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How to sign and why you should have a collective agreement

61% of Sweden's companies do not have a collective agreement

The labor law legislation in Sweden is not very comprehensive. Instead, the responsibility for handling the regulations regarding employment conditions and the rights and obligations involved in employment has been handed over to the social partners through contracts. These can include conditions such as the right to an occupational pension, the right to overtime pay and the minimum wage.

Despite the fact that so much is left to the market itself to regulate, 61% of Swedish companies have not signed a collective agreement. Many Swedish companies do not have employees and those who have employees but do not have a collective agreement relate in many cases to a norm or to a specific collective agreement.

Why collective agreements?

The Swedish labor market is based on the idea that collective agreements should regulate the rights and obligations that social partners owe to each other. Then the individual employers, the actors in the labor market, join the contracting employers' organization and apply the agreed rules. 


Since the market is built on this 'Swedish model', as a collectively affiliated employer you are often at an advantage compared to employers who choose not to sign agreements. It is becoming increasingly common for contracting authorities and municipalities to require tenderers to have collective agreements. It is also becoming more and more common for insurers to require collective agreements to offer their insurance. An additional factor that makes collective agreements more attractive to employers is the so-called peace obligation that is in place during the term of the collective agreement. This prevents the unions from taking combat measures that would otherwise be available such as strikes, blockades and blockades of overtime work, new employment or the hiring of labour. 

Simultaneously, it is becoming increasingly noticeable that the previous perception of non-collective employers as being less serious than employers with collective agreements is beginning to loosen. This is owing to the fact that it is entirely possible to have benefits and conditions that amount to or even exceed those that follow from collective agreements. Yet, the employers' opportunity for freedom of choice is greater. 

Is there any difference between suspension agreements and collective agreements? _Cc781905-5cde-3194-bb3b-136bad5cf58d_

It is easy to get confused by all the different concepts that abound in labor law.

The decision to make a distinction between "collective agreements" and "suspension agreements" was made in order to be able to demonstrate membership, or lack thereof, in an employers' organization. 

As part of being a member of an employers' organization, you normally sign a collective agreement automatically, this applies to both workers and salaried employees. If you choose not to be a member of an employers' organization, but still want to (or must) sign a collection agreement, you can do so directly with the contracting trade union. In doing this, you are committing to a suspension agreement. You "hang" on to an existing collective agreement without membership in the contracting employers' organization.

Why do some companies choose not to sign collective agreements?

There are several reasons for not signing a collective agreement. It might be that the conditions that you have in place for your employees are better than what the collective agreement stipulates. You could be in an industry that is difficult to define based on the existing unions - which agreement would apply? It may be that there are ideological or political reasons present. Or it could be that you do not have any employees who are members of the trade union that have entered into a relative collective agreement. Many smaller entrepreneurs may also find that the collective agreements lack flexibility and are principally designed according to the needs and functions of larger companies. 

There is no statutory obligation to sign a collective or suspension agreement. The Swedish system has admittedly been designed in a way to incentivize companies in order to persuade them to sign agreements, but as I said, this is optional. 

What does it cost to sign a collective agreement?

The costs of a collective agreement consist of the membership fee to the employers' organization in addition to the premium for the insurances that are included and the payments to the employees' occupational pension ITP. 

For employers who choose not to be a member of an employers' organization (and instead sign a suspension agreement), in addition to premiums for insurance and occupational pensions, they may have to pay a so-called special connection fee of 0.3-0.4% (depending on which agreement is applied). This may be covered by prescribed adjustment insurance. 

The additional cost of signing a collective agreement depends on the terms of employment that the employees are operating under before the agreement is signed. There is no statutory right to a minimum wage, reduction of working hours or occupational pensions in Sweden. In approximate terms, a collective agreement can cost half a million kroner per year for a company with forty employees who earn an average of SEK 20,000 a month. For a company with ten employees who earn an average of SEK 40,000, the sum is almost the same. As such, employees that earn a higher wage are more expensive because the provisions for occupational pensions will be high. 

There is no material difference between collective agreements and suspension agreements in terms of the benefits and conditions that apply to the employees. There is no major difference in terms of costs either. If you choose to have a suspension agreement and thus not become a member of an employees' organization, the cost of the membership fee disappears. However, the cost of the special connection fee is added for the adjustment insurance.

Do you need advice on signing a collective agreement?

Contact us today!

Do not hesitate to contact us regarding questions relating to drawing up collective agreements. 

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