Silhouette of Man Holding Flamethrower

3 things to consider when signing Byggavtalet as a foreign contractor.

One of the most commonly used collective bargaining agreements used in the Swedish construction sector is “Byggavtalet” or the Construction Agreement. The contract is very extensive and should make clear to the contractor all the conditions that apply in various work-related situations and how to solve them. However, the reality is that a foreign contractor has to deal with risks and requirements that are not explicitly stated in the agreement. Below are three examples of such risks.

Byggavtalet is a collective bargaining agreement of more than 200 pages that sets out all the working conditions that construction companies and workers must abide by. Byggavtalet is signed between Byggnads (the Swedish Builders’ Association) and Byggföretagen (the Swedish Construction Companies’ Association). The agreement can be entered into either by the contractor independently or by becoming a member of Byggföretagen. Once the agreement has been signed, the contractor is obliged to comply with the terms of the agreement on every site in Sweden where it operates.

Byggavtalet is very detailed, and Byggnads expects the contractor to familiarize itself with all the contents of the agreement and to follow all the rules laid down in it. Here are some examples of the scope of the details:

  • Differing minimum wage for a builder with 0-1 years’ experience, 1-5 years’ experience, and 6+ years’ experience.
  • Different pay rates to be paid to workers who work overtime, or at “inconvenient hours” (for example, if the official working hours are 09.00-18.00 on weekdays but for some reason work is done from 11.00-20.00, the hours worked after 18.00 must be compensated at a 40% premium).
  • Different compensation structure for daily commute to work depending on mode of transportation: personal car ; company car; carpooling ; public transport.

The agreement structure is based on the assumption that the contractor operates mostly in a single geographical area and that the company’s workers live in the same area where most of the work takes place. However, foreign companies often do not limit themselves to a single area but work everywhere in Sweden. This is one of the competitive advantages of foreign companies: a foreign worker does not care where he works abroad, he is still abroad. This means that a foreign contractor must consider the following risks.

1: You may be obliged to pay a daily allowance in addition to salary.

Because Byggavtalet assumes that the contractor mostly operates in a single geographical area, workers must be paid compulsory daily allowance at any time when they are sent to work outside the originally established geographical working area (70+ km).

As the employees of foreign construction companies are generally not residents in Sweden and may work on several different sites located in different geographical areas, there is a very high risk that the company will oblige itself to pay the employees a daily allowance. The criteria of Skatteverket (Swedish Tax Agency) and Byggnads on what constitutes a posting and the obligation to pay daily allowance are slightly different, but that difference is very impactful. Skatteverket’s normal rules do not oblige the company to pay daily allowance to posted workers. Byggavtalet, on the other hand, obliges the company to pay the posted worker a tax-free daily allowance of 290 SEK per day. This can increase total costs substantially

What makes this even more dangerous is that, according to Byggavtalet’s rules, the usual working area is not measured from an office or construction site, but a 70 km radius around the employee’s home address. Foreign workers usually have their homes located outside of Sweden, i.e. 70+ km away from the Swedish sites. This means that Byggnads can interpret working in any workplace in the whole of Sweden as a potential posting. Fortunately, there is a special rule in the contract (Byggavtalet §6, 3.8) which allows to establish the temporary residence as the employee’s home address in the employment contract. This can only be done once, i.e. when the employment contract is drawn up. This allows a foreign contractor to work in one area without being obliged to pay daily allowance, but as soon as workers need to be sent somewhere else that is more than 70 km away from the temporary place of residence, the obligation to pay daily allowances comes into force again.

2: You need to consider what the consequences might be if payroll is calculated in one currency, but employees want to be paid in a different currency.

For foreign construction companies, it is very common for workers to want to be paid in the currency of their home country. However, Byggavtalet sets wages in SEK and requires employers to keep payroll in SEK as well. This creates a situation where the employee may be unhappy because each month, he or she receives a different amount of net pay due to the fluctuating exchange rate. The second option, to guarantee the employee a fixed salary in the home country currency, may make Byggnads administrators raise some eyebrows if they receive salary reports for some months in which the employee’s salary in SEK is less than the minimum wage agreed with the union.

The employee did the same amount of work in “Month 2” as in “Month 1” but received 85.77 EUR less in pay. Failure to set out the exact terms of the salary in the contract could lead to a dispute and damage the employment relationship between the employee and the company.

The second option is no better. If the contractor instead chooses to calculate the salary in EUR, which guarantees the employee a fixed net salary, this will affect the calculation of the salary in SEK and the reporting of salary statistics. Namely, the employer is obliged to report to Byggnads the payroll statistics on the remuneration paid. Byggnads determines the minimum wage that a company’s employees should receive. The statistics must include the number of hours worked and the gross wage in SEK (among other data). If the gross salary level is close to the agreed minimum, there may be situations where some of the months the reported gross salary is lower than the minimum agreed with Byggnads. In that case Byggnads might contact you and ask for clarification. It is in the interest of the contractor to behave as correctly as possible so that the annual Byggnads audit goes smoothly and any situation that raises red flags for Byggnads may damage the impression that Byggnads has of the company.

As you can see, Byggnads is receiving a “Month 2” statistic report where each employee has received 3 SEK less per hour than the minimum agreed with Byggnads. Since their payroll statistics program is automated, they immediately receive a notification that this company is paying less than the agreed amount. This could create a situation where some kind of subsequent unpleasant scenario is triggered.

  • Byggnads will immediately contact you and demand clarification.
  • Byggnads will do nothing presently but use the statistics in their annual review as proof that the company is not playing by the rules.
  • Byggnads will act without informing the company and, for example, come to the site and shut it down, inform the general contractor that their subcontractor is not paying enough wages, put you on a supplier blacklist, or take other actions that are detrimental to the company. 

3: You must take into account that different salary rates apply in different areas of Sweden.

The proactive entrepreneur will do his homework before entering the Swedish market and read the Byggavtalet contract in English and see the term “basic wage” several times, which is currently 188,5 SEK/h. It is logical to assume that this is the minimum wage under normal working conditions. Unfortunately, it is not that simple. The ‘basic wage’ refers to the wage that must be guaranteed to a worker in situations where there is no work to offer, for example a work stoppage due to bad weather or similar circumstances. Similarly, the basic wage must also be paid when a worker is called to a site but is unable to carry out his work, for example when he is waiting for an electrician to come and prepare his section on site.

The actual ‘minimum wage’ to be paid by the contractor is agreed with Byggnads when the contract is signed. The wage will depend on the geographical area where the construction is taking place and the occupation of the workers. On average, tilers earn more than scaffolders and Stockholm is a more expensive area than Sundsvall. In addition, it should be kept in mind that Byggnads has divided Sweden into 11 regions, and that if the construction sites are located in different regions, each region requires separate salary negotiations with the Byggnads office managing that region.

I strongly recommend that before you accept any project, you check with Byggnads what the average wage is in the area where the project is located and use this figure in your calculations, as the real average wage can easily be 30-50 SEK higher per hour than the “basic wage” of 188.5 SEK.

Signing Byggavtalet as a member of Byggföretagen removes this problem, but joining them is a lengthy process and you should have been active on the market at least a year before you are eligible.

What to do next?

Familiarizing yourself with the content of collective bargaining agreements is crucial if you want to operate in Sweden for the long term and build good relationships with your clients and unions. However, keep in mind that clients and unions are not your friends, and it happens quite often that clients use breaking the rules of the collective bargaining agreement as an excuse to not pay for completed work. Because of this, you need to be very aware of your obligations, your rights and the ‘standard practices’ that no one will tell you about outright.

Many collective bargaining agreements are translated into English, which allows the company to familiarize itself with the content of the agreement and prepare itself. However, many of the terms and practices can be difficult to understand if you have never worked in Sweden before, and it takes a lot of time to educate yourself. In this case, you may prefer to work with an expert who is already familiar with these matters and has helped many companies successfully start and navigate projects in Sweden to completion.

You are welcome to describe your current situation and together we will find a way to move forward smoothly. The first consultation is always free of charge.

Similar Posts