Committee recommends occupational disability insurance reform

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In June 2000, the Dutch government set up a committee of inquiry to make recommendations on the future of occupational disability insurance (WAO). The main lines of the committee's unanimous proposals were made public in April 2001. The current provisions should apply only to employees who are permanently and fully unable to work as a result of disability, whereas those who will eventually be able to return to work should retain their employment contract with their employer. Employers and employees should attempt to reinstate the latter category of employee, in a different job if necessary. The trade unions have announced plans to seek compensation in collective agreements for the loss of income which would be incurred by partially disabled employees as a result of the proposal, but employer's associations have already indicated that they will oppose such provisions.

Since 1967, the Occupational Disability Insurance Act (Wet op de Arbeidsongeschiktheidsverzekering, WAO) has insured employees in the Netherlands against loss of wages as a result of disability, regardless of whether the disability relates to the job they perform or not (ie no distinction is made between "occupational risk" and "social risk") (NL9902124F). When diminishing industrial employment in the second half of the 1970s led to a mass exodus from the labour market, the social partners, among others, used the WAO scheme to shed redundant personnel on more favourable conditions than provided by normal unemployment benefit. Since 1980, the growth in WAO benefits, at 30%, has lagged behind labour force growth (up 40%). Nevertheless, some politicians have stated that the prospect of the number of disabled employees surpassing the 1 million mark is a genuine menace. In the early 1990s, the then Prime Minister, Ruud Lubbers, joined the campaign to prevent the number of WAO claimants from reaching the 1 million mark, and the fight to reduce this number has been a permanent item on the political agenda ever since. Moreover, the general consensus is that the current WAO scheme does not do enough in the way of reintegrating disabled employees into the labour market.

During the 1990s, a number of measures were taken to reduce the number of employees claiming sickness and WAO benefit (NL9910167F). Employers were encouraged to implement better policies regarding working conditions, in part by passing on to employers a greater portion of the financial burden created by sickness and disability. In addition, the government sought to increase the frequency and comprehensiveness of evaluations designed to determine the degree of disability of employees claiming benefits. There was a decrease in absence due to sickness and a turn in the WAO tide in the short term, but this did not last: in February 2001, 946,500 individuals were receiving disability benefits.

The Donner committees

Following reports of a resurgence in the influx of new WAO recipients, and in the light of the fact that one-third of claimants had psychological complaints (NL9904133F), the government set up two committees, both chaired by Professor JPH Donner, a member of the Council of State. The first committee - which is yet to report - is a panel of experts from various fields which focuses on the increase in disability resulting from psychological problems (NL0008103F and NL0011111F).

In June 2000, a second "Donner committee" was set up, partly due to pressure from the social partners, to analyse further the issue of labour losses resulting from sickness and disability, as well as to offer recommendations on how to approach the problem (NL0006195F). The five members of this committee participated in a personal capacity, but were chosen according to their backgrounds, which guaranteed a broad representation of the major political parties and social partners. The committee reached a unanimous agreement, of which the main points were announced in April 2001. The committee's recommendation will be presented to the tripartite Social and Economic Council (Sociaal Economische Raad, SER), which will in turn advise the government on new measures. The committee's unanimity appears to be a crucial step towards a central agreement on new measures to decrease the demand for WAO benefits, and to stimulate and speed up the process of reintegrating employees with disabilities into the labour market.

Employers' responsibilities for reintegration

According to the recommendations of the second Donner committee, only those employees who are, and remain, completely disabled should be eligible for WAO benefits. Employees who are partially disabled or have an illness of a temporary nature should remain bound by their employment contract with their employer. The employer should bear the responsibility of finding or creating an appropriate position for such partially or temporarily disabled employees. This can be a job in the company concerned, adapted to the employee's capabilities, or another job in a different company. The employee should be actively involved in the reintegration process and be required to accept a different suitable job, as long as the pay is at least 70% of their last-earned wage.

If disability were to last for two years, and employer and employee efforts did not result in securing a new job, or if the employee did not contribute sufficiently to the reintegration process, he or she could be dismissed. In this case, employees could apply for benefits under a new unemployment benefit scheme that would cover "normal" unemployed people as well as partially or temporarily disabled employees. If the employer had not done enough to reintegrate the employee or find alternative work, it would be required to continue paying the employee's wages for longer than two years. The timing of the current evaluation to determine the degree of disability of a sick employee after one year should be more flexible, depending on the nature of the illness. In some cases, the evaluation could take place as soon as three months after the initial report of sickness; in other cases, it would be best to wait two years before carrying out the evaluation. The proposed new measures would apply to new cases; individuals currently receiving WAO benefits would retain their existing rights.

Benefit levels contentious

Despite broad agreement with the committee's recommendations, social partner organisations disagree on a number of points. First, the level of the WAO benefit to be awarded for total and lifelong disability remains a stumbling block. The trade unions believe that it should be higher than the current level of 70% of previous pay. However, this would create a gap between the situation of existing fully disabled WAO recipients and new claimants. The Dutch Trade Union Federation (Federatie Nederlandse Vakbeweging, FNV), has proposed giving the former group the opportunity to "opt in", entitling them to increased benefits after undergoing an evaluation based on the new criteria. The financial consequences of this option remain unknown.

The unions have stated that collective agreements are required to support partially disabled employees, who would suffer a loss of income as a result of the implementation of the committee's recommendation. These agreements could perhaps provide for private supplementary disability insurance. The unions are non-committal about the level at which partially disabled workers' income should be guaranteed, regarding this as a topic to be negotiated with employers on a sectoral basis. The employers' associations have already declared that they will not accede to making up for the shortfall in benefits through collectively agreed provisions. The employers' associations wish to avoid a repeat of the situation which developed after WAO benefits were last cut, in 1994. Collective compensation for this "WAO gap" was subsequently included in collective agreements and, it is claimed, this undermined the greater individual responsibility which the measure was supposed to foster.

The social partners are also not in agreement regarding the scope of any compensation for a decrease in wages resulting from disabled employees accepting a new job at a lower salary, as proposed by the committee.

Favourable reactions to main points

Despite the abovementioned areas of contention, reactions from unions and employers' associations to the major points of the Donner committee's recommendation have been favourable for the most part. The recommendation is considered a solid foundation for an agreement within the SER. In the political arena, the government coalition parties and opposition alike support the move to transfer more responsibility for reintegrating partially or temporarily disabled employees to employers and employees. One of the parties in the coalition government, the liberal People's Party for Freedom and Democracy (Volkspartij voor Vrijheid en Democratie, VVD) also continues to call for the effective application of stricter eligibility criteria for disability benefits.

The small and medium-sized business sector still has doubts regarding the details of the proposed new measures, arguing that clear-cut criteria must be laid down in order to allow for a workable separation of people with a total and lifelong disability from those partially or temporarily disabled workers who are to be reintegrated. Moreover, it must also be made clear exactly what efforts are expected from employers.

The trade unions consider a higher level of benefit for fully disabled employees - at least 75% of previous pay according to the Christian Trade Union Federation (Christelijk Nationaal Vakverbond, CNV) or 80% according to FNV - as a condition for making the proposal acceptable to their members. FNV wishes to use the roughly NLG 19 billion accumulated in various social security funds for this purpose. The FNV chair, Lodewijk de Waal, has requested that the cabinet broaden its request for a recommendation from the SER, following the Donner committee's proposals, and include the entire social security system within the scope of the final recommendation.

Commentary

In practice, an employee in the Netherlands who is off work sick for three months faces too great a risk of ending up as a WAO beneficiary. The current provisions regarding sickness and disability do not include sufficient incentives to stimulate the parties involved to reintegrate employees. Although, since 199,6 the employer must bear the costs for the first year of an employee's sickness and recovery, this has not led to any significant increase in attention to reintegration. Employers are still frugal with their policies and often call in privatised working conditions services, based on an inexpensive package of minimal service provision. When an employee has been off sick for three months, their job is usually taken over by a substitute employee and the employer waits patiently until the employee is evaluated after a year and disappears into the WAO system. A combination of a longer period of responsibility on behalf of the employer and an earlier evaluation might help bring an end to this cycle.

The clear-cut boundary introduced in the committee's recommendation - between lifelong, fully disabled employees who receive a higher benefit on the one hand, and the temporarily or partially disabled employees eligible for reintegration on the other - would increase pressure on the organisations which implement the rules. Certainly if the benefit level under the reformed WAO for fully disabled workers turns out to be relatively high, this sharp boundary may tempt employees to exaggerate the severity of their condition in order to profit from the more attractive benefit scheme. It is doubtful whether examining physicians always have the means to prevent this from occurring. The evaluation of an application, which in the current provision determines the percentage of disability, would take on a much more "all-or-nothing" quality. Based on research into actual practice, it appears that the implementing authorities, including examining physicians, often work under pressure of time and with insufficient information, which results in a bias in favour of awarding a benefit. Limiting their scope of decision-making simply to evaluating whether the employee has a lifelong disability would not automatically lead to the anticipated reduction in the number of WAO recipients. Experience with implementing the 1996 "Fines Act", an item of legislation developed in part to require implementing bodies to apply stricter criteria regarding benefits eligibility, shows that the inherent dynamic of implementation can "throw a spanner in the works" and have a contrary effect.

Finally, it must be pointed out that the proposed measures will decrease the number of disabled employees, but at the same time increase the number of employees receiving unemployment benefits. In the Netherlands, as well as in other countries, the various measures for compensating loss of wages as a result of inactivity function in part as "communicating vessels" (ie, changes in one lead to changes in others). It can therefore be expected that the current extremely low rate of unemployment in the Netherlands will show a significant increase if the Donner committee's recommendations are put into effect. (Robert Knegt, HSI)