EurWORK European Observatory of Working Life

Handelsbanken, Sweden: Make work pay – make work attractive


Organisation Size: 
Financial services
Making work pay

Handelsbanken is one of the major banks in Sweden, with offices in the Nordic countries and the UK. Handelsbanken has had a profit-sharing system in place for 30 years. When profits exceed the average profit level in comparable banks, one third of the ‘excess’ profit is transferred to a fund called Octogonen. All employees are entitled to a share of the fund, based on years of employment. At the age of 60, employees can withdraw their share of the fund.

Organisational background

Handelsbanken (SHB) is one of four major banking groups in Sweden. Handelsbanken offers all types of banking services, including life insurance and pension plans. The bank has 9,500 employees in Sweden, Denmark, Norway, Finland and the UK, and another 400 in the rest of Europe, USA and Asia. The headquarters and main offices are in Sweden; however, 128 of Handelsbanken’s 583 offices are located outside Sweden.

Handelsbanken has a personnel policy aimed at internal mobility and competence development. Internal mobility is encouraged and the external mobility (personnel turnover) is low at 2.4%. Ninety-six per cent of all managers are recruited internally. Of the total workforce, 52% are women, but only 35% of the managers are women.

Industrial relations are traditionally cooperative in Handelsbanken. The level of organisation is high, around 80%, and most employees are organised in Finansförbundet. SHB is a member of the banker’s employer organisation.

Description of the initiative

Octogonen, a foundation for the employees of Handelsbanken, was founded in 1973 on the initiative of former CEO, Jan Wallander. Jan Wallander was a very prominent business leader and a strong believer in the importance of human relations and the role of employees in banking. His argument for introducing Octogonen was that if Handelsbanken does better than other banks it is because of the employees of the bank. It is therefore logical that ‘additional profits’ in Handelsbanken should be shared with the employees.

The role of the foundation is to receive, administer and distribute profits from the bank to the employees. The idea of the profit-sharing system is that half of the profits exceeding the average profits of comparable banks should be shared equally between the shareholders and the employees. Taking the difference in tax situation between shareholder and employees into account, it was decided that one third of profits exceeding the average profit of comparable banks be transferred to Octogonen. This calculation is based on profit after financial adjustments but before taxes.

The funds annually transferred to Octogonen are administered by the board of the foundation, which is free to use the funds as they see fit. It is, however, understood that the main part of the funds will be used for buying shares in Handelsbanken. At present (March 2006), 78% of the funds are invested in Handelsbanken shares and the rest in other major companies traded on the Stockholm stock exchange. There are no safeguards regarding the value of the fund. Octogonen funds are dependent on market conditions.

All full-time employees earn shares in Octogonen, depending on years of employment. Part-time employees and individuals that only work part of the year earn shares in proportion to their working time. Persons working less than 25% of a year are not included. Position and salary are not considered when computing the amount of shares earned.

The board members of Octogonen are elected by each of the regional chapters of Finansförbundet, the financial sector union of Sweden. The unions at Handelsbanken have, as do all trades unions in Sweden, a legal right to appoint two union members to the company board. The unions in Handelsbanken decided to let one of the positions of the board be elected by the Octogonen board and one by Finansförbundet.

An employee can withdraw their share in Octogonen at the age of 60. Individual shares are calculated on the basis of the number of years of employment and the current share value at the end of the year before the individual turns 60. Payment can be made in the form of a lump sum or in parts over fifteen years. The shareholder does not have to be an employee of Handelsbanken at the time of the sixtieth birthday. Currently, Handelsbanken has 9,900 employees, and there are altogether 18,000 employees and ex-employees with a stake in Octogonen.

Since the initiative started in 1973, there has only been one year that Handelsbanken did not make a contribution to Octogonen. Hence, Handelsbanken has constantly performed better than comparable banks. The dividends have varied from less than a one-month’s average salary to three-quarters of an average month’s salary.

The funds in Octogonen have grown to a considerable amount over the years. Currently, Octogonen holds over 10% of the shares in Handelsbanken. In 2006, a person who has been a full-time employee since 1973 has a stake in Octogonen of some 750,000 euro. Of the current value of Octogonen funds, about 10 % represent dividends from Handelsbanken and 90 % thirds represent the increased value of the shares.

Both the management of Handelsbanken and Finansförbundet are in agreement that the existence of Octogonen should have no effect on the salaries of the employees or on wage negotiations in Handelsbanken. Salaries are set individually and processed in a system with annual individual wage negotiations.


The profit-sharing arrangement in Handelsbanken has been in operation for a long time and has a very good reputation both within and outside the bank. During its existence, Handelsbanken has performed very well. There has been, however, no research done to verify the relationship between Octogonen and the performance of Handelsbanken. Handelsbanken has a favourable cost situation compared to other banks, and there is a feeling among mangers and union representatives that Handelsbanken employees are very cost-conscious.

Handelsbanken profit-sharing is a collective system. All employees get the same benefit, regardless of individual performance. Individual performance is observed in the individual pay policy of the company and is handled in the employer/union relationship.

As the profit-sharing system has given significant sums of money to the employees, it can be assumed that it is an incentive to stay with the company and thereby reduce personnel turnover. The profit-sharing system supports the company’s personnel policy of internal training and promotion. Whether the low turnover also has negative effects is not clear and has not been a management concern.

Exemplary and contextual factors

Octogonen is a foundation for profit-sharing within Handelsbanken. It has been in operation for over 30 years, longer than any comparable system in Sweden. The system is a combination of profit-sharing and collective employee ownership. It stands out as an important pillar in a company aiming at a long-term and trustful relationship with its employees. The fact that the individual cannot access the shared profit before the age of 60 gives it the character of a pension system.

Olle Hammarström, National Institute for Working Life, Stockholm

Useful? Interesting? Tell us what you think. Hide comments

Add new comment