How to hire employees in Sweden: Your options as a foreign company

Foreign companies have several options for hiring in Sweden. You can use an Employer of Record (EOR), employ the person directly as a registered foreign employer, set up a Swedish company, or engage an independent consultant when the relationship is genuinely between two businesses. A Professional Employer Organization (PEO) can support employment administration when you already have a local legal entity that is the employer.

Which solution is best depends on how quickly you need to hire, the expected number of employees, long-term plans, the employee’s role and the degree of control the company needs. This guide provides a practical starting point for choosing the right structure.

What options do I have for hiring in Sweden without setting up a company?

Without a Swedish company, you can generally hire via an EOR or employ the person directly after the foreign company has been registered as an employer in Sweden. You can also engage a genuinely independent consultant, although this is not employment. A PEO usually requires that your company has a local legal entity and is therefore not a standalone option for companies without a Swedish company.

The four main models are:

For a more detailed comparison of cost, control and administration, read BTR guide to EOR, PEO and setting up a company in Sweden.

Employer of Record (EOR)

An EOR employs the employee through its Swedish company and becomes the legal employer. The EOR provider issues a locally adapted employment contract, manages payroll, makes tax withholdings, pays employer contributions and handles statutory employment administration. The foreign company directs the employee’s day-to-day work, priorities and performance within the agreed allocation of responsibilities.

This model is often useful for one or a small number of hires, when an employee needs to start quickly, or when the company has not yet decided on a permanent market presence. It can also work as a transitional solution while your own company is being established. The company should still assess the risk of a permanent establishment and ensure that the practical allocation of responsibilities is clear.

Direct employment via a foreign company

A foreign company can employ someone working in Sweden without forming a Swedish subsidiary. The company normally needs to register as an employer with the Swedish Tax Agency (Skatteverket), make preliminary tax withholdings, submit monthly employer declarations and handle Swedish social security contributions. Swedish employment law may apply even if the foreign company is the party to the employment contract.

This model preserves a direct contractual relationship between the company and the employee, but means the company itself – or with the help of local providers – must manage Swedish payroll administration and HR compliance.

A foreign employer without a permanent establishment in Sweden may still have obligations linked to payroll. A social security contributions agreement with the employee can affect who practically administers the payment of contributions, but it does not mean the employer’s underlying responsibility automatically disappears.

Professional Employer Organization (PEO)

A PEO supports your own Swedish employing entity with functions such as payroll, HR administration, benefits and coordination of compliance. Unlike a typical EOR solution, your company remains the legal employer.

A PEO is therefore relevant when a Swedish company already exists or is ready to start hiring – not as a replacement for the company itself.

This model suits companies that want local infrastructure without building all finance and HR functions in-house. The exact allocation of responsibilities depends on the service agreement, while the Swedish company and its management retain their legal obligations.

Independent consultant

A consultant provides services through an independent business and is not your employee. This can work for a clearly defined project where the supplier controls how the work is performed, bears commercial risk and works independently.

The consultant model should not be used solely to avoid payroll administration or to bring someone in faster when, in practice, they will work like a regular employee.

Do I need to set up a Swedish company to hire someone in Sweden?

No. A foreign company can often make its first Swedish hire via an EOR or by registering as a foreign employer.

Setting up your own company becomes more attractive when the company expects to build a stable team, needs a Swedish commercial presence, or wants direct control over hiring and local operations in the long term.

There is no universal number of employees at which it automatically becomes mandatory or financially advantageous to form a company. The decision should take into account, among other things:

• the number of planned hires and when they will take place;
• how long the Swedish operation is expected to continue;
• EOR fees compared with the costs of a company, payroll, accounting and corporate governance;
• the need to enter into local customer or supplier agreements;
• requirements relating to banking, licences, procurement and office space;
• whether employees will generate revenue or enter into agreements; and
• corporate tax exposure and the risk of a permanent establishment.

An EOR can be a suitable solution during market entry and can also be temporary. Companies can start by hiring and later move from an EOR to their own company when the Swedish operation justifies it.

When that time comes, advice on corporate structure can help align the Swedish legal entity with the rest of the group.

How do companies legally hire remote employees in Sweden?

A remote employee who regularly works from Sweden can trigger Swedish obligations under employment law, payroll tax and social security even if the employer has no Swedish office.

“Remote” describes where the work is performed – it does not mean the employment is exempt from local rules.

Companies typically meet their obligations through an EOR, registration as a foreign employer, or through their own Swedish company.

Before the start date, you should confirm:

1. Who the employer is. Decide whether the EOR provider, the foreign company or the Swedish company will sign the employment contract.
2. The right to work in Sweden. EU/EEA and Swiss citizens generally have a different status than third-country nationals, who may need a Swedish work permit before starting work.
3. Employment contracts and policies. Swedish rules cover, among other things, type of employment, working hours, holiday, sick pay, parental rights, discrimination and termination. Collective agreements may impose additional terms.
4. Payroll and social security. Register the correct employer, determine which country’s social security system applies, make correct tax withholdings and set up monthly reporting.
5. Corporate tax exposure. Assess whether the employee’s authority and activities could create a permanent establishment in Sweden for the foreign company.
6. Practical remote-working matters. Manage the work environment, equipment, information security, confidentiality, intellectual property, expense reimbursements and data protection.

Permanent employment is the main rule in Sweden. Fixed-term employment and probationary employment must comply with Swedish rules.

Sweden also has no general statutory minimum wage, but collective agreements and market practice are highly significant for pay and benefits. These issues should be addressed before a global offer is adapted for signature in Sweden.

How to engage consultants in Sweden correctly

To engage a consultant in Sweden, you should contract with a genuinely independent business, check its tax status and structure the assignment around deliverables rather than day-to-day management resembling that of an employee.

Approval for F-tax is important because it generally indicates that the supplier is responsible for its own preliminary tax and social security contributions. But the actual working relationship still matters.

Having multiple clients can indicate an independent consultancy relationship, but it is not an absolute criterion. Swedish classification is based on an overall assessment and no single factor automatically determines the outcome.

Before signing the agreement, you should examine:

• who determines working hours, workplace and working methods;
• whether compensation is based on time worked or defined deliverables;
• whether the person can take other clients or have someone else perform the work;
• who provides tools and bears the operating costs;
• whether the supplier bears financial risk and is responsible for remedying defects;
• how closely the person is integrated into internal teams and the company’s management structure; and
• whether the assignment is temporary and project-based or runs indefinitely.

The Swedish Tax Agency states that F-tax does not apply to work performed within an employment relationship. If a consultant is not approved for F-tax, the payer may need to withhold tax and, if the recipient is an individual, pay employer contributions.

Misclassification can also mean the company is exposed to employment-law claims and disputes over rights that the agreement attempted to exclude.

Practical rule of thumb: If you need the person to work as a member of the team – under a manager, on an ongoing basis, with internal processes and with limited commercial independence – you should use an employment model. Do not call the role freelance or consultant solely because the company is not yet ready to handle Swedish payroll administration.

How to hire developers in Sweden

Foreign companies can hire developers in Sweden through the same models: EOR, direct employment via a foreign company, a Swedish company with optional PEO support, or a genuine consultancy relationship.

For a single urgent hire, an EOR can offer the fastest operational route. For an established development team, a local company can provide better long-term control and infrastructure.

Consulting engagements for developers require particular attention because an agreement may describe the person as a “consultant” while the person works full-time in a product team, reports to an engineering manager, uses the company’s systems and lacks real commercial independence.

Such a situation should be assessed as a potential employment relationship.

The agreement should also regulate ownership of intellectual property, confidentiality, open-source software, security standards, equipment, inventions and the handling of personal data.

Do not assume that a global IP clause will automatically produce the intended result under Swedish law. For talent outside the EU, processing time for work permits should be included in recruitment planning before a start date is set.

Can a US company hire a Swedish employee without a Swedish company?

Yes. A US company can hire an employee based in Sweden without creating a Swedish subsidiary.

The company can use a Swedish EOR or register the US company as a foreign employer and manage its Swedish payroll and employer obligations itself.

Which model is best depends on the contractual relationship the company wants, internal compliance capacity, the expected number of employees and how long the operation will run.

With an EOR, the Swedish EOR provider signs the employment contract and handles local payroll and employment administration, while the US company directs the work.

With direct employment, the US company signs the agreement, but the company must implement relevant Swedish registrations and processes for payroll, tax, social security and HR.

Neither model automatically means the US company avoids a permanent establishment in Sweden. The risk depends on the employee’s actual activities, authority and other circumstances – for example, whether the person regularly negotiates or enters into agreements on the company’s behalf.

This should be assessed together with the choice of employment structure, not only after the employee has started.

EOR vs PEO vs your own company: Which option should you choose?

As a starting point, an EOR can be used when speed or early market testing is prioritised. Direct employment via the foreign company can be an option when the company can handle Swedish employer obligations without forming a company.

A PEO is relevant when your Swedish company needs administrative support, while setting up your own company may suit when the operation has become sufficiently permanent and extensive to justify local infrastructure.

The difference can be summarised as follows:

• EOR: a local legal employer is provided as a service;
• direct employment via a foreign company: your foreign company is the employer;
• PEO: your Swedish company is the employer and receives support from a service provider;
• your own company: local employment combined with full corporate responsibility; and
• consultant: an independent supplier, not an employee.

For a complete review of advantages, disadvantages and cost considerations, you can read BTR comparison of EOR, PEO and setting up a company in Sweden.

Companies with a Swedish legal entity can combine a PEO solution with local accounting services for payroll, bookkeeping and coordination of tax matters.

How to succeed with your first hire in Sweden

Sweden offers workable options for companies at all stages of expansion.

The most important decision is first to determine whether you need an employee or an independent supplier and, if it is employment, which organisation will be the legal employer.

Resolve that question before making an offer of employment and then adapt contracts, registrations, payroll and tax analysis to the chosen model.

For a first hire, you can follow these steps:

1. Define the role, the expected time period, the person’s authority and the degree of integration into the business.
2. Confirm the candidate’s right to work in Sweden.
3. Compare EOR, direct employment via a foreign company and employment via a Swedish company.
4. Assess the implications for permanent establishment and social security.
5. Calculate the full employment cost – not just gross salary.
6. Prepare an employment contract and an onboarding process that comply with Swedish rules.
7. Ensure payroll processing and reporting work before the first salary payment.

BTR's EOR and PEO solutions support companies at different stages of this journey – from the first hire to a larger local operation.

Not sure which way of hiring in Sweden suits your company? Contact our experts.

This article contains general information and does not constitute legal advice or advice on tax, employment law or immigration. Applicable requirements depend on the employer, the employee, the role, the activities, nationality and the chosen structure.

Written by Elise Bredenberg
Marketing Manager at BTR Group

Fact-checked by Erik Doxner
Customer Success Manager & HR Specialist at BTR Group