Swedish government deadlock impacts 2019 regulatory agenda

Just before Christmas each year, Sweden waits with bated breath to hear about forthcoming legislative changes. But this year, it is different.

The country’s election at the start of September resulted in a hung parliament,  which has put the nation in a situation it has never been in before. Three months later and, despite plenty of political drama, there is still no government in place, which has had a huge knock-on effect in terms of enacting regulations.

The Speaker of the Riksdag (Swedish Parliament) was initially asked to suggest a Prime Minister (PM) who he thought could drum up enough support to be elected by other members of Parliament. So far this process has taken place twice and both proposals have been rejected. But if the Speaker is unable to come up with a successful candidate soon, another election will become inevitable in order to replace the current caretaker government.

A key problem in legislative terms though is that the caretaker government only has limited powers. As a result, the usual carefully-considered Budget Bill is being replaced by one based on previous decisions made by the Riksdag and which leaves scope for adjustments when a new government is formed.

In other words, there are previously-decided changes to existing regulations that will start to apply in the New Year. The biggest change, although not based on new legislation, first came into force on 1 July, but will affect few companies until 2019. The new PAYE tax return (AGI-arbetsgivardeklaration på individnivå) rules mean that employers will be required to report their payments and tax deductions for each employee every month.

Variants of this reporting approach have been common in other countries, such as the UK, Netherlands, Denmark and Norway, for many years, although each requires differing amounts of information – and Swedish employers will need to report less than their counterparts in Norway and Denmark.

New considerations

Nonetheless, they will be required to handle payroll processes with extra care, mostly because of the transparency that results when it becomes necessary to report personal data. Until now, a worker’s aggregated wages hid any negative figures on a monthly basis, which postponed any underlying issues until the time came to report the company’s annual income statements.

In other words, the forthcoming change is less about regulatory compliance per se and more about behaviour. Information on time reporting, role and job changes all need to be provided to payroll on time, and the payroll process needs to be streamlined and accurate. While adjusting to this new way of doing things may seem onerous in the short run, the benefits will make the shift worthwhile into the longer term.

Meanwhile, as of 1 January, a new way of reporting sick pay will also be introduced in the form of the ‘Karensavdrag’. Rather than being based on how many workdays someone has taken off, sick pay deductions will instead be based on 20% of an individual’s average weekly sick pay, no matter what their job status is.

This means that, rather than counting up the number of days someone has taken off sick as in the past, it will be necessary to keep track of how much has been deducted in sick pay instead. These deductions must never exceed what should have been the amount paid in sick pay on the day of the individual’s absence.

If this situation occurs, the deductions will continue until the right amount has been paid. This new regulation will be negotiated centrally each year by the unions, although some collective bargaining agreements are already based on this approach.

But the negotiation of many of the 680 collective bargaining agreements is not on track either - and since employees are entitled to certain working conditions as laid down in law, it is still unclear how to deal with this scenario in payroll terms.

So given this backdrop, the only option open to employers is to ensure they deal with annual changes such as tax tables and keep an eye on what is going on for everything else.

Zennie Sjölund

Zennie Sjölund is divisional director for payroll of Srf konsulterna  Sweden’s association for accounting and payroll consultants, which was formed in 1936. Srf konsulterna’s role is to promote effective and modern payroll processes as well as provide certification for members and help to boost their professional skills. It has also developed a code of conduct (SALK).