Newsletter – Employment and Pensions

Newsletter – Employment and Pensions – February 2023

Swedish employment law – Key takeaways from 2022

This newsletter is a publication from Mannheimer Swartling. The contents do not constitute legal or other professional advice and should not be relied upon as such. You may cite or refer to the information in the newsletter, provided that you clearly indicate the source.

With significant changes introduced to the Swedish Employment Protection Act (the “EPA”) and a number of other employment law changes, 2022 was arguably the most eventful year for Swedish employment law since the introduction of the EPA in the seventies.

The changes to the EPA would, on their own, be enough for a newsletter. However, 2022 was the year that kept on giving as it also introduced: (1) increased protection for agency workers, (2) a cap to the collective pension scheme ITP1 and (3) the implementation of the Working Conditions Directive.

This newsletter sets out the key changes that employers with employees in Sweden should be aware of, in particular when recruiting or terminating an employment. The information in this newsletter is intended to provide a high-level summary of recent changes – for more detailed advice, please feel free to contact any of the members in our team.

The Mannheimer Swartling Employment and Pension Group

At the start of the employment

Information obligation

The Working Conditions Directive (Directive (EU) 2019/1152) was implemented in the EPA in June 2022 and replaces the previous applicable directive. The EPA already included information requirements before 2022, but with the new provisions, the employer now has a broader obligation to inform all employees of the terms and conditions of their employment, including more detailed information on salary and benefits, social security, working hours, scheduling, access to training and the termination process.

The information must be provided in writing within either a week or a month after the commencement of employment, depending on the type of information. If during the employment, the working conditions change, the employer must provide written information on the new conditions as soon as possible, but in any event, before the changes take effect. The new requirements apply from 29 June 2022 and cover employment contracts concluded after that date, but existing employees also have a right to request information. The information does not necessarily need to be provided in the employment contract, but in practice this will normally be the case.

Key takeaway:

Review your recruitment processes, your template employment contract and relevant policies to ensure all legally required information is provided in writing.

A new form of fixed term employment and full-time employment as a norm

There has been a change to the EPA’s fixed term provisions meaning that the maximum length of a fixed term employment is reduced. The previous “general fixed-term employment” (Sw. allmän visstidsanställning) has been replaced by a “specific fixed-term employment” (Sw.
särskild visstidsanställning). Whereas the previous general fixed-term employment automatically transformed to a permanent employment after two years, the specific fixed-term employment will automatically transform to a permanent employment when (i) the total duration of an employee’s specific fixed-term employment is more than twelve months during a five-year period, or (ii) the total duration of fixed-term employments exceeds twelve months during a non-stop period of various fixed-term employments (for this purpose, non-stop means if less than 6 months between two fixed term employments). Specific rules on the calculation of length of service apply to on-demand fixed-term employments. There are also specific transition rules that apply on general fixed term contracts entered into before 1 October 2022.

Unless the parties expressly agree otherwise, an employment is now assumed to have been entered into on a full-time basis. Therefore, an employment contract clearly stating that it is an employment on a part-time (and what part-time means) will be required if recruiting part-time employees.

Key takeaways:

Be mindful of the length of any current general fixed-term employments and the use of on-demand fixed-term contracts.
Ensure that a part-time employment contract states that the employment is part-time and what the working hours are.
The maximum length of a fixed-term contract entered into after 1 October 2022 is 12 months.

Retirement and the collective ITP-plan

As of 1 January 2023, the right to remain in employment according to the EPA has been increased from 68 to 69 years of age.

The largest collective defined contribution pension scheme for white collar employees – the ITP1 pension plan – has as of 1 January 2023 introduced a salary cap on an employee’s pension premiums. The cap is 30 “income base amounts” per year. For 2023, the cap corresponds to SEK 185,750 per month. If the total salary payment, including e.g. bonus, exceeds the cap, the exceeding amount is not regarded as pensionable salary under ITP 1. In addition, the age limit for the ITP1 old-age pension benefit has been increased from 65 to 66 years. This means that an employer bound by the ITP1 plan must continue to pay contributions to the ITP1 old-age pension benefit for those who work after 65 years.

Key takeaways:

An employee is covered by the EPA up until the age of 69, instead of the previous 68 years.
For employers bound by a collective bargaining agreement, a cap has been introduced to the ITP1 pension plan which reduces the pension benefit for high-earners and employees have a right to pension contribution up to the age of 66 instead of the previous 65.

Increased protection for agency workers

With changes made to the Swedish Agency Work Act (Sw. lag (2012:854) om uthyrning av arbetstagare), employees engaged through temporary employment agencies have been given an improved opportunity to obtain a permanent employment with the client companies for whom they carry out work. A client company is now obliged to offer a temporary worker a permanent employment with the company if the temporary worker has been placed with the client company and in the same operational unit for a total of more than 24 months during a 36-month period. The offer must be made no later than one month after the time limit has passed. However, instead of offering the temporary worker a permanent employment, the client company may choose to pay the temporary worker an indemnity equivalent to two months' salary. The payment must be made within the same period as the offer would have been made. Only time worked after 1 October 2022 should be considered, meaning that these rules will be of less practical importance until 1 October 2024.

Key takeaway:

A company hiring an employee through a temporary employment agency will be required to offer an employment contract with the company, or alternatively a payment, if the employee is engaged for more than 24 months during a 36-month period.

Reorganisations and termination of employment

Just ”reasons” instead of just ”cause”

The previous requirement that just cause is required to terminate an employment has been replaced with a new requirement of just reasons, with the aim to clarify and increase employer flexibility in the event of a termination. Though this is the aim, there is little guidance on what this will actually mean or how it will be applied in practice. Just reasons can be either due to redundancy or personal reasons (as was previously the case when just cause). Although no change is intended in the event of a redundancy, personal reasons should to a greater extent focus on the severity of the contractual breach and whether or not the employee understood or should have understood the consequences of his/her actions (i.e. the breach). An employer will now generally only once have to look into alternative positions in the event of e.g. misconduct or other issues relating to the employee, instead of what was previously the case where the employer could be obliged to move an employee several times before being able to lawfully terminate an employment.

The EPA allows for the central employers’ associations and central trade unions to agree on a deviation from the definition of just reasons (in a collective bargaining agreement). Employers bound by collective bargaining agreements should therefore consider the terms of the applicable agreement before terminating an employment.

Key takeaway:

Though just reasons are still required, there may be cases where a termination is justified at an earlier stage than what was previously the case.

All employers can now exempt at least three employees from the list of priority in the event of redundancy.

Before terminating an employment due to redundancy, an employer must look into alternative reasonable vacant positions to offer the redundant employee, or failing that, apply the last-in first-out principle by establishing a list of priority under which an employee with a longer period of service may have a stronger right to a position held by an employee with a shorter period of service.

Previously, employers with ten employees or fewer were allowed to exempt two employees from the list of priority in a redundancy situation. As of 1 October 2022 all employers, regardless of the number of employees, are allowed to exempt three employees when establishing the list of priority in a redundancy situation initiated on or after 1 October 2022. An employer who has exempted employees from the priority list, may not make further exemptions in any new redundancy situations within the following three months.

As with the definition of just reasons, deviations from the EPA’s rules on exemption from the list of priority can be made through a collective bargaining agreement. The main central collective agreement entered into in 2022 between the umbrella employers’ associations and a number of umbrella trade unions include additional employer friendly rules in relation to exemptions from the list of priority.

Key takeaway:

The extended use of the exemption from the list of priority will make it easier for employers to keep employees of particular importance in the business.
Deviating rules related to termination of employment will generally apply for employers bound by a collective bargaining agreement.

Priority rules in connection with a reduction of employees’ working hours

Priority rules are introduced with regard to the employer’s possibility to decide which employees will be affected by a reduction in working hours for a specific position (e.g. from full time to part time). With the introduced changes, employers must now under certain circumstances consider the employee’s length of service when reducing working hours, meaning that an employee with a shorter period of service will be subject to the reduction before an employee performing the same work in the same business unit but with a longer period of service.

Key takeaway:

If needing to reduce an employee’s working hours, be mindful that there may be rules restricting the business decision on which employee that should be subject to the reduction.

CONTACT

Stockholm/Gothenburg
Henric Diefke

0709 777 699

henric.diefke@msa.se

Stockholm
Tobias Normann

0709 777 610

tobias.normann@msa.se

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