Resources How to Hire Remote Workers as Contractors in Sweden

How to Hire Remote Workers as Contractors in Sweden

A significant change is occurring in global hiring practices, as companies are recognizing the advantage of recruiting remote workers. These workers can be in your city or country, but in many cases may be residents of foreign countries. With the advent of technological communication and monitoring tools, it is entirely realistic to hire a skilled remote worker abroad for certain roles.

Why Sweden?

The northern European country of Sweden has a strong economy with an educated English-speaking workforce of professionals. Sweden may be home to the talented remote worker that you are looking for, but you will then have to decide how to hire them.

Sweden already has a high rate of employer social contributions and support. Due to this, workers may want to be hired as employees to avail of the entitlements. While this is understandable, as a foreign company you have to consider the overall cost of hiring a remote worker. The employer social contribution in Sweden is over 30% (compared to 7.5% in the US), so that is a significant expense to hire a full-time employee.

Another option is to hire remote workers in Sweden as independent contractors. This can give them a trial period or meet your short-term needs. Some contractors may be less loyal to your company than an employee, but others may prefer autonomy and will be satisfied with the role.

Here are some of the benefits of hiring contractors:

  • No long-term financial/HR commitment by the company
  • Cost-effective when compared to paying employee benefits and entitlements
  • Contracting is a B2B relationship, outside of typical labour laws
  • A good way to give a recruit a ‘probationary’ period before hiring
  • Can hire for short projects or on a repeat basis
  • More flexible to scale up or down, or if different skill sets are needed as the company grows

How to hire and pay remote contractors in Sweden

Once you have recruited the right remote contractor, the next step is to arrange a hiring and payment method.

Hire and pay them as a freelancer

One common way to pay a contractor is as a freelancer, where they may also be working for other clients. You would contract directly with the freelancer, and they would invoice you at regular intervals. All of this does require some degree of trust so there is no misunderstanding about payment or performance.

Pay them through their limited company

Seasoned contractors may have their own limited company set up to issue contracts and maximize tax savings. A limited company is a registered entity in Sweden, and you would contract directly with the company. The contractor would then deliver the services, giving you some confidence that they have an established business presence.

Use an umbrella company in Sweden

An umbrella company is an intermediary between the contract with your company and the remote worker. The umbrella company ensures that all performance milestones are met before releasing payment to the contractor. This is a beneficial arrangement for you both as it removes the uncertainty of hiring a new contractor abroad. The umbrella company also handles all tax calculations and withholding for the contractor.

Compliance risks when hiring remote workers in Sweden

One of the benefits of hiring contractors is that you are not subject to the labour laws of the worker’s home country. In essence, you don’t have to worry about complying with unfamiliar regulations, and can set up the contract as a B2B arrangement. There are two exceptions to this that can present some compliance risks.

Misclassification risk: Employee vs contractor

The first is misclassification where your new remote contractor is classified as an employee under Sweden’s criteria. The reason for this regulatory oversight is that companies will sometimes hire contractors for the sole reason of avoiding employment compliance and costs. Some of those employee criteria include control over work methods or schedule and paying a guaranteed salary.

Foreign companies are at less risk when hiring a remote contractor, but you will want to ensure that the contractor has true independence. For example, contractors with limited companies would rarely be seen as employees.

Permanent establishment risk in Sweden

The other compliance risk is corporate tax liability due to permanent establishment (PE). PE stems from business activity in Sweden that would create local revenue for your company. You might think that just hiring a remote worker would never trigger PE, and in most cases, you would be right. Typical remote roles such as marketing, customer service or web development would not result in direct revenue or taxation.

However, if you are expanding your business into Sweden and hiring salespeople to conclude new contracts with Swedish customers, then that could result in PE. It would have to be regular, sustained activity and not just an occasional contract to meet the PE criteria.

How Contractor Taxation helps you hire remote workers in Sweden

Contractor Taxation has a global network of umbrella companies, including in Sweden, who are ready to hire the contractor and administer all the tasks related to taxes, payments and contributions. As a company looking to hire Swedish contractors, an umbrella company can assist the relationship with the new hire. There is a fee, but it could be shared as there are benefits for you both.

Most contractors will be open to this, as it reduces the risk of non-payment with a new client and relieves them of the administrative burden of self-employment. This gives the contractor an ally and advocate interface with the client and ensures the contract proceeds smoothly.

Please contact us if you are interested in hiring a Swedish or ex-pat worker for your company as a contractor.

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