Radical reform to work incapacity rules

The Government of Estonia wants to radically reform the country’s incapacity for work policy. The proposals come after figures revealed the increasing number of people who received some kind of incapacity benefit and their low participation in the labour market. The first step of the reform is to move from the evaluation of incapacity to evaluation of a person’s capacity to work. The government also wants changes to initiatives to support people who are willing to work.

Background

Around 10% of the Estonian population aged between 20 and 64 is registered as having a permanent incapacity for work. This proportion has been increasing year after year – from 8.8% in 2008 to 10.7% in 2012. In 2012, the labour force participation rate of people with incapacity to work was 51%, that is 29 percentage points lower than the rate for the total population in that age group (80%). Also, people with a registered incapacity have more difficulty entering employment as their unemployment rate is about six percentage points higher than for the workforce as a whole.

The increasing number of people who have some form of incapacity for work, and the low participation of this group in the labour market, is putting strain on the social security system. The government began discussions with interest groups, including the social partners, to consider the future policy framework of work incapacity.

In June 2013, the government set out its proposals for reform. It said its aim is to help people with limited capacity for work through labour market activation support, rehabilitation and employment opportunities.

Major changes

The current definition of permanent incapacity for work covers both health and the ability to perform a ‘suitable’ type of work. In practice, however, incapacity for work is evaluated only on health factors.

The government’s first reform proposal is to move away from evaluation of incapacity, and instead assess an individual’s capacity to work on the basis of not only health, but also taking into account suitable conditions of employment and a reasonable job. This would require vocational guidance to the employee and assistance to a potential employer.

Currently people with a permanent incapacity for work can apply for a monthly financial social security payment. The same benefit also covers those who have to stop working because of illness or injury and those whose are not able to work full time. Their eligibility for a benefit does not depend on whether they are actively looking for work or taking part in active employment services.

The government proposes to change benefit eligibility rules, and to change the rules so that people with a partial capacity for work will be eligible for benefit, only if they are employed, unemployed and actively seeking a suitable job or participating in active employment services, or take part in formal education.It is also planned to reform social and vocational rehabilitation services as well as provide further help and assistance to employers in improving and adapting the work environment and working conditions. It is hoped these measures will support reactivation and employment opportunities.

No specific measures or plans are so far in place.

Commentary

The Ministry of Social Affairs (Sotsiaalministeerium) started negotiations with interest groups, including social partners, on these reforms in the first half of 2013. At the beginning of 2014, the government also started consultation on the draft legislation to change regulation of the capacity for work evaluation system and the eligibility rules for benefit. The government anticipates that the new legislation will come into force on 1 July 2015.

Social partners have more or less supported the changes. However, they are concerned about the complexity of the reform, and worry that some aspects have not received the attention they need. Some specific concerns have been raised.

Employee representatives have argued that

  • the proposed measures only deal with outcomes and prevention of health risks need more attention;
  • the reform proposes too few initiatives for employers to improve working conditions, adapt working environments and improve the skills of their employees and potential employees;
  • services crucial for successful reform, including case management and assistance in adapting work environments, is lacking.

Employer representatives say they are reluctant to introduce measures that, while motivating employers to improve the work environment, would also increase labour costs if other labour taxes remained the same. However, they have suggested that the government should start discussing, sooner rather than later, reform of the insurance model for work accidents and occupational diseases. This would be crucial for the prevention of incapacity and the improvement of working conditions.

Also, taking into account the variety of measures and the complexity of the administrative processes that will have to change, interest groups and social partners have argued that the reforms should not be rushed.

Märt Masso, PRAXIS Center for Policy Studies

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