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The Swedish rules around hiring and firing that could spark a political crisis

The Swedish rules around hiring and firing that could spark a political crisis
Currently, the most recently hired employees are at biggest risk of redundancy. Photo: Isabell Höjman/TT
What are the Swedish employment law changes that are being argued about – and why could they spark a government crisis? The Local explains.

What's the Employment Protection Act?

This is the law that is under review. It outlines the rules for hiring and firing within Swedish businesses, and also contains regulations for employment contracts. In Swedish, it is called Lagen om anställningsskydd, and is usually referred to simply as LAS. 

One of the key principles is 'last in, first out' when it comes to redundancies. In other words, if a company needs to restructure or cut jobs, they should work from the principle that the most recently hired person is the first to go. There are exceptions, such as if that employee performs a key role that can't easily be done by someone else.

The government ordered a review into the law, the results of which were shared in June. They've been welcomed by centre-right parties and businesses, but received criticism from trade unions and the Social Democratic Prime Minister as well as other left-of-centre parties.

Why is it being reviewed?

It was part of the so-called January Agreement, a deal drawn up between four parties to ensure that Sweden's government could rule and put an end to post-election deadlock.

In order to get the passive backing of their former centre-right rivals the Centre and Liberal parties, the centre-left Social Democrat-Green government agreed to a review of the employment law.

In the agreement, the government pledged to “modernise the Employment Protection Act to adapt to the present-day labour market while maintaining a basic balance between the actors in the labour market”.

“The law should give businesses flexibility and protect individuals against arbitrary dismissal,” the January Agreement said. 

Specifically, it asked for proposals giving clear exceptions from the 'last in, first out' rule, to reduce the costs of dismissal for small businesses, lay out the responsibility of employers for skills development, and create a balance in job protection for people on different kinds of contracts. 


Photo: Lieselotte van der Meijs/imagebank.sweden.se

What did the review say?

The review suggested that all companies, regardless of size, should be able to exempt up to five employees from the 'last in, first out' principle during any rounds of layoffs. Currently, companies with more than ten employees may exempt up to two, and smaller companies must follow the principle.

And age would no longer be a factor. In cases where two employees have been at the company an equal length of time and one must be laid off, currently the youngest employee has to leave. Under the new proposals, the employer would be able to make their own decision.

It also suggested making the rules stricter when it comes to giving an employee a new position rather than lay them off. Instead of being allowed to take new qualifications, as is allowed under the current rules, the person would need to be able to take on their new responsibilities straight away.

Another big proposed change was that in small companies, those with fewer than 15 employees, it would not be possible for a dismissal to be declared invalid. That means that in the case of any disagreement, the company would not have to pay the salary of the affected employee until the issue was resolved, as is the case today. For larger companies, they would only have to pay out the salary in the event of a court decision declaring the dismissal invalid, and not during the time of the dispute.

WORKING IN SWEDEN:

What are the arguments for and against?

The 'last in, first out rule' may lead to less labour market mobility. For example, it could dissuade employees from changing jobs because they would then risk being the last person in. And it means that the highest performing individuals aren't necessarily those who keep their jobs in times of difficulty. Företagarna, an organisation representing business-owners, welcomed the proposals, saying current rules hinder company growth and give flexibility. 

But there's a risk that giving managers the say in who is affected by layoffs could lead to discrimination, or would go against the government directive to protect individuals from arbitrary dismissal.

Sweden's trade unions are very strong, and generally say they prefer to negotiate employment terms themselves. The Swedish Trade Union Confederation has said that the new proposals make it more difficult for them to carry out negotiations.

Prime Minister Stefan Löfven of the Social Democrats was critical of the proposals. 

“The balance between [employers, employees and unions] has not been upheld,” he told Aftonbladet at the time.

What happens now?

The January Agreement stated that if the different parties involved in the labour market were satisfied with the proposals, they would come into force from January 2021. But if no such agreement was reached, it stated that instead the government would put forward proposals on the basis of the other parties' suggestions.

Negotiations between The Swedish Trade Union Confederation and the Confederation of Swedish Enterprise broke down in the early hours of October 1st, so the matter is currently in the hands of the politicians.

This could spark a government crisis, with the Left Party vowing to put forward a vote of no confidence in parliament if the ruling Social Democrats press ahead with the matter. But if the Social Democrats do not do so, they risk angering their Centre and Liberal partners.

At the time of writing, all three latter parties have said that they would be open to allowing the unions and businesses more time to work out an acceptable compromise, so it is currently unclear what will happen.

Have you got a question about working in Sweden, or want to share your own experience? Perhaps you were a victim of the 'last in, first out' principle, have experienced discrimination at work, or have set up your own business? The Local is here to help you navigate life in Sweden and raise your voice, so please get in touch.


Member comments

  1. It’s ok to update articles but please clearly mark what’s the updated part. I read this article when it came out in June and now I couldn’t understand which one is the new part or what is the new information that the update means to deliver.

  2. Hi Renato, that’s great feedback, thank you! We’ll keep that in mind for the future. In this case, most of the updates are in the “what happens now” section, so we now know that negotiations between the labour market groups have broken down (whereas in June they hadn’t yet got under way).

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