Episode 20: Payroll in Sweden

Luisa Rollenhagen (00:07): Hello, and welcome to another episode of Payroll Around the World! I’m your host, Luisa Rollenhagen.  

Payroll Around the World is your all-inclusive guide to understanding how payroll operates across different countries. Each episode spotlights a specific country and features interviews with ADP experts on the ground, as well as locals who share their perspectives on work and pay in their homeland.  

After all, payroll can’t truly be global if it isn’t local as well.  

Today, we’re heading to Sweden. This Scandinavian nation has given the world many indispensable gifts, such as ABBA, flat-pack furniture, and a design aesthetic that’s the envy of every well-curated Pinterest board devoted to Scandi style.   

Sweden’s economy is also one of the most developed in Europe, with a strong sense of equality baked into its labor laws. The country’s labor landscape is also characterized by some genuinely surprising complexity, particularly when it comes to benefits, holiday pay, and the cultural norms of Swedish working life.  

Ben Dale-Gough (01:20):  

Some countries are maybe a bit more metric driven or maybe more prone to micromanage almost. Whereas in Sweden, people are keen to help you succeed as an organization, but as long as you take them on that journey and explain the story to them.  

Luisa Rollenhagen (01:35): These cultural norms also extend to payroll. Swedish employees place a big premium on trust, and getting payroll wrong can create significant tension.   

Ingela Persson (01:45): 

I would definitely say that Sweden is very particular about payroll. A company can literally get a bad reputation if they can’t get the payroll right.  

Luisa Rollenhagen (01:58): But that’s not the only thing a multinational employer in Sweden needs to keep in mind. Certain things that can seem pretty straightforward, such as benefits, are actually quite complex because of the specific taxation rules surrounding them. Employees may think twice about accepting benefits offered by their employer, and instead expect a different perk.  

Carlo (02:19) 

So salary-wise, if I would’ve taken all of the benefits that were offered, I would get paid around 10,000 krona less every month, and this would also affect my retirement funds as well as the accumulated sick day pays, et cetera.   

Luisa Rollenhagen (02:38): That was Carlo, a Stockholm-based consultant who found himself navigating Sweden’s benefit taxation rules the hard way. We’ll hear more from him shortly.  

And those other voices you heard? That was Ingela Persson and Ben Dale-Gough, our ADP experts for today. They’re going to walk us through the ins and outs of payroll in Sweden, and I’m thrilled to welcome them to the episode.  

Hello Ingela and Ben! Would you like to introduce yourselves?  

Ingela Persson (03:06): 

My name is Ingela Persson and I am the senior service and implementation manager in Sweden.  

Ben Dale-Gough (03:13): 

Hi, my name’s Ben Dale-Gough. I’m now with ADP running the payroll teams, the service teams, client teams in Ireland, the UK, and the Nordics.  

Luisa Rollenhagen (03:26): Thank you for joining us today.  

I’d like to kick things off by talking about Sweden’s economy and what makes it an attractive destination for international businesses.  

Ben Dale-Gough (03:36): 

So from a GDP perspective, it’s, compared to the rest of the EU, it’s a bit ahead of the EU, so it’s expected to see growth this year of 2.6% compared to the EU. So that I think it’s about 1.4, 1.6%. So overall, it’s a growing economy. So it’s a good place to be, hence the reason the number of organizations are based out of Sweden. From an unemployment perspective, I guess unemployment is slightly higher than the EU, it’s around about 8%. But looking at the people in country, we do see that it’s a highly skilled and a highly educated workforce as well, which is very attractive for organizations to locate to Sweden.  

Luisa Rollenhagen (04:14): That’s an interesting point regarding the educated workforce. What other aspects make Sweden an appealing destination for businesses?  

Ben Dale-Gough (04:23) 

Apart from the people, as we said, there’s a highly skilled workforce, so that’s obviously attractive, but also highly adaptable as well. So although industry, I guess it’s the broad range of industry within Sweden. So it ranges from maybe slightly older industries. So things like forestry in lumber, all the way to manufacturing and specifically vehicle manufacturing, all the way into more newer industries such as pharmaceuticals and technical. So as I said, there’s a broad range of different companies out there. As ally to that, there’s a high level of individuals who are bilingual, specifically with English as well. So again, that makes it very attractive to other organizations. And like you say, there’s a higher proportion of globally headquartered companies based out of Sweden compared to countries of a comparable size. So it is really attractive and that’s what makes the market in terms of employment, quite competitive.  

Luisa Rollenhagen (05:16): Yes, I think the high number of English speakers plays a significant role for multinationals looking to gain a foothold within the European market.   

Speaking of: Sweden is a member state of the European Union. While the EU shares many rules and regulations, there are significant differences between countries. What makes Sweden and Swedish payroll different from other EU countries, or the Nordics more specifically?  

Ben Dale-Gough (05:43): 

A misconception is that the Nordics or Scandinavia are all pretty much the same. And of course, yeah, there are similarities, absolutely. However, they are independent countries, which have all got different ways of working in different tax regimes, for instance. So that’s a common misconception, although there is a lot of shared services between the Nordics. So there might be, for instance, for instance, it might be teams based in Stockholm and Sweden that might support payrolls in Finland or Norway or Denmark. So that is a common operating model, but just need to be clear that actually they are different markets with very, very different payroll requirements and tax regimes.  

Ingela Persson (06:21): 

We are similar, but definitely not to the point where people might think that we are.  

Luisa Rollenhagen (06:27): There’s also a difference in currency, right? Finland has the Euro, but Sweden has the Krona.  

Sweden is also notably stable from a regulatory perspective. That’s something that matters significantly for companies planning long-term.  

Ben Dale-Gough (06:42): 

That’s the thing that makes Sweden an attractive place for international organizations to come into. So a stable environment from a political perspective, stable environment from an economic perspective, and also from a legislative perspective, it remains pretty stable as well. So all those things combine to make it a very attractive place for companies to base themselves.  

Luisa Rollenhagen (07:05): Let’s dive into some details about running payroll. In your experience, what are the biggest challenges or obstacles that multinationals encounter when it comes to payroll in Sweden?  

Ben Dale-Gough (07:17): 

I think it’s a bit of a cultural thing really, in terms of payroll and the importance that has within organizations.   

Within certain countries, payroll could almost be viewed as a more of an administrative task, a clerical task that has to be fulfilled. Whereas with Sweden, it’s more of a core requirement within organizations. So it’s important that really accuracy is there.  

Nobody wants to make errors, nobody wants there to be inaccuracies in any country whatsoever. But in Sweden, it’s more of a breach of trust, I suppose, when there are errors or if there are ever errors. So it’s a deeper integration within any organization.   

Ingela Persson (07:58): 

I would definitely say that Sweden is very particular about payroll. A company can literally get a bad reputation if they can’t get the payroll right. There’s very little room for mistakes.  

So it’s about trust, as Ben said. It’s about trust, how the company will be perceived from the employees, whether they can manage your payroll or not in the right way.  

Ben Dale-Gough (08:25): 

Just to add, just the importance that payroll and getting it right is considered within Sweden because it can be super detrimental to any organization should they be part to any kind of fine because that gets out there. People know about it and there’s a reason not to work for that organization. So just because I guess as a country, people are more sensitive to it and aware of it.  

Luisa Rollenhagen (08:47): And what are some of the consequences of getting payroll wrong, beyond reputational damage?  

Ingela Persson (08:53): 

The obvious is the tax authorities. And I think that’s not necessarily a Swedish thing. Tax authorities in all countries always want to have it. So it can be big fines. And if you do the declaration wrong or if you don’t are fully into the correct reporting, statistics is also very important and mandatory that we have to send into the government, different type of statistics. So yeah, but what happens is not only the bad reputation, it is actually fines, I would say, that you get fined and it can be very high fines for not doing the correct reporting.  

Luisa Rollenhagen (09:29): Since you mentioned the tax authority, I’d like to speak about one of the things that can really catch multinationals off guard, namely the taxation of benefits. In Sweden, the rules around perks like a company car, a gift, or even an employee lunch are very strict for both employees and employers.   

Ingela Persson (09:49) 

What most international companies react to is actually the taxation, and especially the taxation of benefits, which is quite high in Sweden.  

Luisa Rollenhagen (10:00): So where can things get confusing?  

Ingela Persson (10:02):  

Definitely with meals or when traveling. I obviously have to eat something when I’m traveling, that also needs to be taxed. And the complexity comes too because Swedish employees might say, “I don’t want these benefits because it costs me too much as an employee.” So I’ve worked in companies like that where actually HR or compensation and benefits have looked into what maybe we should not have the same benefits that we have, for example, in the US, because in Sweden, they don’t actually become so much of a benefit. So they have been discussing, can we give something else that works better in Sweden so that we don’t have to be so much taxed?  

Luisa Rollenhagen (10:43): The consequence of all this is something that might surprise employers from other countries. As Ingela said, Swedish employees sometimes actively turn down benefits because the tax burden makes them not worth taking. That’s exactly what happened to Carlo.  

Carlo is a Stockholm-based consultant who worked for a healthcare company. When his employer asked him to relocate temporarily to Uppsala — a city about an hour north of Stockholm — he was offered a package of benefits to make the move easier.  

Carlo (11:17): 

My name is Carlo and I live in Stockholm and have been employed for a healthcare company as a consultant.  

During the time that I was working as a consultant, I was based here in Stockholm, but the consultancy firm asked me to work in Upsala and I was offered different types of benefits. I was offered a company car, paid travel, or accommodation in Upsala.  

Luisa Rollenhagen (11:43): While this sounds like a pretty standard relocation package, Carlo started looking into what those benefits would actually mean for his take-home pay. He wanted to make sure he wasn’t making any mistakes and got professional advice. Along the way, he discovered that he’d have to pay taxes on many of these benefits.  

Carlo (12:01): 

It caught me off guard. And I also feel like the employer himself didn’t really know so much about the taxation.  

First I asked the employer for more information about it, but they couldn’t really give that much detail. They just explained that the salary and the pay per hour would change. So I ended up consulting with a lawyer.  

Taxation is so strict in Sweden and it comes with heavy penalties if you give false information or if you do not have a complete tax declaration. So for that reason, I didn’t want any risks and I contacted professionals in the field.  

Luisa Rollenhagen (12:38): He found that accepting the benefits would have an impact that went beyond his net pay.  

Carlo (12:43): 

So salary-wise, if I would’ve taken all of the benefits that were offered, I would get paid around 10,000 Krona less every month, and this would also affect my retirement funds as well as the accumulated sick day pays, et cetera. And in terms of the tax refund, because it is deduced from the salary paid before taxes, this could have led to me having to perhaps reach a breaking point in terms of the tax refund or perhaps even have to pay back a few thousands.  

Luisa Rollenhagen (13:19): Carlo ended up turning down the benefits. But he ended up negotiating a different arrangement with his employer.  

Carlo (13:27): 

I ended up negotiating to get an apartment in Upsala instead, but rather than having it paid for by the company, I just asked them to find an apartment and then I would rent it myself directly.  

Luisa Rollenhagen (13:40): With his employer handling the logistics but Carlo paying for the rent himself, the arrangement avoids becoming a taxable benefit while still easing the burden of relocation.  

Carlo’s experience with this kind of complicated taxation system extends back to the pandemic, when he was working at a hospital.  

Carlo (14:00) 

During the pandemic, there were many restaurants and cafes in the area that wanted to donate food, and they actually did so. Then when the tax agency found out that we had received lots of food and pastries, they wanted to tax for that because they said it’s a benefit. And that actually became such a big thing and a big problem in the whole country that they had to pass a new law, a temporary law, in order for the tax agency to not tax anyone for those types of gifts.  

Luisa Rollenhagen (14:31): Carlo says the experience permanently changed how he evaluates job offers, especially now that he’s in law school to switch up his career.  

Carlo (14:39): 

I would say that I become more focused on the net value and how well different parts of a compensation package would align with my actual needs and lifestyle. So these days or in the future when I graduate from law, I think I will look at the full picture rather than just what sounds attractive on paper. So for sure it helped me to make more balanced and informed decisions.  

Luisa Rollenhagen (15:03): I was curious about how common Carlo’s experience is, and how benefit taxation works in practice for employers, so I went back to Ingela and Ben to learn more.  

So is there a monetary threshold for things like meals and gifts before they’re considered a taxable benefit?  

Ingela Persson (15:21): 

Let’s say a gift once a year. The absolute maximum is around 40 euros.  

Luisa Rollenhagen (15:27): Got it.   

I want to talk about another aspect of Swedish payroll that can often be quite confusing for those coming from abroad, namely the complexities around holiday pay. How does this work in Sweden?  

Ingela Persson (15:40): 

So in Sweden, we have by legislation, by law, everyone has 25 days. So that is not negotiable in Sweden, but we also have what most international companies react about is that we get an extra pay when we use a vacation day, but we get it after the vacation. So that’s a little bit a shame because we could maybe use it for the vacation. So for example, if you are white collar and you have a monthly salary, you get a percentage on top of your salary when you have used your vacation days. If you have a monthly salary and you have some, let’s say, bonus or things like that on top of your salary, especially if you’re within sales, sorry, I can’t find the English word right now, but then that comes up with a 12% extra for that part on the salary. I think it is definitely one of the most questions we get where other countries have difficulties to understand what’s going on with that.  

Luisa Rollenhagen (16:41): Ah okay, so employees receive a 3.8% top-up on their salary on top of their regular pay for every vacation day they take, paid out the month after the vacation is used. For hourly and blue-collar workers, this figure rises to around 12% of their hourly rate. So basically, you’re being paid to take holidays. I love it! Although I absolutely get what you mean about having to wait for the payout until you’re back from vacation.  

There’s also a law around when that leave has to be made available, right? I believe it ties back to Sweden’s industrial history.  

Ingela Persson (17:19): 

So by law, we are entitled to have four weeks consecutive, in a row, from June to end of August. So every employer has to, by law, make that happen somehow. And I think that’s a very old law that happens from back in the days when we had a lot of industries and the industries closed down in July.   

You can choose to take them whenever you want, but Swedish people tend to want to take them during the summer and the majority wants to take them in July.   

So it’s voluntarily. But if someone says, “I want to have four weeks in a row,” you have to provide that as an employer between 1st of June to end of August.  

Luisa Rollenhagen (18:00): I see. And what about unions? Are they very prevalent in Sweden?  

Ben Dale-Gough (18:05): 

It’s a highly unionized workforce as well in Sweden, which is a little bit surprising, I guess, but I think it’s over 80% of the working population in Sweden is a member of the union, whereas I know the rest of the EU and the US is about 15 to 25%, so significantly more in that respect, which I guess when organizations first start working within Sweden, I guess that could promote their concern. A lot of time we’ve spent working with unions, but actually it works out well because I think it means there’s more dialogue between employees and employers. And actually the number of disputes, industrial disputes, is really low in Sweden when compared to other countries. So it’s a really interesting model to look at.  

Luisa Rollenhagen (18:47): Let’s talk about another topic that’s hot in the EU right now, namely, pay transparency. Sweden is also notably ahead of many EU countries in this regard. If I understand correctly, employers already submit detailed statistics on salaries.  

Ben Dale-Gough (19:03): 

Sweden as a country is pretty progressive already. So a number of these requirements are not really new to Sweden because they’re in place.   

Luisa Rollenhagen (19:12): So what are the reporting requirements that employers need to comply with?  

Ingela Persson (19:16): 

So it’s the salary, the benefits, any type of benefits, different type of leaves, sick leave, parental leave, and also different type of statistics, let’s say gender statistic. And now with the pay transparentive, we will also have to report on that to what people are within the brackets. The salaries for different type of roles and different type of levels.  

Ben Dale-Gough (19:43): 

Overall the ethos and the idea of transparency and reporting is already really very well ingrained within the Swedish market.  

Luisa Rollenhagen (19:15): And what are the main required contributions that employers need to make?  

Ingela Persson (19:56): 

We have a labor or employer fee or percentage that is around 32% that the employer has to pay to the tax authorities.  

Luisa Rollenhagen (20:05): Got it, so employers pay a social security levy of around 32% on top of every employee’s gross salary, and this funds the country’s public healthcare and welfare systems.  

This levy includes state pensions, but is it common for employers to offer contributions to private pension plans?  

Ingela Persson (20:25): 

That one is also something we get a lot of questions around from international employers. So it’s very much expected in Sweden. It’s not by law that you have an extra addition to bonus payment for the employees. So that varies a lot. It could be stated in the collective agreement, of course, but it’s very much expected, almost in any sector these days.  

So we have several pension companies, let’s say, where you can invest your pension money and this extra set of pension money. And then it goes into, it’s called My Pension, let’s say. So the tax authorities are collecting all of this information. So you can log in in an app and see what will it look like when I retire.  

Luisa Rollenhagen (21:10): I want to circle back to something both of you said earlier in the episode. You spoke about the importance of getting payroll right, because the trust that employees have in their employers is paramount to a good working relationship.   

From what I understand, there are also cultural expectations that shape day-to-day working life in ways that international employers might not be aware of. One thing that really comes to mind is the tradition of Fika, an almost sacred ritual. Simply describing it as a daily coffee-and-pastry break downplays the integral position it holds in Swedish culture. What can you tell me about this?  

Ingela Persson (21:49): 

The famous Swedish Fika. Yeah. We don’t joke around about that. We have days for cakes. We have the Cinnamon Bun day, which is the 4th of October, we have the Sema Day. And I remember having to tell Ben in late September, I said, “Well, I need some budget because I need to buy cinnamon buns.” He looked a bit surprised, but I said, “No, no, no, it’s a must. We have to do that.”  

Ben Dale-Gough (22:13): 

I’ve definitely learned about that, that’s for sure. It’s a good one actually that potentially you should take to other countries as well. I mean, it’s just good investing time.  

To be able to just sit there, focus, concentrate, put the phone away and just enjoy the time with somebody else. So I think it’s a great concept that probably we could all learn from.  

Luisa Rollenhagen (22:31): Got it, so employers cannot be skimping on Fika provisions.  

What other cultural aspects of the employee-employer relationship stand out to you?  

Ingela Persson (22:40): 

We have a horizontal organizations. So we are very outspoken. And I would also say that Swedish people always want to know the why. And I think Ben can testify to that.  

Ben Dale-Gough (22:54): 

I certainly can. I think one of the things I learned when I started working with the team over in Sweden was, well, I think any good leader always has to adapt and understand how they work with the people in that particular country, because every country is different. And you’ve got to understand those nuances and adapt yourself to that. But yeah, exactly as Ingela said, what I found is that actually people are, I guess, a bit more about more questioning and want to understand why you’re looking to achieve something. So I think it’s important to articulate what is the vision and what’s that going to look like and why are we looking to do it? And then I think I’ve found that I need to invest more time in actually talking people through the why and helping them understand it. And then once you do get that understanding, then people are bought in and are completely aligned in helping you deliver against whatever the goals are you’re trying to achieve.  

So rather than some countries are maybe a bit more metric driven or maybe more prone to micromanage almost, where actually people are in the detail. Whereas in Sweden, people are keen to help you succeed as an organization, but as long as you take them on that journey and explain the story to them.  

Luisa Rollenhagen (23:54): Right, so the hierarchies are quite flat, which may come as a surprise to multinational employers who are accustomed to a different management style.  

We’re nearing the end of the episode, but before I let you go, I’d like to ask my favourite question. What do you love most about working in payroll in Sweden?  

Ingela Persson (24:14): 

You make people happy every month and we are, I mean, there are changes once in a while where you have to adjust to, which is good, but you still have, it’s not too much that it actually creates a super difficult situation for the payroll team. It’s just very fun. I don’t know. It’s a lot of problem solving. And nowadays as a leader, I also see the potential of how we can improve, take away repetitive tasks and let AI do that. And then we can focus on other things because payroll people are quite skilled in labor law and we don’t use that very much because we’re sort of stuck in repetitive tasks.  

Ben Dale-Gough (24:53): There are rules set in place where people can take four weeks off holiday if they want to in the summer, but they will still ensure payroll gets done. And why is that? Well, people get it, they understand the why, and therefore because they’re empowered and trusted with having bigger holiday allocations, let’s say, or the ability to take holiday at one particular time, but things still get done because people get it and they care. So I think that’s probably one of the differences within the Swedish market.  

Luisa Rollenhagen (25:20): That’s a great note to end on.   

Ingela and Ben, thank you so much for joining us today. It’s been a real pleasure learning about Swedish payroll, from the cultural importance of getting it right, to the surprising complexity of holiday pay and the untouchable ritual that is Fika.  

I hope you got a bit more insight today into the intricacies of payroll and the labor landscape in Sweden. If this episode has piqued your interest, or your company is considering expanding into Sweden, please visit adp.com to learn more.  

And don’t forget to subscribe to learn more about payroll around the world with each new episode.   

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