Changes to insurance system curtail sickness benefits

In January 2008, several important changes to the sickness insurance system took effect. These changes result from Act No. 261/2007 Coll. on the stabilisation of public finances and are mainly designed to reduce public expenditure in the social domain. Meanwhile, the implementation of the new sickness insurance act has been postponed for another year. Trade unions and the main opposition party strongly oppose the changes to the sickness insurance system.

Aims of government

The government pushed through legislative changes in the form of Act No. 261/2007 Coll. to the sickness insurance scheme as part of its aim to stabilise public expenditure. The act, which took effect in January 2008, is intended to reduce social welfare expenditure and to prevent benefit abuse. In connection with the new rules, the effective date of the new sickness insurance act – Act No. 187/2006 Coll. – was deferred by one year. In practice, this means that the introduction of employer-provided wage compensation has been postponed until 1 January 2009. This wage compensation would be paid by the employer for the first two weeks of a temporary work incapacity period due to illness or family care responsibilities.

Changes to sickness insurance benefits

Many of the current changes will impact on the level of sickness benefits paid to the workers. One of the main changes is the introduction of a so-called ‘buffer period’: this means that benefits are no longer provided during the first three days of sickness. Changes to the daily assessment base of sickness benefits entail reductions when calculating the amount of benefits for sick leave and for caring for a family member. The daily assessment base of sickness benefits is calculated as follows: the gross income generated by a worker in the relevant period – which equals up to 12 calendar months before the calendar month in which the work incapacity began – is divided by the number of calendar days of the relevant period. However, some days are not included in the number of calendar days, such as those on which sickness benefits were paid, for example. With the legislative changes, the amount of sickness benefits will be calculated on the basis of 90% of the daily assessment base, up to a limit of CZK 550 (€22 as at 17 February 2007), for the entire period that benefits will have to be provided. For any amount between CZK 550 (€22) and 790 (€31.50), the sickness benefits will be calculated on the basis of 60% of the daily assessment base; any amounts over CZK 790 (€31.50) will not be taken into account.

Further changes to the amount of sickness benefits concern the staggered rate of the daily assessment base, depending on the duration of the temporary incapacity to work. Up to the end of 2007, sickness benefits amounted to 69% of the daily assessment base for the entire duration of the temporary work incapacity. The new rates for sickness benefits up to 60 days of sick leave are lower, corresponding to 60% of the daily assessment base from the fourth to the 30th day of sick leave and 66% from the 31st to the 60th day. Conversely, the rate of sickness benefits has been increased to 72% of the daily assessment base for any temporary work incapacity exceeding 61 calendar days. The benefit rate for caring for a family member, however, has been reduced to 60% of the daily assessment base.

The new legislation also provides for stricter penalties for those on sick leave who abuse the system. Not only can unpaid sickness benefit be reduced or revoked, but benefits that have already been paid have to be reimbursed from the day the infringement was ascertained.

Further changes have been made, such as shortening the period during which a worker’s entitlement to sickness benefits is maintained after the termination of an employment relationship. This period has been reduced from 42 to seven calendar days following the end of an employment contract.

Objections raised by trade unions and political opposition

The Czech-Moravian Confederation of Trade Unions (Českomoravská konfederace odborových svazů, ČMKOS) disagrees with all of the fundamental changes to the sickness insurance scheme. The confederation opposes the introduction of the ‘buffer period’ and considers that this measure aims to reduce the costs for employers when the new sickness insurance act will be implemented in 2009. Furthermore, ČMKOS is against the reduction of sickness benefits for a temporary work incapacity lasting up to 60 days and the reduction of the daily assessment base amounts throughout the entire period of work incapacity. The confederation draws attention to the reduction in the level of employees’ security caused by these changes and underlines that sickness insurance benefits are intended as a compensation for lost earnings. ČMKOS also opposes the shortening of the period over which the entitlement to sickness benefits is maintained after an employment relationship has been terminated.

The biggest political opposition party, the Czech Social Democratic Party (Česká strana sociálně demokratická_,_ ČSSD), is also against the new legislation which, in its opinion, will mainly affect the lower income groups.

Commentary

The new sickness insurance regulations are part of the public finances reform pushed through by the government, which the trade unions have resolutely opposed so far (CZ0706049I, CZ0707019I). Whereas the government bases its argument on the effort to cut public spending in order to maintain the country’s level of access to EU structural funds, the trade unions draw attention to the fact that the sickness insurance system finances are sufficient to cover benefits in their unreduced form. The sickness insurance system has shown a financial surplus for some years. The trade unions also argue that the standard of employees’ security over a period of temporary work incapacity should be maintained. For this reason, the trade unions believe that it is crucial to increase the daily assessment base limits for calculating the amount of sickness insurance benefits.

Ondřej Novák, Research Institute for Labour and Social Affairs (RILSA)