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Why Sweden doesn’t have a minimum wage and how to ensure you’re fairly paid

New arrivals to Sweden are often told how generous the country's working hours and benefits are, so it may come as a surprise that there's no minimum wage as such.

Why Sweden doesn't have a minimum wage and how to ensure you're fairly paid
Large pay rises are unusual in Sweden, so follow these tips to ensure you're happy that your starting salary is fair. Photo: Lieselotte van der Meijs/imagebank.sweden.se
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Most countries in Europe have some sort of minimum wage in place, after the first laws on minimum legal pay were implemented in New Zealand and Australia in the 1980s.

In Sweden however, there is no official minimum wage.

That doesn't mean salaries go entirely unregulated. Instead, they are agreed by negotiations between the employer and either the individual employee or a trade union which represents them (or often, both).

Trade unions agree collective bargaining agreements (kollektivavtal) which apply to different industries. These usually include minimum pay levels for different jobs within the industry, which might differentiate between employees with different levels of education. They usually require employers to conduct an annual performance and salary review, as well as an annual pay rise of at least around 2.5 percent.

The agreements cover other aspects of your working life beyond salary, which can have a big impact on your take-home pay and quality of life, so it's well worth finding out if your employer or prospective employer has one, and what it includes.

For example, a typical kollektivavtal will include provisions for overtime pay, pensions, sick pay and parental leave, vacation allowance. There are also often extra benefits such as training or 'fitness benefit' (friskvårdsbidrag) which is an annual sum of money you can spend on sport- or health-related expenses, like a gym membership or sports club.

Photo: Lieselotte van der Meijs/imagebank.sweden.se

As well as in kollektivavtal, another situation in which minimum wages apply is for third-country workers in Sweden. If you want to move to Sweden from a non-EU country for work, you must have an offer from a job that will allow you to earn a minimum of 13,000 kronor per month before tax. This is extremely important for self-employed people to be aware of. There have been several high-profile cases of successful entrepreneurs being deported from Sweden after choosing not to take a salary and instead investing the money back into their business and living off personal savings or a partner's salary, for example.

For many full-time work permit-holders, though, another of the requirements is more pertinent when it comes to salary. In order for a work permit to be approved, the employer must be offering the prospective worker a salary “that is at least on par with that set by Swedish collective agreements or which is customary within the occupation or industry”.

Around 90 percent of employees are covered by a kollektivavtal, but some companies, especially smaller businesses and startups, choose not to use them.

So when you're interviewing, how can you be confident if the wage you're being offered is fair?

If you're a member of a union, you'll have access to their salary statistics which give detail about the average pay for people in your industry. You can find out the market rate for someone in a similar position to you, in a similar location and with a similar level of experience and responsibility. 

Some unions will also offer advice over the phone or by email so that you can get help reviewing an employment contract or preparing for your salary review.

And even if you're not a union member, a lot of useful data is publicly available.

Websites such as Alla Studier, Lönestatistik, and SCB offer information on average salaries, which you can break down by length of experience, location, and education level. But be aware of any extra factors which can affect salaries in your industry, such as professional qualifications or language skills which might be a requirement to reach the higher end of the band. 

If you're at a larger company with a clear hierarchy and structure, it may well be possible to have a frank discussion with the hiring manager (for a new job) or your line manager (if you're already employed). Many companies have salary bands for different positions, and you can ask questions like what the salary band for your current position is, what you would need to do to be qualified for a higher level within the band, or what your options for career progression within the company are.

Something else to be aware of is that large pay rises are unusual in Sweden unless you're changing position, so it's best only to agree to a salary you're completely happy with, rather than settle for something lower and hope you'll be able to increase it later.

Member comments

  1. I think there is a typo here. The first minimum wage laws were passed in Australia and New Zealand in the 1890s, not the 1980s.

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For members

EUROPEAN UNION

Pensions in the EU: What you need to know if you’re moving country

Have you ever wondered what to do with your private pension plan when moving to another European country?

Pensions in the EU: What you need to know if you're moving country

This question will probably have caused some headaches. Fortunately a new private pension product meant to make things easier should soon become available under a new EU regulation that came into effect this week. 

The new pan-European personal pension product (PEPP) will allow savers to take their private pension with them if they move within the European Union.

EU rules so far allowed the aggregation of state pensions and the possibility to carry across borders occupational pensions, which are paid by employers. But the market of private pensions remained fragmented.

The new product is expected to benefit especially young people, who tend to move more frequently across borders, and the self-employed, who might not be covered by other pension schemes. 

According to a survey conducted in 16 countries by Insurance Europe, the organisation representing insurers in Brussels, 38 percent of Europeans do not save for retirement, with a proportion as high as 60 percent in Finland, 57 percent in Spain, 56 percent in France and 55 percent in Italy. 

The groups least likely to have a pension plan are women (42% versus 34% of men), unemployed people (67%), self-employed and part-time workers in the private sector (38%), divorced and singles (44% and 43% respectively), and 18-35 year olds (40%).

“As a complement to public pensions, PEPP caters for the needs of today’s younger generation and allows people to better plan and make provisions for the future,” EU Commissioner for Financial Services Mairead McGuinness said on March 22nd, when new EU rules came into effect. 

The scheme will also allow savers to sign up to a personal pension plan offered by a provider based in another EU country.

Who can sign up?

Under the EU regulation, anyone can sign up to a pan-European personal pension, regardless of their nationality or employment status. 

The scheme is open to people who are employed part-time or full-time, self-employed, in any form of “modern employment”, unemployed or in education. 

The condition is that they are resident in a country of the European Union, Norway, Iceland or Liechtenstein (the European Economic Area). The PEPP will not be available outside these countries, for instance in Switzerland. 

How does it work?

PEPP providers can offer a maximum of six investment options, including a basic one that is low-risk and safeguards the amount invested. The basic PEPP is the default option. Its fees are capped at 1 percent of the accumulated capital per year.

People who move to another EU country can continue to contribute to the same PEPP. Whenever a consumer changes the country of residence, the provider will open a new sub-account for that country. If the provider cannot offer such option, savers have the right to switch provider free of charge.  

As pension products are taxed differently in each state, the applicable taxation will be that of the country of residence and possible tax incentives will only apply to the relevant sub-account. 

Savers who move residence outside the EU cannot continue saving on their PEPP, but they can resume contributions if they return. They would also need to ask advice about the consequences of the move on the way their savings are taxed. 

Pensions can then be paid out in a different location from where the product was purchased. 

Where to start?

Pan-European personal pension products can be offered by authorised banks, insurance companies, pension funds and wealth management firms. 

They are regulated products that can be sold to consumers only after being approved by supervisory authorities. 

As the legislation came into effect this week, only now eligible providers can submit the application for the authorisation of their products. National authorities have then three months to make a decision. So it will still take some time before PEPPs become available on the market. 

When this will happen, the products and their features will be listed in the public register of the European Insurance and Occupational Pensions Authority (EIOPA). 

For more information:

https://www.eiopa.europa.eu/browse/regulation-and-policy/pan-european-personal-pension-product-pepp/consumer-oriented-faqs-pan_en 

https://www.eiopa.europa.eu/browse/regulation-and-policy/pan-european-personal-pension-product-pepp_en 

This article is published in cooperation with Europe Street News, a news outlet about citizens’ rights in the EU and the UK. 

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