Estonia: Studies on sick leave show lack of incentives to encourage return to work

​​The Ministry of Social Affairs has published two studies, one on sickness absence and the other on the occupational disability compensation system, as part of the government's drive to reduce the level of absenteeism at work. The studies suggest that a reformed compensation system should motivate employers to offer suitable work to employees with disabilities and to encourage a timely return to work after sickness.


In June 2013, the government of Estonia proposed reforming the country's incapacity-to-work policy and began enforcing the first changes to the policy in 2016. The government has also been preparing further reforms that aim to prevent absenteeism through changes to the compensation system for sickness and occupational disability. To do this, the Ministry of Social Affairs procured two studies to analyse sickness absence in Estonia (in Estonian, 6.2MB PDF) and the occupational disability compensation system (in Estonian, 5.6MB PDF). The authors of the studies were asked to propose evidence-based changes to the compensation system that would motivate employers and employees to reduce sickness absence and support early return to work. The studies were published in December 2015.


A mixed methodology was used to evaluate the compensation system and to present arguments for the required changes.

The quantitative analysis was based on both registry and survey data. Registry data from the Social Insurance Board, the Labour Inspectorate, the Estonian Health Insurance Fund, and the Tax and Customs Board were used. The survey data came from primary research and secondary analysis of the European Working Conditions Survey (EWCS), the European Survey of Enterprises on New and Emerging Risks (ESENER), and the Labour Force Survey (LFS). The statistical analysis evaluated the linkages between temporary and permanent incapacity for work, associations between working conditions and the onset of incapacity for work, absence management in enterprises, and the take-up of different policy measures.

The document analysis was based on the theoretical literature on sickness, occupational disability compensation and interventions to support an early return to work, and on a structured scientific literature review of empirical impact assessments of interventions. It also included a comparative review of sickness and occupational disability compensation systems in seven EU countries: Denmark, Estonia, Finland, Germany, Latvia, the Netherlands and Sweden. The analysis gives an overview of the theory underlying different policy measures, their empirical impact on employees and employers’ behaviour, and the policy mix of different measures in different countries.

The policy analysis synthesises qualitative and quantitative information into practical policy recommendations. Different policy options are qualitatively and quantitatively compared, presenting their possible impact on employees and employers, and the elements to be taken into account in designing and implementing the measures and the system.

Main results

Based on the information gathered, a modern sickness absence and occupational disability compensation system can be characterised as:

  •      promoting the prevention of occupational injuries and diseases in all sectors and occupations;
  •      guaranteeing sufficient and fair compensation that, at the same time, motivates people to return to work;
  •      promoting and supporting stay-at-work and return-to-work practices in the workplace.

Prevention of work-related health problems

Under Estonia’s current sickness compensation system, occupational accidents account for 4% of all compensated working days. According to one of the studies, three-quarters of people with permanent or long-term temporary work incapacity associated their health loss with work or working conditions. The majority of people surveyed suggested that early intervention would have slowed down or avoided completely the deterioration in their health. Nearly one-fifth of respondents reported that their employer could have prevented their health loss by modifying their working arrangements and environment.

The authors argue that the Estonian system could implement measures to prevent occupational injuries and diseases. They point out that employers’ contributions are not tied to hazard levels in the work environment. The examination of other countries showed that a compensation system that rewards employers who create a health-promoting environment and discourages employers that fail to enforce safety in the workplace could be used to prevent occupational accidents and diseases. Since this reformed scheme would replace a fixed flat rate with several separate premiums, the overall cost to employers and society should remain the same. Employers that failed to improve safety would contribute more to compensation and rehabilitation. Occupational accidents could also be prevented by making other changes in the occupational safety and health policy, such as regulating the rights and obligations of employers and employees. Therefore, an economic stimulus in the compensation system may not be the only option, or the most effective, and changes in other aspects of the occupational safety and health policy might be preferable or necessary, taking into account Estonia’s particular context.

Prevention of absence

The unemployment rate is higher among people with a permanent disability or a long-term health problem than on average in Estonia, even among those who have not yet been officially classed as having a permanent incapacity for work. Among people with a permanent incapacity for work, the share on sick leave is higher than among people without a permanent incapacity even five years before they have acquired permanent disability status. The analysis shows that permanent incapacity for work develops over a long time, and the condition causing it may affect a person’s working life for years before they are officially deemed to have permanent incapacity status.

The authors argue that, in the current system, the compensation terms do not motivate employers to offer suitable work or work adapted to the needs of workers with reduced capacities, nor do they motivate employees to return to work as soon as possible. They propose that the compensation system should be based on the principle that working is always more beneficial than inactivity. Few enterprises regularly analyse the reasons for sickness leave or take action to promote returning to work after an extended leave of absence.

Based on best practice, the research suggests that the Estonian compensation system should include a partial work ability allowance for people whom doctors deem capable of working part time. Other countries’ experience shows that if enterprises systematically engage in stay-at-work and return-to-work practices, they help people with occupational disabilities to regain their ability to work and gradually to return to work. The authors propose a type of system where the employee, employer, doctor and healthcare provider manage each case from the start and ensure that the leave of absence is as short as reasonable, so that the employee can regain their health; at the same time, it should promote the use of a person’s abilities that have not been affected. The length of sick leave could be used as a cue for implementing the intervention measures. For example, there is a proposal for a two-step system where, after sick leave lasting six weeks, part-time working with adjusted working conditions could be considered. For longer sick leaves, lasting four or six months, a more structured intervention could be offered, possibly including individual management to help adjust the working conditions of a person with a long-term illness, or to consider helping them to find a new job. Possible incentives for employers to introduce return-to-work management include:

  •       increasing the employers’ contribution period from the current 5 days to 30;
  •       changing the current certificate for sick leave to a statement of fitness for work that includes new obligations for employees and employers;
  •       giving more generous discounts and subsidies for rehabilitation and adapting working conditions to the needs of employees with long-term conditions.


The Estonian government is planning to propose changes to its system of compensation for sickness absence and occupational disability as part of its incapacity-to-work reform. The two studies conducted for the government indicate that the current system focuses on sufficient and fair compensation but overlooks incentives to prevent work-related health problems and stay-at-work and return-to-work procedures for people with health conditions or disabilities affecting their capacity to work. The studies conclude that the compensation system should be based on the principle that prevention and working are, in general, more beneficial than dealing with the consequences of inactivity.


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