How to hire and pay remote workers in Sweden

Ready to expand your business abroad? If you're looking to find top talent in Europe, Sweden could be a solid option. The country’s leadership in innovation, legal and regulatory transparency, and the popularity of remote work make Sweden an attractive location for companies who’re looking to recruit remote workers.

Employing international workers can be challenging, especially if you don’t have local legal experts to advise you on labor regulations and tax practices. You'll also have to make sure you're classifying your workers correctly and paying them on time. But, don't let the complexities of global employment stop you from hiring remote workers in Sweden.

This comprehensive article can help you figure out how to hire, onboard, and pay Swedish remote workers while remaining in compliance with local labor laws. Read on to get started with your first remote hire in Sweden.

How do foreign businesses pay remote workers in Sweden?

To employ and pay Swedish workers, employers can establish a legal entity in the country to hire employees, work with a global employment partner or pay workers in Sweden as contractors. Each of these options is explained below.

Open a legal entity in Sweden

A legal entity, such as a corporation, is necessary to be able to hire employees and collect and remit their taxes to the tax authorities. If your company opens a legal entity in Sweden as a subsidiary, complies with the rules for establishing a business entity, and follows local labor and tax laws, then your company can hire and pay remote employees in Sweden.

Work with a global employment partner

If your company does not have the resources or legal team to establish a legal entity in Sweden, you could partner with a global employment service. A global employment partner like Remote can help you easily hire and pay employees in Sweden, while helping you stay compliant with labor laws and tax regulations.

Pay Sweden workers as contractors

Alternatively, you could consider getting work done via global contractors. These are self-employed individuals who run their own businesses providing services to clients. They are paid once they submit an invoice for the hours spent working on the project. These contractors are not employees, and it’s crucial that you avoid treating them as employees. 

In what currency do companies pay remote workers in Sweden?

The currency used in Sweden is the Swedish krona (SEK).

What are the tax rates for tax brackets in Sweden?

Employers are required to collect tax withholding for their employees from paychecks. Employees will file their annual returns. The national tax rates are 0% for incomes up to 613,900 SEK and 20% for incomes over 613,900. The average municipal tax rate is 32%.

Which parts of salary in Sweden are taxable?

Components of Sweden salary that incur full taxes

Salaries incur full taxes in Sweden.

Components of Sweden salary that incur partial taxes

Swedish salaries are not taxed partially.

Is per diem taxable in Sweden?

Per diem expenses are expenses incurred by employees for working, such as lodging on business trips, paid by the employer. Per diem payments are tax-free in Sweden, up to 240 SEK per day.

Is there a difference between an allowance and a reimbursement in Sweden?

An allowance is a set amount given to employees, and a reimbursement is a payment to cover the actual expense of the employee. A car allowance is a taxable benefit in Sweden if it is used for personal use. Other reimbursed expenses incurred during business are not taxable and can be deducted from income for tax purposes.

What payroll deductions are employers required to make in Sweden?

Employers are required to deduct 7% of Swedish employee salaries to pay for pensions. 

What is the minimum wage in Sweden?

There is no minimum wage set by labor laws in Sweden. However, collective bargaining agreements, which cover about 88% of Swedish employees, require companies to pay certain rates and provide certain benefits to workers. 91% of Swedish employees have at least part of their pay negotiated at the local level.

How much is overtime pay in Sweden?

Working hours may not exceed 40 hours per week. Working beyond these hours is considered overtime. The maximum number of hours per week must not exceed 48 hours in four weeks, 50 hours in a calendar month, and 200 hours in a calendar year. Overtime compensation is set in Collective Bargaining Agreements (CBAs).

What are the local labor laws in Sweden?

While hiring workers in Sweden, your company will not only need to follow Swedish labor laws but will also need to abide by CBAs, which may include provisions more favorable to employees than labor laws. Labor laws govern how employers must treat employees and which statutory benefits they must provide. The statutes that govern labor relations include:

• Employment Protection Act

• Co-determination Act 

• Personal Data Act

• Discrimination Act

• Parental Leave Act

• Annual Leave Act

• Sick Pay Act

• Working Hours Act

• Work Environment Act

How to pay contractors in Sweden?

Once the contractor submits an invoice to the employer, the employer can make direct payments to contractors in Sweden. Since the contractor is responsible for filing and paying their own income tax, there are no deductions, tax withholding, or contributions to social security that need to be made. 

Payments can be made via bank transfer, direct deposits (which can be set up for ACH payments), or online payment services such as PayPal or Wise. It’s not necessary to provide any other benefits to workers, as long as the individual is classified as a contractor and would not be considered an employee according to the law.

Differences between contractors and employees

Independent contractors are not the same as employees in a few key ways. A contractor is a self-employed individual who manages their own business and has the freedom to set their working hours, location, and salary. An employee, on the other hand, works under the supervision of the employer, who also decides their employees’ working hours, location, and salary. 

Independent contractors are not entitled to the same benefits as employees under Swedish labor laws. Contractors also don't receive certain labor law protections, such as:

• A minimum wage

• Overtime compensation

• Leave entitlements

• Worker compensation

• Unemployment benefits

• Health insurance

Employers are not obligated to make payroll contributions towards social security, insurance, or pension while hiring contractors.

Worker misclassification

Worker misclassification happens when you are paying workers as contractors, but there is a de facto employment relationship, and you're treating them as employees.

While working with contractors in Sweden, you have to ensure you correctly classify your workers. Otherwise, there may be serious consequences such as fines, penalties, or legal issues.

To avoid misclassification risks and for several other reasons outlined in our helpful article on the topic, it may be wise to convert your contracts to employees.

How to pay remote employees in Sweden?

You can hire and pay employees in Sweden by setting up a local entity in the country. However, you’ll have to comply with local employment and tax laws and be aware of the consequences of permanent establishment. 

Permanent establishment is a tax term that implies that a business has ongoing operations in the country, which means that a foreign company doing business in Sweden may have to pay local corporate tax. A permanent establishment designation can happen in a country when a foreign company:

• Has a fixed address in the country

• Employs local workers for a long time

• Earns a sizable amount of revenue in the country

• Has agents regularly conducting business operations in the country

• Makes strategic decisions and has meetings in the country

To avoid permanent establishment risks and pay your remote employees efficiently, partner with a trusted employer of record (EOR) who can do the heavy lifting for you.

When to use an employer of record

The decision to use an EOR may largely be based on whether your company has a legal entity, or subsidiary, in Sweden. In many countries, a legal entity is required to be able to hire that country’s citizens as employees. Establishing an entity may take a considerable amount of time, effort, and money. 

The easiest and most-effective way for companies to hire and pay remote workers globally is to partner with an EOR service. A global employment provider, like Remote, already owns entities in countries your company may want to hire in, such as Sweden. Remote can help you legally hire and onboard remote workers, process their payroll, and provide them with benefits, all while remaining fully compliant with local laws.

Pay and hire remote workers in Sweden with Remote

Employing and paying remote workers can be difficult, especially if you’re working with multiple workers across countries. You’ll have to establish a local entity to pay remote workers, learn the basics of Swedish labor laws, and make sure you compliantly pay remote workers.

But global employment doesn’t have to be stressful. An international payroll service like Remote can make it easy for you to pay your remote workers in their local currency in accordance with Swedish tax and compliance requirements. Our team of in-house experts can help you handle payroll, taxes, benefits, stock options, and local compliance so that you can focus on growing your business.

For professional advice on expanding your business in Sweden, download our helpful guide on hiring remote employees. You can also visit our Sweden Country Explorer page for more information about how you can use Remote to hire and onboard remote workers in Sweden.