managed effectively and in compliance with Swedish labour laws and tax regulations. This partnership allows businesses to focus on their core operations, knowing that their payroll requirements are taken care of.

Global: Local: Personal

At Revideco, we collaborate with accountants, chartered accountants, CPAs, CFOs, and shared service centers globally via our international network MGI.

We are proficient in disseminating knowledge pertaining to Swedish legal frameworks, Swedish GAAP, and distinct Swedish regulatory stipulations.

Our primary objective is to identify the most optimal solution tailored for each individual client.

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