PEO Sweden

Professional Employer Organization (PEO)

Employer of Record (EOR) | Remote Work

peo sweden

World Bank Ease of Doing Business Ranking

  • DB Rank – 10
  • DB Score – 82.0

Rankings on Doing Business topics – Sweden

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Topic Scores

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Global PEO in Sweden

Sweden, as a Professional Employer Organization (PEO) country, stands as an appealing destination for companies looking to expand their operations in Europe. Renowned for its high standard of living, progressive social policies, and a well-developed infrastructure, Sweden provides a stable and business-friendly environment. Its strategic location at the crossroads of Northern Europe makes it an excellent gateway to Scandinavian and Baltic markets. The country boasts a skilled and educated workforce, with a strong emphasis on innovation and sustainability, making it an attractive hub for companies in technology, green energy, and research-intensive sectors. PEO services in Sweden offer valuable support in navigating the country’s labor laws, handling payroll, and managing HR functions, enabling businesses to focus on their core operations. With a transparent legal system and a business culture that fosters innovation and collaboration, Sweden remains a compelling choice for companies seeking growth opportunities in Europe.

What Is a PEO?

A PEO, or Professional Employer Organization, is a company that provides a range of HR and payroll services to small and medium-sized businesses. These services can include employee benefits, payroll, compliance with labor laws, and recruiting and training.

PEOs work by entering into a co-employment agreement with the businesses they serve. In this arrangement, the PEO becomes the employer of record for the business’s employees, taking on responsibilities such as payroll, tax withholding, and employee benefits. The business, however, retains control over its day-to-day operations and the supervision of its employees.

PEOs can help businesses streamline their HR and payroll processes, reduce costs, and free up time and resources to focus on their core business activities. They can also provide access to a range of benefits and resources that small businesses may not be able to afford or manage on their own.

PEOs are also understood as employer of record / EOR at times.

Sweden – Country Overview

Sweden, a Scandinavian nation in Northern Europe, is the third-largest country in the European Union. The Swedish economy is export-oriented and driven by hydropower, timber, and iron ore. Predominant industries are telecommunications, industrial machines, chemical goods, pharmaceuticals, motor vehicles, precision equipment, iron and steel, and home goods and appliances. Swedish economy’s regulatory efficiency combined with open-market policies help sustain competitiveness, flexibility, and large inflows of trade and investment. A conducive industrial environment in Sweden helps setting up businesses in a hassle-free way.

Capital City



Swedish Krona

Principal Language



Parliamentary Representative Democratic Constitutional Monarchy

Employment Contracts in Sweden

An employment contract is considered as established when the party performing the work:

  • becomes a part of the organization established by the other party
  • provides services to another for monetary reward
  • is subject to the control/direction concerning the way in which work is to be performed

A clear distinction between a contract for services and contract of employment is crucial in deciding on applicable legislation related to labor, social security, and taxation. Employment contracts, under the Employment Protection Act, are of indefinite term. Fixed-term employment contracts are permitted under special circumstances such as temporary substitute employment, seasonal employment, under a general fixed-term employment contract, and when employees turn 67. Fixed-term employment contracts are converted into indefinite employment contracts after an employee has worked for 5 years under a fixed-term contract or for more than 2 years as a substitute employee.

Working Hours in Sweden

The 1982 Working Hours Act sets regulations governing work schedules for employees’ protection. Normal work schedule includes an 8-hour workday and 40 hours work week. Overtime is limited to 48 hours in a week but should not exceed 200 hours in a year. Collective bargaining agreements (CBAs) generally set the overtime premium at 50% or 100% of the ordinary hourly wage.

Employee Leave in Sweden


Employees are entitled to the following paid public holidays:

  • Jan. 1: New Year’s Day
  • Epiphany
  • Good Friday
  • Easter
  • Easter Monday
  • May 1: Labor Day
  • Ascension
  • June 6: National Day
  • Whit Sunday
  • June 21: Midsummer Day
  • Nov. 1: All Saints’ Day
  • Dec. 25: Christmas
  • Dec. 26: Boxing Day

Public holidays that fall on a weekend are not carried over. There are no provisions on overtime pay for working on a public holiday.

Annual Leave/Vacation

Under the Vacation Act, employees are entitled to 25 days of annual vacation and are given holiday pay accrued during the qualifying year. The qualifying year starts on 1st April and ends on 31st March. Employees can take the vacation even during their first year of employment, but if employment begins after 31st August, they are entitled to 5 days of vacation during the first year. Employers can decide when employees can take annual leave, but they must provide a minimum of continuous 4 weeks during June, July, or August.

Maternity Leave

Pregnant employees are entitled, under the Parental Leave Act, to 7 weeks of leave before childbirth and 7 weeks after childbirth.

Paternity Leave

Fathers can take 10 days of paternal leave for childbirth.

Sick Leave

Employees are entitled, under the 1991 Sick Pay Act, to sick pay due to an injury/illness/rehabilitation and are protected from dismissal on the grounds of illness. Employees get additional benefits under the National Insurance Act if an illness extends beyond the general sick pay entitlement. Employers are required to notify the Social Insurance Agency in such situations. Employees can receive sickness benefits for a maximum of 364 days in a 15-month period. This period is extended only under special conditions. The extended sickness pay is 75% of the employees’ annual salary up to 550 days.

Paid leave in Sweden

There are 13 paid public holidays in Sweden.

Annual leave: Employees in Sweden are entitled to at least 25 days’ paid holiday per year, once they have worked for an employer for 12 months.

Sick leave: From the 2 to the 14 days of sickness, an employer pays sick pay. From the 15 day onwards, benefits payments are made by social security.

Maternity leave: Women can take 14 weeks’ maternity leave, 7 weeks before the birth of their child and 7 weeks after.  

Paternity leave: Fathers are entitled to 10 days paid paternity leave following the birth of a child.

Parental leave: Parents are entitled to 480 days of parental leave. This can be taken by one parent or be split between two parents. Employees are entitled to use this parental leave to reduce their working hours until their child is 8 years old.

Bereavement leave: Employees are entitled to 10 days paid leave following the death of a close family member.  


Tax and employer contributions in Sweden

Employee tax contributions

In Sweden, national income tax rates for employees are as follows:

  • Up to 523,200 SEK (around $54,000 USD) – 0%
  • 523,200 SEK and above – 20%

Employees pay additional municipal income tax. Rates vary depending upon which municipality an employer lives in. The average rate of municipal income tax is 32.28%

Employee payroll contributions

Employees must contribute 7% of their salary to cover pension insurance.

Employer payroll contributions

Employers contribute up to 31.42% of an employee’s salary. This covers health, parental and occupational injury insurance, retirement pension and a general payroll tax.

Corporate tax in Sweden

In Sweden, the corporate tax rate is 20.6%.

Employee Benefits in Sweden

The legal retirement age is 65 for employees with 40 years of Swedish residency. Employers must contribute to fund pension and health insurance at a rate of 31.42% for all employees/contractors who earn more than 1,000 krona in a year. Employers make reduced social security contributions for employees aged less than 26. There is no upper limit to employer contributions to the social security system, but employee contributions of 7% of their salaries are capped at an annually adjusted amount. Collective agreements generally have provisions that require employers to provide additional insurance for benefits such as group insurance and supplementary pensions.

Workers’ Compensation

Employees who suffer an injury in the workplace receive compensation through their workers’ compensation insurance fund. Employers are required to notify the Work Environment Authority in case of an accident or any situation that results in severe injury or death of an employee (s). Failure to respond to deficiencies or violations of the safety and health-related laws can result in penalties and imprisonment in serious cases.

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