Swedish Proposal to Change Employer Sick Pay Role Met With Resistance

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By Marcus Hoy

June 7—Employers in Sweden would be liable to pay 25 percent of employees' sickness benefit after 90 days' sick leave while payroll taxes funding the sick pay program would be reduced by 0.16 percent, according to a government proposal that would go into effect June 1, 2017.

The Confederation of Swedish Industry (SN) “strongly opposes” the plan because it would significantly increase employers' sick pay liability, it said in a June 7 legal opinion. The proposal, drafted by a government commission April 6, would hike costs for companies and expand the financial liability of company directors, the employers' organization said. The change could force some companies into bankruptcy if enacted in its current form, SN salary analyst Edel Karlsson Haal told Bloomberg BNA June 7.

Urgent measures are needed to reduce the number of Swedish employees who are receiving long term sickness benefits, the Health and Social Affairs Ministry said in a May 9 statement. Spending in the area rose to 32 billion kroner ($3.9 billion) in 2014 from 21 billion kroner ($2.6 billion) in 2010 and would likely reach 45 billion kroner ($5.5 billion) by 2020, the Ministry said. New measures were urgently needed to reverse this trend and employee and industry representatives should work together to find a solution to this challenge, the Ministry said.

25 Percent Liability

Under current law, companies are required to cover salaries for their first two weeks of an employee's absence due to sickness. These payments are fully covered by the state from the fifteenth day of their absence. Under the newly proposed law, employers would be liable to pay 25 percent of the employee's sickness benefit after 90 days of sick leave, which would continue for the duration of their illness. Payroll taxes would be reduced by 0.16 percent to compensate for the increased liability.

An annual tax-free threshold of 33,500 kroner ($4,124), 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 the employee.

The 90-day period was designed to give employers adequate time to assess the absent employee's need for rehabilitation and adapt to the employee's work tasks, Social Ministry Press Officer Linn Johansson told Bloomberg BNA June 7. The new financial model would provide an incentive for employers to maintain the good health of their employees and those employers that did not meet this obligation would bear a greater share of the resulting costs, she said. “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,” she said.

No bill has yet been drafted because the proposal currently only takes the form of a ministerial document, Johansson said. Respondents' views and suggestions for alternative solutions would be considered, she said. The government was hoping that employers and employee representatives could agree on an alternative solution before any legislation was put before parliament, she said. If the parties are unable to agree on measures to reverse the trend, however, then the proposal will be included in the nation's 2017 budget plan presented to parliament in the fall of 2016, she said.

Bankruptcies Feared

According to the SN opinion, the proposal entails “considerable and unpredictable cost risks” for companies, who 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 and directors of struggling companies could become personally liable if their payable share of the sickness benefit was outstanding, SN said. In many such cases, the most logical measure would be to file for bankruptcy, SN said.

Companies might also be dissuaded from employing people with a history of disease or disability should the proposal become law, SN's Karlsson Haal told Bloomberg BNA. “This is a very bad proposal that would make it even harder for people with long term illnesses to get a job,” she said. “Smaller companies might have to close down if employees become sick. All Swedish employers would be affected.”

The proposal will be referred to the nation's Council on Legislation following the consideration of comments, Ottilia Bostrom, a Stockholm-based attorney at the Bird & Bird legal firm, told Bloomberg BNA. If enacted, the employer contribution would be debited automatically from the employer's tax account, she said. The law would enter into force on June 1, 2017, but “the obligation to pay the health fee would apply from Aug. 30, 2017, at the earliest,” she said. “It is, at this stage, difficult to assess whether the proposal will be approved by the parliament or not,” she said.

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

To contact the editor responsible for this story: Molly Ward at mward@bna.com and Jared Mondschein at jmondschein@bna.com

For More Information

The government proposal can be found at http://www.regeringen.se/pressmeddelanden/2016/04/regeringen-foreslar-okade-incitament-for-arbetsgivare-i-de-langa-sjukfallen-genom-ny-halsovaxling/.

More information on payroll issues in Sweden can be found in the Sweden country primer.