Ending an employment relationship in Sweden is a highly regulated process that requires careful compliance with labor laws and, in many cases, collective bargaining agreements. The country’s employment protection framework is designed to safeguard both employees and employers, ensuring that terminations and redundancies are handled fairly, transparently, and with due process.
For foreign companies operating in Sweden—or planning to establish a presence—understanding these rules is critical. Missteps can lead to costly legal disputes, reputational damage, and strained relations with employees and unions.
1. Understanding Employment Protection Legislation
The cornerstone of Swedish labor law is the Employment Protection Act (LAS – Lagen om anställningsskydd). It sets out the rules for when and how an employer may terminate an employee, including both redundancy and personal reasons.
- Applies to most employees, regardless of contract type, unless exempted by specific rules.
- Includes provisions on notice periods, valid grounds for termination, and priority rights.
- Collective bargaining agreements may add further protections or procedural steps.
2. Valid Grounds for Termination
Swedish law allows termination of employment on two main grounds: redundancy (workforce reduction) and personal reasons (related to the employee’s performance or conduct).
- Redundancy: Economic downturns, restructuring, or changes in operations that reduce the need for staff.
- Personal reasons: Underperformance, repeated misconduct, or inability to fulfill duties—provided sufficient warnings and opportunities for improvement have been given.
Redundancy is considered an “objective” reason and is generally easier to justify legally than personal reasons, which require more documentation and prior corrective measures.
3. Consultation and Negotiation Obligations
Before any decision is finalized, employers must consult with relevant trade unions—even if the affected employees are not union members.
- Negotiations are required under the Co-Determination in the Workplace Act (MBL).
- Consultations must occur before issuing formal notice of termination.
- Failure to consult properly can result in fines or annulment of the termination decision.
For larger workforce reductions, the employer may also need to notify the Public Employment Service (Arbetsförmedlingen) in advance.
4. The “Last In, First Out” Principle
In redundancy situations, Swedish law applies a seniority rule known as “last in, first out” (sist in, först ut), unless otherwise agreed with unions.
- Employees with longer tenure have priority to stay in their positions.
- Exceptions can be made if an employee has unique skills essential to the business.
- Collective agreements may modify or replace this principle with alternative criteria.
5. Notice Periods and Termination Procedures
Notice periods are determined by both law and collective agreements, typically ranging from one to six months depending on the employee’s length of service.
- During the notice period, the employee remains on payroll and is entitled to regular benefits.
- Employers must provide written notice, clearly stating the reason for termination.
- Employees have the right to request written clarification of the grounds for termination.
6. Severance and Financial Considerations
While Swedish law does not mandate severance pay in all cases, collective bargaining agreements often include such provisions. Employers should review the applicable agreements to determine financial obligations.
- Severance terms may depend on tenure, age, or redundancy circumstances.
- Employees made redundant may have priority rights to re-employment for a set period.
- Unused vacation pay must be settled upon termination.
7. Special Protections for Certain Employees
Additional safeguards apply to specific groups, such as employees on parental leave, those with disabilities, and union representatives.
- Terminating these employees typically requires exceptional justification.
- Employers may need to explore reasonable accommodations before proceeding.
- Union representatives enjoy enhanced protection due to their role.
8. Dispute Resolution and Legal Risks
If an employee disputes the termination, they may take the case to the Labor Court. Employers found in violation of LAS can be ordered to reinstate the employee and/or pay substantial damages.
- Documentation of all steps taken is critical to defending against claims.
- Engaging legal counsel early in the process reduces the risk of procedural errors.
- Many disputes are resolved through negotiation before reaching court.
From Compliance to Confidence in Employee Transitions
Employee termination in Sweden is more than a legal formality—it’s a structured process designed to protect fairness and maintain workplace integrity. For international businesses, mastering these procedures ensures smoother transitions, minimizes legal exposure, and preserves your employer brand. With the right planning, terminations and redundancies can be handled respectfully and in full compliance with Swedish law.
Need expert guidance on workforce changes in Sweden? CE Sweden can provide legal insights, negotiation support, and step-by-step compliance strategies.
