Frequently Asked Questions & Answers

When a company utilizes an EOR, a three-party agreement is signed by the company, the employee, and the EOR:

• The company and the employee maintain a direct relationship. The company is responsible for assigning tasks, managing performance, and overseeing other aspects related to the work itself.
• The EOR acts as the legal employer of the employee, handling administrative and legal responsibilities such as payroll, taxes, benefits, and compliance. For global EORs, this may also extend to managing employee visas and addressing taxation issues in the host country.
• The employee is responsible for fulfilling the duties outlined in their job description.

An EOR assists businesses in hiring and managing a global workforce, while a PEO provides support for companies with domestic HR and workforce functions where they already have legal entities.

With a PEO, you enter into a co-employment arrangement, meaning you remain the legal employer of your hires and retain responsibility for any legal or compliance issues that arise. In contrast, an EOR becomes the legal employer, assuming full responsibility for your team.

If your focus is on domestic operations, a PEO is a great choice. However, if you’re looking to expand internationally while streamlining HR, payroll, and compliance, an EOR is the ideal solution.

PEO and EOR services share several similarities, which is why they are often confused. The main common features include:

• Both PEOs and EORs provide HR services to other businesses.
• Both specialize in ensuring compliance with regulations regarding payroll, employment, and taxes.
• Services offered by both include payroll, HR management, benefits management, onboarding, and payroll tax administration.
• The primary motivation for using either a PEO or an EOR is to free up internal resources to focus on core business activities while avoiding compliance issues due to lack of knowledge about local employment laws.
• In both models, the client company remains the managing employer, retaining exclusive decision-making authority over compensation, projects, workload, and more.

Employer of Record (EOR) providers offer comprehensive employment outsourcing services for companies that want to hire international talent without worrying about compliance or establishing legal entities in each location. EORs operate through their own legal entity in the country where they hire employees on behalf of their clients. This is particularly useful for companies entering new markets without the complexity of global employment regulations.

Key services:

• Employee benefits management
• Payroll processing
• Compliance management
• Provision of compliant employment contracts
• Administration
• Acting as the legal employer for new hires
• Arranging visas and work permits
• Acting as an intermediary between employees and government authorities
• Offering legal advice on issues like notice periods, termination rules, severance pay, and more

1. Assess your business needs and the services required for international hiring. Create a shortlist of potential EOR providers and refine it further by evaluating the pros and cons of each option.
2. Verify that the EOR has its own entity in Sweden, like BTR, rather than outsourcing services to a third party. Relying on a partner-dependent EOR could introduce risks, such as limited control over costs and security, due to the reliance on external companies.
3. Since the EOR manages everything from onboarding to payroll on your behalf, ensure they provide a positive experience for your employees. For instance, do they respond promptly to inquiries and offer support when needed? Do they ensure timely salary payments? Is their onboarding process engaging and thorough?
4. Confirm that your EOR offers a competitive and fair compensation and benefits package to help attract and retain top talent. Work with the EOR to develop a benefits package that reflects the employee’s role, skills, experience, and local employment regulations. Additionally, ensure the EOR prioritizes security and compliance to safeguard your intellectual property and company data.

The cost of using an EOR can vary depending on factors like the services needed, the location of your employees, and the number of workers you plan to hire. Typically, prices range from $599 to over $2,000 per employee, per month.

If you come across EORs offering lower rates, make sure they provide the same level of security and compliance as more established providers.

For pricing, it’s best to choose an EOR that offers clear, flat-rate pricing for a comprehensive set of services, including onboarding, benefits, taxes, payroll, compliance, and data protection.

Sweden has several labor laws that employers must comply with, as well as specific guidelines surrounding termination, contracts, compensation, and other aspects of employee hiring and management. Below, you can find more information on these topics.

When hiring employees in Sweden, it’s essential to consider both collective bargaining agreements and Swedish labor laws. Each industry has its own set of collective bargaining agreements that regulate employment terms, so it’s important to identify which agreements apply to your workers during recruitment. Some industries have more complex agreements than others, and labor laws are frequently updated.

Employment contracts in Sweden typically cover details about leave, compensation, and benefits. Every employee must have a contract outlining the scope of work and terms of employment, though specific details are only required if outlined in the collective bargaining agreement for the industry.

In general, employment contracts are considered indefinite unless stated otherwise, such as for seasonal or temporary roles. For fixed-term contracts, if the employee has been in the role for over two years, the contract automatically becomes indefinite.

There are no formal requirements regarding how contracts are negotiated. However, if the employment lasts more than three weeks, a written contract is required. While oral contracts are permitted, they are not the norm.

Swedish labor laws provide worker protections and benefits, guided by the following key acts:

• Employment Protection Act
• Work Environment Act
• Employment Act
• Annual Leave Act
• Paternal Leave Act
• Discrimination Act
• Working Hours Act

In Sweden, the regular working hours for employees are 40 hours per week. Employees are permitted no more than 48 hours of overtime within any four-week period, and the maximum allowable overtime is 200 hours per year. Employees must take a 30 minute break after five hours of work and are entitled to an 11-hour rest period within every 24-hour workday. There are also specific regulations for underage workers and those working night shifts.

Sweden offers generous benefits for sickness and parental leave. If an employee falls ill, they are entitled to sick pay from their employer for the first 14 days. After that, the Swedish Social Insurance Agency provides sickness benefits. Parental leave in Sweden is among the most generous globally, with parents eligible for up to 480 days of compensated leave, which can be shared between both parents.

Hiring employees in Sweden comes with several costs in addition to wages. Employers are required to make social contributions, which cover pension fees and health insurance, totaling approximately 31.42% of the gross salary. Holiday pay is typically around 12% of the annual gross salary, and there may also be additional expenses for employee benefits, such as wellness allowances and other health-related perks.

Non-EU citizens wishing to work in Sweden must obtain a work permit. The application process includes several steps, such as the employer having to advertise the position within the EU/EEA for at least ten days before submitting a work permit application. Work permits are typically granted for up to two years and can be extended.

An employer must have a valid and legitimate reason to terminate an employee, such as business needs, performance or productivity issues, or workplace misconduct. Generally, employers must provide notice based on the employee’s length of service with the company. Notice periods can range from 14 days to six months.

While Swedish employment laws do not mandate severance payments or compensation, such payments may be required under individual contracts, specific agreements, or collective bargaining contracts.

An Employer of Record (EOR) in Sweden is a third-party organization that assumes the role of the legal employer for your workforce in the country. The EOR manages employer-related tasks such as onboarding, payroll, and benefits, ensuring compliance, while allowing you to focus on overseeing the daily operations of your team.

The best employer of record providers are EOR companies with their own entity in the country where the talent is being employed, a so-called direct EOR. BTR Group has its own entities in Sweden, Finland and Denmark and are experts on the Nordic market.

The primary role of an EOR is to act as the legal employer for a company’s global workforce. As the official employer, the EOR assumes responsibility for all compliance-related matters, including HR compliance, payroll, and tax obligations.

A Professional Employer Organization (PEO) is a company that offers HR services such as payroll, tax, and compliance management to businesses looking to outsource these functions. PEOs typically work with small to medium-sized companies, also assisting in recruiting and onboarding employees.

Key services:

• Employee benefits
• Tax management
• Payroll processing
• Compliance support
• HR administration
• Employee training and onboarding
• Recruiting and hiring
• Employment contracts
• Other HR-related tasks (e.g., complaint management or terminations)
• Co-employment, where employment liabilities are shared with the official employer

PEO and EOR services share several similarities, which is why they are often confused. The main common features include:

• Both PEOs and EORs provide HR services to other businesses.
• Both specialize in ensuring compliance with regulations regarding payroll, employment, and taxes.
• Services offered by both include payroll, HR management, benefits management, onboarding, and payroll tax administration.
• The primary motivation for using either a PEO or an EOR is to free up internal resources to focus on core business activities while avoiding compliance issues due to lack of knowledge about local employment laws.
• In both models, the client company remains the managing employer, retaining exclusive decision-making authority over compensation, projects, workload, and more.

A PEO solution (Professional Employer Organization) helps companies manage payroll, taxes, and employer responsibilities according to local regulations (in Sweden, Denmark, and Finland). The PEO provider acts as a local HR department, ensuring correct salaries, tax payments, social contributions, and reporting to each country's authorities. The company retains operational responsibility for the employee, while the PEO partner handles HR compliance, employment contracts, benefits, and regulatory requirements, reducing risks and simplifying international expansion in the Nordics.

It depends on the company’s turnover and reporting period. VAT can be reported monthly, quarterly, or annually, depending on the company’s size and turnover.

If a company does not report VAT correctly, it may be subject to a late fee or an estimated tax assessment, where the Swedish Tax Agency estimates the basis and sets an amount the company must pay.

The Cash Method (Bookkeeping Method): This method can be used by companies with annual revenue of less than three million SEK. The company records VAT when payment is received from the customer or when the invoice is paid. The Invoice Method: This method is used by larger companies with annual revenue over three million SEK. Here, VAT is recorded both when the invoice is issued and when payment is received.

VAT reporting is done in a VAT return, where both input and output VAT for each accounting period are reported. Even if a company has no VAT to report, a VAT return must still be submitted.

The VAT rates vary depending on the goods and services, but the three most common VAT rates are 6%, 12%, and 25%. Output VAT must be reported to the Swedish Tax Agency. The difference between input and output VAT must be reported to the Swedish Tax Agency. The company will either receive a refund or pay the difference to the Tax Agency.

There are two types of VAT: input VAT and output VAT.

• Input VAT is the VAT paid on the goods and services the company purchases. You are entitled to reclaim this VAT.
• Output VAT is the VAT charged on the goods and services the company sells.

As an accounting firm, we often handle VAT accounting for our clients. Here, we explain what applies to the accounting of VAT (value-added tax). VAT must be paid on most goods and services, and as a sole proprietor, you are required to report and pay VAT to the Swedish Tax Agency. For this purpose, all sole proprietors must register for VAT with the Swedish Tax Agency and receive a VAT registration number.

The accounting requirements for Swedish companies vary depending on the company’s size and form. External accounting is governed by several laws, including the Annual Accounts Act (1995:1554) and the Bookkeeping Act (1999:1078). Generally accepted accounting principles, meaning compliance with relevant accounting rules, recommendations, and established practices, form the foundation for all accounting.

Accounting is divided into external and internal accounting. External accounting, also called business accounting, is regulated by law and aims to provide external stakeholders with information about the company’s financial performance and position during a specific period. Internal accounting is often more detailed than external accounting and focuses on providing internal stakeholders, i.e., those working within the company, with the information they need to make informed decisions.

Accounting is a broader concept than bookkeeping and includes not only the registration of business transactions (bookkeeping) but also financial statements, tax returns, and reporting. For certain companies, especially larger ones, accounting may be subject to an audit, meaning an independent auditor reviews the accounting and assesses whether it gives a true and fair view of the company’s financial position.

Accounting is a broader concept than bookkeeping. Although the terms bookkeeping and accounting are often used synonymously, accounting is a more comprehensive term. In bookkeeping, a company’s invoices, receipts, and other verifications are registered, either physically or digitally, according to the methods prescribed in the Bookkeeping Act, which can either be the cash method or the invoicing method. All business transactions must be recorded continuously, a process known as journalizing, and organized systematically according to accounts, known as the general ledger. Every business transaction must have a verification that confirms the transaction has been completed.

Accounting also includes other parts, such as financial statements, tax returns, and reports that may form the basis for decisions about the company’s future development. The purpose of accounting is to provide an overview of the company’s financial results. Accounting is significant for, for example, the taxation of business activities. In limited companies, accounting is also used to make decisions about the board of directors’ and CEO’s discharge from liability, as well as any potential dividend distribution.

For larger companies, the accounting often undergoes an independent audit, where the auditor assesses whether the accounting presents a fair view of the company’s financial position. Which parts of accounting must be carried out according to the Bookkeeping Act and the Annual Accounts Act depend on the company’s form and turnover. Regardless of the company form, accounting must always follow generally accepted accounting principles, meaning it must be carried out according to laws, recommendations, and established practices.