What global businesses need to know about payroll in Sweden
Did you know that 68% of Sweden is covered by forest? No surprise, then, that wood-based products are a major Swedish export. But there’s much more to love about doing business in Sweden than the fresh smell of pine.
Sweden is a country that stands out for its calmness and stability when it comes to employment and business. Its workforce is well-educated with English widely understood and spoken; its membership of the European Union gives it easy access to a large talent pool to hire from; and its standard of living is very high.
This has helped Sweden establish the 24th-largest economy in the world by GDP. This might not sound like much, but for a country with a population of just over ten million, it demonstrates how it punches above its weight. A third of its economy is industry, with a sizable automotive industry underpinning its manufacturing.
Sweden’s tax and social security rates are among the highest in the world, but this is counterbalanced by very generous social benefits and leave entitlements. Nevertheless, this can make things a little more complicated when running payroll in Sweden, especially when the strong influence of unions and collective bargaining is factored in, too. Read on to find out more.
Getting Started
The one-stop shop for starting a business in Sweden is Verksamt, an online portal which covers most of the key registrations, including business, VAT, employer and F-tax. It’s available in English, and is full of helpful resources and advice to ease the processes. Additionally, the Bolagsverket constantly updates its processing times online to provide a more exact timeframe of how long each step is likely to take.
Organizations need to obtain certification from a Swedish bank that a cash amount (for the payment of company shares) has been deposited into an account. The minimum level for private limited companies is SEK 25,000 (approx. £1,850; $2,350; €2,250). However, companies do not have to use a Swedish bank account to make payments to employees or tax authorities.
Companies operating in Sweden who do not have permanent establishments there are not liable to pay tax on their business income.
Employment & Compensation Considerations
Laws protecting employees are strong in Sweden, and are administered under the country’s Employee Protection Act, Annual Leave Act, the Working Hours Act.
Sweden’s standard working week is in line with much of the rest of Europe – 40 hours, across five eight-hour shifts. Employees are not allowed to work more than five hours at a time without a break. Overtime pay is 1/94th of monthly salary per hour, rising to 1/72nd for work after 8pm or at weekends. These rates can be revised through collective bargaining. However, overtime is limited to eight hours a week, 50 hours a month and 200 hours a year.
Probation periods should be agreed through employment contracts or collective bargaining and set out in writing. The maximum length is six months, and any employee who is still hired after this time automatically becomes a permanent employee.
Notice periods can also be negotiated through collective bargaining, but there are statutory minimums in place – one month to begin with, rising by an additional month with each two years’ service completed. The maximum is six months’ notice for employees with at least ten years’ service.
Compensation, Bonuses and Severance
Sweden is one of only a few countries in Europe that has no legally mandated minimum wage. Instead, around 90% of the Swedish workforce has their wage levels negotiated through collective bargaining agreement. For those that don’t, wages are entirely up for negotiation between employer and employee.
Discretionary and contractual bonuses are common in Sweden. Any employees that are made redundant or laid off remain entitled to their full salary and other contractually defined benefits for the entire length of their notice period.
Similarly, there are no legal requirements around severance pay, which can be agreed through negotiation and collective bargaining.
Tax & Social Security Considerations
Income tax rates are high in Sweden and can be fairly complex. Firstly, employees must pay a municipal tax – the rates vary slightly between different parts of the country, and as of 2025, range between 28.98% and 35.3%. On top of this, a national income tax of 20% is levied on all earnings above SEK 625,800 per year (approx. £46,500; $58,700; €56,100). Non-residents must pay a flat tax rate of 25 percent.
Employers contribute a total of 31.42% of employee salary to social security, while employees contribute 7% towards pension insurance.
Sweden’s tax year runs through the calendar year. Tax return forms are typically issued the following April and must be completed and sent back to the Skatteverket by early May. However, taxes should be paid monthly according to a fixed schedule. This is normally by the 12th of each month, except for January and August when the deadline is the 17th of the month. The Skatteverket requires that the money is received in their bank accounts no later than these days, so it may be necessary to process payments in advance of the due dates.
Leave & Holiday Considerations
The high levels of tax and social security contributions in Sweden are counterbalanced by a generous approach to leave.
Paid leave entitlement is 25 days per year, with each holiday year starting on April 1, although many companies offer as much as 30 days. However, the majority of this time off has to be taken as a four-week summer holiday between June and August, at a time determined by employers at least two months in advance. Paid leave entitlement can be carried over for up to five years, with a cap of 30 carryover days in place.
Sweden has 11 days of public holidays per year, those that fall on the weekend do not generate a day off in lieu. Many businesses close at lunchtime on the day prior to a public holiday. If a holiday falls on a Tuesday or Thursday, many Swedes like to take off the adjacent Monday or Friday with their paid leave to create a long weekend.
The first day of sick leave is unpaid, and employers pay 75-80% of normal salary from day two until the end of the second week. After that, social security picks up the tab at the same rate.
Sweden offers some of the most generous parental leave entitlements of any country in the world. Couples can take up to 480 days of leave in total; some of these are parent-specific (the two weeks immediately post-birth for the mother, and ten days within the first 60 days post-birth for the father) while the rest is more flexible. Parents generally get 80% of their salary while taking parental leave.
Managing Payroll in Sweden
As you can see from this guide, there are some complexities when it comes to running payroll in Sweden. The influence of collective bargaining means many rules and regulations are up for negotiation, while there are some stringent requirements around tax remittance and reporting. These are areas where local expertise can make the difference in establishing and maintaining compliance; a good global payroll partner will be able to connect you to this vital know-how.
This guide is for informational purposes only and not intended to convey or constitute legal or any other advice. It is not a substitute for advice from a qualified professional. Click here to see more country payroll guides from CloudPay.