21
the firm, as the law did not affect the content of the existing collective agreements. Moreover,
the law was repealed in 1995. The law of 1997 was a more significant piece of legislation since it
allowed hiring on a temporary basis without specifying a particular reason. The fact that the use
of the new contract was limited to five employees per establishment suggests, however, that the
impact of the reform would be marginal. 12
Moreover, when one considers that the 1997 law also restricted the use of leave
replacements, there are grounds to argue that the restrictive element in the legislation may even
have dominated the liberalising element, particularly when one recognizes that leave
replacements are the most common form of fixed-term contract in Sweden. Furthermore, since
1993, Sweden has one of the most liberal statutory regulations of temporary work agencies in the
OECD. Evidence from various countries, reported in Storrie (2002), shows that the replacement
of absent employees is among the most important of reasons for employers to use agency
workers. Thus both the restriction of leave replacements and the liberalisation of temporary work
agencies have reduced the opportunity to meet absenteeism with a fixed-term contract relative to
using agency workers and may even have resulted in a shift from fixed-term to open-ended
contracts. Employment in a temporary work agency in Sweden is, as in all sectors, presumed to
be on an open-ended contract. This statutory presumption is backed-up by collective agreements
which since the spring of 2000 cover practically the entire work agency sector (Storrie, 2002).
Moreover, as we have documented above, the major increase in fixed-term contracts occurred
prior to the reform of 1997.
What role, then, remains for regulation in explaining the evolution of fixed-term contracts in
the 1990s? A distinct feature of employment protection in Sweden is the importance of the
collective agreement for the formation of the rules at the work place. This gives rise to
considerable leeway for “negotiated flexibility” at the local level. There is at least some scattered
12 There are no comprehensive statistics on the incidence of this form of fixed-term contract. However a
governmental inquiry reported that there are very few of this type of contract. The private employer association