Sweden: Employers Oppose Sick Pay Proposal

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By Marcus Hoy

June 10—The Confederation of Swedish Industry (SN) “strongly opposes” a government proposal that would significantly increase employers’ sick pay liability. In a June 7 legal opinion, the group said that proposed new rules drafted by a government commission would hike costs for companies and expand the financial liability of company directors. If enacted in its current form, SN salary analyst Edel Karlsson Haal told Bloomberg BNA June 7, the proposal could force some companies into bankruptcy.

According to a May 9 Health and Social Affairs Ministry statement, urgent measures are needed to reduce the number of Swedish employees receiving long term sickness benefits. Spending in the area rose from 21 billion kroner ($2.6 billion) in 2010 to 32 billion kroner ($4 billion) in 2014, the ministry said, and will likely reach 45 billion kroner ($5.6 billion) by 2020. Employee and industry representatives should work together to find a solution to this challenge, the ministry said.

New Employer Liability

Under existing rules, companies are obliged to cover employees’ salaries for their first two weeks of sickness. From the fifteenth day, these payments are fully covered by the state.

Under the proposed new rules, employers would be liable for 25 percent of the employee’s sickness benefit after 90 days' sick leave, which would continue for the duration of the illness. Payroll taxes would be reduced by 0.16 percent in compensation, and an annual tax-free threshold of 33,500 kroner ($4,130), equivalent to the average annual cost of a single sick employee, would apply to all companies. The Swedish Social Insurance Agency would calculate the sum payable by the employer on a monthly basis based on the total sickness benefit paid to employees.

In a June 7 statement, social ministry press officer Linn Johansson told Bloomberg BNA that the 90-day period was designed to give employers adequate time to assess the absent employee’s need for rehabilitation and adapt the employee’s work tasks. The new financial model would provide an incentive for employers to maintain the health of their employees, and those employers that did not meet this obligation would bear a greater share of the resulting costs.

“The proposal will involve no additional cost if the employee is sick for more than three months, but rather a gain, since a reduction in the payroll tax of 0.16 percent is included for all employers collectively,” Johansson said.

No bill has yet been drafted, and the proposal is currently in the form of a ministerial document, Johansson said. Respondents' views and suggestions for alternative solutions will be considered, and the government hopes that employers and employee representatives can agree on an alternative solution before any legislation is put before parliament. If the parties are unable to agree on measures to reverse the trend, Johansson said, the proposal will be included in the 2017 budget plan, which will be presented to parliament this fall.

Bankruptcies Feared

According to the SN opinion, the ministry proposal entails “considerable and unpredictable cost risks” for companies, which would be forced to maintain hefty financial reserves to cover potential future sickness contributions. Smaller companies could be forced into bankruptcy if a number of their employees become sick, SN said, and directors of struggling companies could become personally liable if their payable share of the sickness benefit is outstanding. In many such cases, SN said, the most logical measure would be to file for bankruptcy.

Should the proposal become law, Karlsson Haal told Bloomberg BNA, companies might also be reluctant to employ people with a history of disease or disability.

“This is a very bad proposal that would make it even harder for people with long term illnesses to get a job,” Karlsson Haal said. “Smaller companies might have to close down if employees become sick. All Swedish employers would be affected.”

Ottilia Bostrom, a Stockholm-based attorney at the Bird & Bird legal firm, told Bloomberg BNA that the proposal would be referred to the nation’s Council on Legislation following the consideration of comments. If the measure is enacted, the employer contribution would be debited automatically from the employer's tax account.

“According to the proposal, the law would enter into force on June 1, 2017,” Bostrom said. “However; the obligation to pay the health fee would apply from August 30, 2017, at the earliest. It is, at this stage, difficult to assess whether the proposal will be approved by the parliament or not.”

To contact the reporter on this story: Marcus Hoy in Copenhagen at correspondents@bna.com

To contact the editor responsible for this story: Rick Vollmar at rvollmar@bna.com

For More Information

For more information on Swedish HR law and regulation, see the Sweden primer.