The Norwegian government has proposed to increase the financial burden on employers in relation to the costs of long-term sickness absence. However, strong criticism from the social partner organisations has forced the government to set up a committee of social partner representatives; the committee will examine alternative mechanisms by which to achieve the objectives of the government proposal.
Proposal objectives
In September 2006, it became public knowledge that the government intends to propose amendments to the existing sick pay scheme in connection with the 2007 state budget. The proposal will require the employer to cover 20% of the costs of sickness absence lasting longer than 14 days and up to six months, and 10% of costs of sickness absence between six and 12 months. In return, the number of sick days fully financed (100%) by the employer is reduced from 16 to 14 days. The employee will still receive full compensation from day one of absence due to sickness. Moreover, some groups of workers are to be exempted from these regulations, such as pregnant employees and employees suffering from chronic illnesses that lead to high rates of absence.
It is estimated that the plan will cut state costs in relation to sick pay by NOK 2.5 billion (€300 million). The main rationale for the government to propose such measures is that the sickness absence rate has increased over the last quarters. Latest figures from Statistics Norway show that the total sickness absence rate was 6.6% of all scheduled working days in the second quarter of 2006, compared to a rate of 6.3% for the same period in 2005. The rate of long-term sick leave in particular has increased. The sickness absence rate has been increasing over the last year, after a two-year period when the rate had been in decline, according to the Statistics Norway findings.
As such, it was regarded as unlikely that the objectives of the agreement for an inclusive working life to reduce sickness absence would be accomplished (NO0110107F, NO0301104F, NO0601101N). By obliging the employer to partly finance long-term absence, the government hopes to encourage greater efforts to avoid long-term absenteeism. In an earlier meeting in July 2006, the government called on the social partner organisations to make recommendations for new measures to reduce the sickness absence rate. Thus, the most recent proposal seems to suggest that the government did not believe that the social partners’ recommendations would have the desired effects.
Social partner response
The proposal for changes to the sick pay scheme seems to have come as a surprise to the social partner organisations, and has prompted a very critical reaction from both sides. Both employers and unions view it as representing a breach of the agreement for an inclusive working life, which was renewed in December 2005. The eight employer and employee organisations that signed the agreement soon joined forces in sending a letter to the government (in Norwegian, 140Kb PDF) in which they emphasise that ‘the organisations unanimously agree that the government’s approach in this matter is totally unacceptable and contrary to common practices in relation to tripartite cooperation in Norway’.
The organisations further underline that when agreements are broken in this way it serves to undermine their confidence in the government as a future party to agreements. The letter also highlighted that the social partners are committed to the inclusive working life agreement and its measures.
Committee to seek alternatives
Following a week of political turmoil, the government decided to set up a committee (in Norwegian, 800Kb PDF) to discuss alternatives to the controversial proposal. The social partner organisations were invited to participate in this committee, which would be led by the Prime Minister, Jens Stoltenberg. The committee is to review the government proposal, and the social partners are requested to make recommendations for new measures that may help to reduce sickness absence, and to cut costs equivalent to the cuts envisaged in the government’s original proposal (NOK 2.5 billion).
If the committee’s recommendations are deemed acceptable, the government will put forward an alternative proposal before parliament (Stortinget). All of the eight organisations accepted the government invitation to participate in the committee, which will submit its recommendations to the government by 1 November 2006.
Commentary
The government’s proposal provoked reactions seldom seen in industrial relations in Norway, and to some degree unsettled the otherwise close relationship between the Norwegian Confederation of Trade Unions (Landsorganisasjonen i Norge, LO) and the leading government coalition partner, the Norwegian Labour Party (Det norske Arbeiderpartiet, DnA). The government also received considerable criticism in parliament, not only from the opposition, but also within its own ranks. Commentators thus argued that it was only a matter of time before the government would be forced to reconsider its proposal. It still remains to be seen whether the new committee will be able to agree on an alternative proposal that is acceptable both to the government and the social partners. However, the strong reactions indicate that the proposal will have to be modified in some form.
The case also serves to illustrate the challenges associated with achieving an inclusive working life, as well as the debate on the Norwegian sick pay scheme. The scheme has frequently led to political controversy (NO0010109F, NO0109140N). After the introduction of the inclusive working life agreement in 2001, the issue was sidestepped when the social partners and the government agreed to focus on measures other than making changes to the sick pay scheme.
However, lasting reductions in the sickness absence rate have proven difficult to obtain. While sickness absence declined in 2004 and 2005, it increased again in the spring of 2006. It has been pointed out that an increasing employment rate – which is currently the case in Norway – often leads to an increase in the sickness absence rate. Critics of the government proposal are concerned that companies will become more reluctant to employ vulnerable groups with a higher risk of absence, such as women and older employees. Nevertheless, for its part, the government faces the problem of increasing costs and is meanwhile tied to an agreement that stipulates that it should not make any unilateral decisions regarding the existing sick pay scheme.
Kristine Nergaard, Fafo Institute for Labour and Social Research