Heightened competition for IT talent in Sweden has led to a significant increase in salaries as small and medium-sized enterprises (SMEs) contend with larger, more financially stable corporations in their efforts to attract IT professionals.
Ongoing skill shortages in Sweden, coupled with an increasingly competitive talent landscape, have driven salaries for IT professionals with three years of experience up by 12%, reaching €4,000 per month since 2022. The most critical skill shortages among growth companies continue to be in three primary fields: engineering, IT, and data.
A tech industry survey by Ada Digital conducted in June revealed that companies offering salaries below €4,000 are no longer seen as competitive enough to attract even entry-level IT talent. Furthermore, the Stockholm-based recruiter’s Reveal re-define survey indicated that IT professionals with five or more years of experience are declining job offers that fall below €6,000 per month.
For SMEs in Sweden, the tightening talent pool exacerbated by ongoing skill shortages in essential IT areas is likely to drive payroll costs higher in 2024 and 2025, as companies allocate increasingly larger portions of their budgets to compete with larger organizations for IT professionals.
Experienced IT personnel with over eleven years in the field can expect to earn between €5,300 and €6,200 per month in Sweden, according to Sara Scheef, CEO of Ada Digital. “The rising salaries for IT talent can be attributed to the value added by experience, current skill shortages, and inflationary pressures on salary expectations,” Scheef stated.
To attract high-caliber talent, SMEs facing difficulties are exploring other strategies, such as offering extended vacation time and more flexible working arrangements.
Despite this upward trend in salary expectations for IT professionals, it unfolds against a backdrop of sluggish growth in Sweden’s overall economy. As of August, Sweden’s employment rate was nearly 8%, with 225,000 men and 228,000 women of working age without full- or part-time jobs. Additionally, the country’s GDP shrank by 0.3% in the second quarter of 2024 compared to the same period in 2023, with full-year GDP growth expected to remain below 1% in 2024.
Both large corporations and SMEs are bracing for higher payroll expenses for IT talent once the anticipated economic growth resumes in Sweden in 2025.
Finance Minister Elisabeth Svantesson stated, “Reforms in the 2025 budget will lower income taxes and incentivize both IT talent and companies to invest and work in Sweden.” This statement reflects the payroll concerns stemming from the government’s budget plan for 2025, announced on September 19, which aims to stimulate growth and revitalize the sluggish economy through targeted capital investment projects, including reforms designed to boost Sweden’s appeal for foreign IT talent.
The budget includes €5.3 billion for initiatives ranging from tax reductions for skilled workers to dedicated projects aimed at attracting IT professionals. Additionally, the reforms aim to upskill immigrants and facilitate their entry into an improving job market. Foreign IT professionals will benefit from reduced income taxes and the option to establish tax-free investment savings accounts (ISAs).
Svantesson noted that a recovery in the labor market is expected to begin in January 2025, driving demand particularly for skills in IT and engineering. “Our focus is on measures to strengthen Sweden’s economy and enhance investment levels,” she affirmed.
To attract top-tier foreign IT talent, the Swedish government is implementing major reforms to the existing work permit system. Between January and May 2024, there was a 20% decrease in the number of highly qualified IT professionals receiving work permits compared to the same timeframe in 2023. Notably, in the IT engineering, system development, and testing leadership sectors—areas with the highest number of work permit holders—initial permit approvals fell by 39% and extensions decreased by 26%.
The government’s roadmap to bolster Sweden’s capacity to attract elite IT talent is detailed in the labor market reform plan attached to the 2025 budget. This plan necessitates the creation of new legislation, effective from January 1, 2025, to implement the EU’s Blue Card Directive.
In a bid to reform Sweden’s approach to attracting international talent, the government has appointed a special investigator to evaluate current immigration laws regarding family reunification. This evaluation is meant to align with the government’s push to concentrate immigration on highly educated and skilled professionals and is expected to be presented to the government by August 2025.
Overall, the proposed legislative changes are likely to encourage more foreign IT professionals to opt for the EU Blue Card over the traditional work permit route for job opportunities in Sweden, according to Martina Ogenhammar Conti, head of immigration and global employer services at Deloitte Sverige. Conti highlighted that “the new legislative proposals for EU Blue Card holders will enable greater freedom of movement, benefiting both Sweden and the EU as a whole.”
In a precursor to the budget, the government announced a plan in June to elevate the monthly salary threshold for foreign semi-skilled workers to €2,510, effective June 24, 2024. This significant increase from the October 2023 threshold of €1,146 is expected to widen the labor pool and augment the available IT talent for employers. Furthermore, Sweden plans to raise this threshold to €3,200 in June 2025, representing a 120% increase from the October 2023 level, which could provide further momentum in broadening the labor pool and enhancing the availability of IT skills to meet employer needs.