What you should know about employing people in...Sweden
As a principal rule, contracts of employment in Sweden are valid for an indefinite term.
1. Employment at willThe employment relationship is interpreted as such, provided the parties have not expressly agreed otherwise, i.e. an employment for a fixed term.Contracts of employment for a fixed term may be entered into only under certain circumstances:
If an employee has been employed by an employer as a substitute for, in aggregate, more than three years during the last five years, the employment is transformed into indefinite-term employment.
A contract for probationary employment of a limited duration may also be entered into, provided that the probationary period does not exceed six months.
Where the employer or employee does not wish the employment to continue after the expiry of the probationary period, notification of such must be given to the other party no later than at the expiry of the probationary period. In the absence of the above-mentioned notice, the employment shall become permanent employment. Unless otherwise agreed, probationary employment may also be terminated prior to the expiration of the probationary period.
An employer who intends to give notice to an employee that probationary employment will be terminated prematurely, or that such employment will be terminated without it being converted into permanent employment, shall notify the employee of such at least two weeks in advance.
Where the employee is a union member, the employer shall notify the local union organisation at the same time as notice is given to the employee. The employee and the local union shall be entitled to consultations with the employer concerning the notice.
It is important to note that, where a contract of employment for a fixed term is entered into under circumstances other than those described above, the employee may obtain a judicial ruling that the contract is valid for an indefinite term.
Also notable is the fact that neither party to the employment contract can alter the terms of the contract.
2. Discrimination lawsThe latest Swedish Discrimination Act entered into force on January 1, 2009, and serves to combat discrimination and promotes equal rights and opportunities to employment, regardless of sex, transgender identity or expression, ethnicity, religion or other belief, disability, sexual orientation or age. A contract or agreement that restricts someone’s rights or obligations under the Act is of no legal effect in that regard. Under the act, an employer may not discriminate against a person who, with respect to the employer, is an employee, enquiring or applying for work, applying for or carrying out a traineeship, or is available to perform work or is performing work as a temporary borrowed labour. The Act also allows for the employee to request information on how the employer administered and decided in an application or promotion process of which the employee is affected.
3. Employee benefits – PensionsIt is common that an employer renders its employees certain benefits. Notable in Swedish law is that employers must pay social security contributions on the taxable value of benefits on top of the actual costs. The employee must also pay tax for the benefit.
Sweden has a state pension scheme issued by statutory law, providing all employees with a retirement pension when they retire from the labour market. In addition, it is common for collective bargaining agreements and many individual employment agreements to contain provisions on pension schemes, especially for managing directors and management. Such schemes are established with professional financial institutions, and the risk must be covered by such an institution. In Sweden, the employees are also allowed to design their own pension schemes that are not established with a financial institution. Notable is that the employee according to statutory law must retire at the latest at the age of 67.
4. Wage / hour lawsWage limits are commonly agreed upon through the collective bargaining agreements that are met between the labour and the employer organizations. Common practice is that companies which are not part of an employer organisation apply the same wages as are determined by the collective agreements for their specific area of work from time to time. Fixed remuneration is normally paid out as a monthly wage, and made available on the 25th of each month.
In Sweden, the Working Hours Act along with the collective agreements regulate working hours. Generally speaking, an 8-hour workday and working week from Monday to Friday prevail (40-hour work week). There are also regulations concerning minimum daily and weekly rest periods, as well as a set maximum for overtime hours during a calendar month and year.
5. Termination of employmentThe Swedish employee enjoys solid protection and employers may not terminate the employee’s contract without cause. The Employment Protection Act applies to both public and private employees, but the following persons are excluded from the application of the Act:
a. Employees whose duties and conditions of employment are such that they may be deemed to occupy a managerial or comparable position;b. Employees who are members of the employer’s household;c. Employees who are employed for work with special employment support or in sheltered employment.
Employees are granted security of employment. Notice of termination requires an objective ground, meaning either shortage of work or circumstances related to the employee personally. Grounds related to the employee personally are in most cases difficult to claim, since the requirements for such grounds are set very high.
An employee may be summarily dismissed where he has grossly neglected his obligations to the employer.
However, before the employer terminates an employment, he must perform a thorough investigation proving that the termination could not be avoided by any other measure, for instance transferring the employee to another position within the business organisation.
Although employees who are deemed to occupy managerial positions are not protected by the Act, it has been ruled common practice that they receive an extended notice period of 6 months.
6. Co-determination in the workplaceSwedish employees enjoy the right to association. The Employment (Co-Determination in the workplace) Act regulates certain aspects of the relationship between the company as employer and the employee’s trade union organization. Among other things, the act defines the prerequisites of a collective agreement and contains an extended right to negotiation and an extended right to information. On top of this, the act contains provisions that give the view of the trade union precedence over the view of the employer in certain disputes. This precedence is applicable prior to a court ruling.
The information rules in the Co-determination Act in principle imply that there should be an open attitude towards giving the employees insight into the progress and circumstances of the company in various respects. In the first place, the employer is obliged regularly to inform his local negotiation counterparts about the development of the business in financial and operational terms and about personnel policy guidelines. This obligation is called the primary obligation to inform. On top of this, the union is entitled, upon request, to examine accounting records and other documents to which the employer has access.
The right to negotiation is granted to a trade union that is party to a collective agreement between the union and the company. It affects matters such as decisions concerning major changes at the workplace in general or concerning individual employees, the company’s use of subcontractors, and lay-offs. The extended right of negotiation does not imply any legal obligation on the part of the employer to actually reach an agreement. If the negotiations come to a conclusion without an agreement being reached, the employer is entitled to make his decision in whatever way he finds appropriate. The employer is also entitled to make decisions unilaterally once the negotiations have been completed.
7. Business transfer and the rights of the employeesThe Employment Protection Act has a regulation to protect the employees on the occurrence of a business transfer.
In the event of a transfer, the rights of an employee are generally fully preserved. However, the employee made decide if he wants to stay with his former employer or if he wants to follow to the new employer. The employee has a right to maintain the existing terms and conditions in accordance to his contract.
An employee cannot be dismissed for a reason concerned with the transfer of the business. The only just ground for a dismissal is shortage of work, if such shortage can be shown irrespective of the transfer.
8. Classification employee /independent contractorThe classification is most relevant for tax reasons. Typically, an employee enters into a work contract with the employer. When assessing the legal status of a person, a court will not take into account the wording of the agreement between the parties, but rather look at how the relationship is structured in reality. The following aspects among other things are often considered in such proceedings:
a. If the working party must perform the work for him/herself, irrespective of whether this is evident from the agreement or presumedb. The working party actually performs the work himself.c. The work tasks are variedd. The working party has put his labour at the disposal of the other party.e. The working party is prohibited, for example by lack of time or agreement, from performing work for anyone else.f. The working party receives compensation for his expensesg. The working party uses the other party’s machines or equipmenth. The working party receives remuneration, which, at least to some extent, may be considered as a guaranteed wage.
9. Right to invention of employee/independent contractorThe Act on Right to Employees’ Inventions has been in force for 60 years, and the general rule is that the employer is granted the right to any invention created by the employee under the terms of the employment. The right to other Intellectual Property, such as design and other copyrighted material, as a general rule is granted the creator. Therefore, depending on the nature of the employment, an employer should consider provisions transferring such rights in the employment contracts.
If the invention is created within the terms of a work-for-hire agreement with an independent contractor, the right to any inventions, as well as any other intellectual property, which arises from the agreement, should be regulated by the agreement with the independent contractor.
10. Employment policy guidelines and staff manualsAs a complement to the employment contract, it is common that staff policies are drafted in order to cover an employer’s overall principles and the detailed guidelines that the employer wants to be applicable to all employees. The aim of the policy guidelines is to ensure that all employees are aware of their rights and obligations, and can often be formatted as a staff manual, containing among other things.
A guideline will in fact become an integral part of the conditions of employment. Since employment policy often contain descriptions of various benefits, a change of the guidelines could constitute a material change to the conditions of employment. Any changes to the guidelines should be communicated to the employees to make sure they are informed about the changes. Furthermore, it is important to note whether any change affects the individual employment conditions of the employee.
Please note that an employment contract with the individual employee should include a clause indicating that staff policies and guidelines are part of the employment contract.