Navigating the Swedish Jungle of Employment Forms
Are you looking to hire someone, but you are unsure of which employment form to use, or how they work? Whether it be part-time or full-time, a trial- or indefinite employment – having a general understanding of the different employment forms is crucial for any business looking to employ in Sweden.
Why does it matter?
The rules found in the Swedish Employment Act are non-negotiable and mandatory for all employers to follow. Non-compliance with the law could result in fines or an unpleasant surprise. If you for example hire someone with a probationary period. If the period is longer than the law allows, the employment automatically converts to indefinite employment; which happens after the maximum allowed six months.
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Indefinite term employment forms
From an employee’s perspective, indefinite-term employment, or “tillsvidareanställning” in Swedish, is the most attractive employment form. As the name indicates, the employment will continue to run indefinitely without a set end date. The employee is free to terminate the employment at any time. In contrast, the employer’s opportunity to terminate the contract is strictly regulated.
To terminate the employment, the employer must prove that the decision has objective grounds; such as a shortage of work. And also, that there is no alternative position for the employee in the business. Even if the employers can prove a shortage of work, the law still requires them to follow a “last-in-first-out” principle. This means that your most recent contracts have to be terminated first, regardless of their work performance.
Indefinite term employment can also be terminated due to personal reasons, or a serious breach of contract from the employee. However, the bar is set fairly high and is reserved for cases such as repeated disallowed absence, refusal to work, serious cooperation difficulties or crimes against the employer or other employees.
Probationary employment form
Due to the commitment that indefinite employment entails, employers often find themselves hesitant to offer indefinite term employment, since the contracts are very difficult to terminate. As a result, probationary employment, or provanställning in Swedish, has risen in popularity. The employer and the employee are free to negotiate a trial period, which may last no longer than six months. During this period, any of the parties can single-handedly terminate the contract without any particular reason.
With probationary employment, the employer gets the benefit of testing the newly recruited employee for a few months before committing to indefinite employment. However, you might discourage senior job applicants from applying for the position in the first place. For example, an employee will have a harder time being granted a mortgage loan from a bank if he or she only has a probationary employment contract as proof of income.
Probationary employment will automatically convert into indefinite-term employment when the trial period ends unless one of the parties chooses to terminate the trial period before its due date. As an employer, you have to inform the employee that you wish to terminate the employment contract at least two weeks before the trial period ends.
The most criticised employment form is fixed-term employment, in Swedish “visstidsanställning”. By employing someone for a fixed term, the termination of the contract is decided from the start, completed with a date. The Employment Security Act prohibits fixed-term employment from lasting more than 24 months spanning over five years. But a new legal act proposed by the Swedish government will, if passed by parliament, shorten the period to 12 months during five years. The new act is proposed to enter into force on the 30th of June 2022.
It is up to the employer and employee to decide whether the fixed-term contract allows for termination before the end date by any of the parties, or if it requires mutual consent. As an employer, you get the benefit of having a predictable workforce for a fixed period. A breach of the contract, such as the employee quitting the job before the end date, may give rise to damages. But few employers enforce the contract and demand damages if the employee insists on leaving.
Even with the law on your side, the side effects of causing a hostile work environment should not be underestimated. Coercing an employee who wants to quit into staying, under the threat of having to pay damages to the employer, is therefore not recommended. Rather, we recommend a compromise where the employee accepts a certain notice period needed to find a replacement, but no longer than necessary.
The Swedish system is complicated and a bit overwhelming, but failure to comply can be expensive. If in doubt you should consult a lawyer. Many firms have special services for startups, most of them free of charge. Avail of those services. And even if you pay a bit, it can save many headaches.