Sweden has a unique system of granting workers unpaid leave to allow them to potentially launch a new business as entrepreneurs. As such, employees can pursue a startup idea for six months without losing the security of a stable job.
Employers can only turn the request down if the employee is vital to the business' operations. Also, the applicant's business idea can’t compete with their existing employer, nor cause their employers any significant inconvenience.
Employees are expected to be able to return in the same position as previously.
Anyone who has been in full-time employment for at least six months is entitled to apply for the leave of absence.
Exact assessments of how much the right to unpaid leave has contributed to Sweden's entrepreneurial economy have been difficult to conduct due to data limitations. But what the figures do clearly confirm is that rising demand for leaves of absence (including paid parental leave) coincides with growing numbers of Swedes starting their own companies:
According to Statistics Sweden: in 2017, 175,000 25- to 54-year-olds on leave were registered, compared to 163,000 in 2007. Over the same decade, the registration office for Swedish companies, Bolagsverket, reported a 73% increase in the number of registered limited companies.
Discrimination upon return
Some observers might argue that workers could face discrimination when it comes to future career prospects or salary after taking time off to start a business. However, this risk is contained in Sweden where this kind of prejudice is against the law.
Impact on existing businesses
According to Samuel Engblom of the Swedish Confederation for Professional Employees, while many employers share a positive attitude toward unpaid leave, others can struggle with the administrative and financial challenges linked to covering a worker’s responsibilities while they are taking time off.
According to Claire Ingram Bogusz, a post-doctoral researcher at Stockholm School of Economics, the trend for taking leave to start a business needs to be viewed in the context of the Nordic country’s notoriously strict employment laws, which make firing staff harder for business owners, compared to many countries. This regulatory framework might encourage some works to stay put once they have the security of a substantive role at a firm.
Nonetheless, many academics, such as Ting Xu, an assistant professor at the University of Virginia whose work focuses on entrepreneurial finance, argues that increasing the right to unpaid leave could play a crucial role in fueling entrepreneurship even in countries with more flexible labour markets. In conversation with the BBC, he cited a 2016 study by Failure Aversion Change in Entrepreneurship (FACE), a European project designed to help would-be tech entrepreneurs break the barriers generated by fear of failure, which found that while financial risk was the top concern, career risk came a close second. “Many countries subsidise financing to entrepreneurs. However, reducing career risk can be just as important, and is often ignored by policy makers”, he argued.