Sick pay reform meets opposition

In October 2004, the Swedish government presented a bill on measures to reduce the current very high sickness absence rate. The proposals include increasing employers' responsibility in this area, with a new system of co-financing of sickness costs. The government's plans have met with considerable opposition from many social partner organisations.

On 18 October 2004, the minority Social Democratic Party (Socialdemokratiska Arbetarepartiet, SAP) government, with support from the Green Party (Miljöpartiet de Gröna) and the Left Party (Vänsterpartiet), presented a bill on measures to decrease Sweden's very high sickness absence rate, entitled 'Driving forces for decreased sick absence' (Drivkrafter för minskad sjukfrånvaro, Prop. 2004/05:21). The proposals mainly follow those announced in a 'declaration of intent' produced by the three parties in December 2003 (SE0401105F).

Main proposals

The final proposals presented in October 2004 are, as in the December 2003 declaration, based on a system that extends the co-financing responsibility of employers. Such a system is not new in Sweden, with the state and the employers already sharing costs to a certain extent. The main proposals are as follows.

• All employers will have a responsibility to finance indefinitely 15% of the costs of the sick pay for their employees on full-time sick leave (after the first two weeks - see next point). The aim of this financial participation is to create economic 'driving forces' and make it more profitable for employers to take measures in order to decrease the amount of long-term sickness absence periods among their employees. These driving forces are constructed so as to stimulate taking preventive measures, rehabilitation and other action to make it easier for a worker on sick leave to come back to work on a full-time or lesser basis (eg half-time work). The new financial responsibility will be named the 'special sick insurance fee' (särskild sjukförsäkringsavgift).

• The ordinary employers' contribution to sickness insurance will be cut by 0.24 percent points. The current initial period of three weeks during which the employer must pay full sick pay to employees will be cut to two weeks. The previous sick pay level of 80% of normal pay up to a ceiling of about SEK 25,000 per month will be reinstalled (this 80% limit was reduced by a 2003 reform - SE0304105F).

• The employer’s responsibility for co-financing will not concern employees regarded as being likely to have longer periods of sickness absence, who the state insurance authorities have designated as being as especially high-risk. This group's sick pay will be met only by the state insurance.

• The current protection scheme (högkostnadsskydd) placing an upper limit on employers' total costs for sick pay will be abolished. The state will instead establish a special insurance scheme for employers’ with small workforces.

Reactions

Since the presentation of the declaration of intent on sick pay in December 2003, the discussion has been lively. In their opinions delivered to the government in June 2004, not only all the main employers' organisations but also some of the trade union confederations opposed the proposed changes in the sick pay system strongly. The Swedish Association of Local Authorities (Svenska Kommunförbundet) and the Swedish Federation of County Councils (Svenska Landstingsförbundet) state, among other arguments, that the government is focusing too much on economic 'driving forces' and forgetting other aspects. They argue that there is no scientific proof that employe co-financing of sick pay contributes to a decreased sickness absence rate. Furthermore, the proposal will lead to less acceptance of workers producing under the 'norm', it is claimed, while female workers may be especially affected as they usually have a higher rate of sickness absence.

The Swedish Agency of Governmental Employers (Arbetsgivarverket) rejects the whole proposal, arguing that it cannot lead to a decreased sickness absence rate or to more healthy workers. Focus has to be placed on the whole life situation of the sick person, in which working life is only one part, it is argued. Also, the proposal will lead to large-scale and expensive administration, for the employers as well as for the state insurance offices. On the whole, it is totally impossible to estimate the consequences of the proposal, the state employers claim.

The Confederation of Swedish Enterprise (Svenskt Näringsliv), the private sector employers’ central organisation, rejects all the proposals except one. The confederation agrees with the government that the employer's responsibility for the third week of sick pay should be abolished. Overall, the confederation fears considerably more cost being passed onto employers and an enormously increased bureaucracy. No good proposals have been made on how to improve the whole system of sick leave, the private employers state.

The Swedish Confederation of Professional Associations (Sveriges Akademikers Centralförbund, SACO) also rejects the proposals, stating that the most important deficiencies in the proposed sick pay system concern its administration. The Swedish Confederation of Trade Unions (Landsorganisationen, LO) is more opposed to the proposals than in favour. LO asserts that employer co-financing as such will not solve any work environment problems. Any reform has to be followed up carefully, it claims, especially in considering the risk of increased segregation in the labour market. Only when the government takes measures to avoid this segregation will LO be ready to take a final position on the proposed (increased) co-financing of the sick pay.

The Swedish Disability Federation (Handikapporganisationernas Samarbetsorgan, HSO), representing 43 disability organisations, rejects the government's proposals forcibly. The proposal that 15% of the sick pay for long-term sickness absence should be met by the employer indefinitely will make it still more difficult for workers with disabilities and chronic diseases to find or retain a job, HSO claims.

The protests resumed when the bill was proposed in October 2004. The employers' confederations in the private and public sectors reacted especially strongly. On 8 December 2004 there is due to be a debate in parliament about the sick pay proposals, which the government plans will be in force on 1 January 2005.

Commentary

The SAP government, together with the Left Party and the Green Party, had their line clear as the new governmental proposal was presented on 18 October 2004. Employers that decrease sickness absence levels will benefit financially. Economic driving forces are needed in order to decrease the amount of sickness absence. The employers should cooperate with the state and pay 15% of the sick pay costs of their employees. Companies that help an employee to return to work will not have to pay any costs. The employer's duty to meet the third week of sick pay will be abolished, and the employer payroll tax will be decreased by 0.24 percentage points. The combined effect will be that the costs for medium-sized industrial companies with a normal sick absence rate will actually decrease, the Working Life Minister, Hans Karlsson, stated as the proposal was presented.

The municipality and city council employers have expressed their worries about not being able to cope with all the costs caused by the proposal. Sickness absence is high in these sectors, especially among female workers in the healthcare sector and in schools. These employers, together with those in the private sector that are not so successful at keeping their staff at work, will thus face another economic burden. The government hopes, however, that the economic driving forces proposed will provide incentives for employers to put more effort into rehabilitation and an improved work environment. Furthermore, the government has 'promised' to halve the level of sickness absence before 2008. (Annika Berg, Arbetslivsinstitutet)