Sweden: Swedish Model in Line with the EU’s Minimum Wage Directive

Author: Nina Voigt Dahl

In October 2022, the European Union adopted Directive 2022/2041 on Adequate Minimum Wages (the “Minimum Wage Directive”), and its provisions must be implemented in national law by 15 November 2024. The purpose of the Directive is to increase living standards and reduce wage inequalities. The Directive has been heavily criticised in a public debate in Sweden. Criticism came, among others, from the parties of the labour market who were united on the issue and feared that EU involvement in wage-setting would undermine the so-called “Swedish model” of industrial relations. Under this model, employers’ organisations and trade unions are responsible for negotiating wages and conditions in collective bargaining agreements, and the state regulates the labour market only to a limited extent through legislation.

The recently published report, The Implementation of the Minimum Wage Directive, SOU 2023:36, presents how the Directive should be implemented in Swedish law. Member States can fulfil the purpose of the Directive through two different approaches. One of which is through statutory minimum wages, and the other is through the promotion of collective bargaining on setting wages. For Sweden, one of the few countries in the EU that regulates wages exclusively through collective bargaining agreements, it is the latter approach that is relevant. The government inquiry concludes that the Swedish model works very well and that Sweden already meets the requirements set out in the Directive for Member States to promote collective bargaining on setting wages by the parties of the labour market. Accordingly, no legislative changes are suggested in order to achieve the purpose of the Directive. The Directive also contains provisions on measures to be taken if the coverage of collective bargaining agreements in a country is less than 80%. In Sweden, the coverage rate has been around 90% for a long time and therefore, no measures are proposed for Sweden to comply with these provisions at present.

  

Key Action Points for Human Resources and In-House Counsel

Due to Sweden’s unique model of industrial relations, the Directive does not require significant legislative changes regarding minimum wages.