Independent contractors or freelancers are self-employed individuals who provide services to companies as a non-employee. This is one of the most common ways companies tend to hire non-local designers, engineers, support reps, etc.
For legal and tax purposes, independent contractors are not classified as employees. They may work for multiple clients, set their own work hours, negotiate their pay rate, and decide how a job gets done.
For example, the IRS says that if an independent contractor or freelancer does work that can be controlled (what will be done and how it will be done) by an employer then they are, in fact, classified as an employee.
As you can imagine, hiring someone as an independent contractor versus an employee is a fine line to tread.
While there are benefits when you choose the contractor route, there are quite a few drawbacks to consider and you’ll need to weigh them carefully to determine the best fit for your company.
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A foreign subsidiary is a company that operates overseas as part of a larger company who’s HQ is in another country.
Establishing a foreign entity is great for having an international presence and accessing new markets. Though, setting up a subsidiary in Sweden can be expensive, stressful, and time-consuming. It's not for the faint of heart.
To set up a subsidiary in Sweden, you have to:
If you're lucky, this process can take months. If you're not so lucky, it can take up to a year. And on average, it costs about $50k-$80k, all-in-all, to get setup. And that's just for Sweden.
An employer-of-record (EOR) is a company that hires and pays an employee on behalf of another company.
An EOR is typically used to overcome the financial and regulatory hurdles that often come with employing remote workers.
Each country has its own payroll, employment, and work permit requirements for non-resident companies doing business in their jurisdiction. Meeting those demands can be a huge obstacle when it comes to hiring remotely.
At Panther, we help companies employ and pay people in over 160 countries, without having to set up a foreign subsidiary. Payroll, benefits, taxes, compliance, and more are all handled by us, at a fraction of the cost.
Outside of saving you months and tens of thousands of dollars, other advantages of using Panther are:
Because you no longer have to set up your own subsidiary, you’ll save a ton of time and tens of thousands of dollars using Panther.
Paying employees in Sweden is not the same as paying workers in your own country. Employees have to be paid using Sweden's employment and payroll standards.
This means that you have to know, understand, and keep up with 1) fluctuating currency changes, and 2) local payroll and tax laws in the countries you’re looking to hire in.
Outside of the laws and regulations around payroll, there may be different conditions surrounding leave, overtime, termination, and more. As you can imagine, maintaining this kind of regulatory knowledge can be challenging. But it is crucial and necessary to follow local legislation.
After, you’ll have to determine the best way to pay your international employees. This can be done in a number of ways, including but not limited to:
One of the most challenging (and expensive) parts of paying international employees is setting up the infrastructure to do so.
Before you start to run payroll, you have to register your company as the local employer in the country the worker resides in. As you can see in the “Set up a subsidiary” section, this is a multi-step process that can take up to a year and put you on your way to bankruptcy.
Outside of EORs acting as the full admin employer, many also provide remote payroll.
For example, at Panther, in just 1-click, you’re able to pay your entire global team, anywhere in the world. We send you an invoice each month, charge you in US Dollars, and pay your employees the same amount in their local currency.
We factor in currency fluctuations and use the mid-market rate plus any applicable fee passed on by our provider at cost at the time of billing.
Full time employment is considered 40 hours weekly. Workers are entitled a break after 5 consecutive hours of work, and an 11 hour break for every 24 hour period.
Overtime should not exceed 48 hours over a four-week period, 50 hours per month, or 200 annual hours. Overtime rules should be in a collective agreement or employee contract, and typically compensated with pay or leave. For overtime worked before 8pm on weekdays, overtime allowance is the monthly salary divided into 94 for each hour. For overtime worked after 8pm or weekends, allowance is the monthly salary divided into 72 for each hour. Employees who are excluded from overtime pay include, employees who hold managerial or comparable positions, those who organize their own working time.
Employer
Employee Income Tax
Salaries are paid on a monthly basis on the 25th of each month.
Employees are entitled to 25 days of paid vacation each year after one year of work at the company. Once accrued, vacation days can be held for up to five years.
Vacation pay accounts for 12% of an employee's gross annual salary.
There are 13 public holidays in Sweden.
An employer is responsible for paying 80% of an employee’s salary for the first 14 days of sick leave.
After 14 days employers report to the Swedish Social Insurance Office, and the employee applies for the benefits. Social insurance pays for sick leave starting on day fifteen.
Mothers receive 240 days of paid leave with the right to start 60 days before the expected birth.
Fathers are entitled to 240 days of paid leave.
Swedish parents are entitled to 480 days of paid parental leave with each parent having an exclusive right to 90 of those days. Leave shouldn’t be taken at the same time, except for the first 10 days following the birth. Single parents are given the full 480 days.
10 days
The employer must have a valid reason to terminate an employee.
Before termination, an employer must try to find the employee a different role in the company before terminating the employee.
For companies with more than five employees, employers are obligated to notify the Employment Service. Companies are also obligated to negotiate with trade unions if relevant.
After negotiations, the employer must provide a termination notice in writing and in person. If this is not possible then a registered letter may be sent to the employee’s address.
Notice periods in Sweden are determined by employment contracts, collective agreements, or by the Employment Protection Act.
Employers:
With a collective agreement – Notice periods should be agreed upon between employer and employee and stated in the employment contract. The most common notice period is one month.
Without a collective agreement –
Employers may dismiss employees without notice if they have grossly misbehaved.
Employees:
With a collective agreement – Notice periods should be agreed upon between employer and employee and stated in the employment contract. The most common notice period is one month.
Without a collective agreement – According to the Employment Protection act notice period is one month.
Companies have no obligation to pay any severance pay but it may be included in an employment agreement.
