Employers to pay fewer sick leave days

On 13 May 2008, the Republic of Latvia Cabinet of Ministers approved amendments to the law on maternity and sickness insurance, stipulating that, from 1 January 2009, employers shall pay sickness benefits to employees in the event of temporary work incapacity for a period not exceeding 10 days. The Employers’ Confederation of Latvia has been campaigning since 2007 to reduce the period of sick leave paid for by employers.

Negotiations between the Latvian social partners on procedures for issuing work incapacity certificates and the responsibility of employers regarding payment of sickness benefits began in 2006. In accordance with existing laws, sickness benefits in the event of temporary work incapacity are paid for by employers from company funds for the period from the second to the 15th day of illness, and by the state social budget for the rest of the period. The first day of sickness is paid for by the employee.

However, the procedures for paying work incapacity claims drew the attention of state institutions and employers because of increasing numbers of work incapacity certificates and suspicions that they were being unjustifiably issued, resulting in losses for the state budget and employers (LV0610039I). The amount of sickness benefits paid almost tripled between 2001 (accumulating costs of €13.57 million) and 2005 (€38.8 million).

Doubts over level of sickness claims

In February 2006, a proposal was made at a meeting of the National Tripartite Cooperation Council (Nacionālās trīspusējās sadarbības padome, NTSP) that the Ministry of Welfare (Labklājības ministrija, LM) and Ministry of Health (Veselības ministrija, VM) should investigate the unjustified issuing of work incapacity certificates. It was widely believed that employees had a tendency to apply for work incapacity status with one employer while simultaneously working for another employer or enjoying a holiday. Employers argued that exposing cheats – both those faking sickness and the issuers of work incapacity certificates – was the state’s responsibility. They demanded improvements in the monitoring of issuing sickness certificates, the introduction of mandatory record-keeping rules for work incapacity certificates and the creation of a single register of work incapacity certificates. Moreover, the employers suggested that sickness benefits should be fully paid from the state budget.

The government promised to restrict the opportunities for manipulating work incapacity documents and approved changes to procedures for issuing such documents at the end of 2006. In accordance with the new requirements, the period of time during which doctors have the right to issue work incapacity documents was reduced, but no changes were made to procedures for paying work incapacity benefits.

Changes to division of responsibility

When it became clear that the new procedures brought no improvement, the Employers’ Confederation of Latvia (Latvijas Darba devēju konfederācija, LDDK) sought to adjust the division of responsibility between the state and employers. Specifically, LDDK demanded changes to the period during which general practitioners can issue work incapacity documents without consulting a specialist, which is currently set at 45 days, and a reduction in the period for which work incapacity benefits are paid by the employer from the current 14 days of sickness to two days.

After lengthy debates, the meeting of 13 May 2008 of the Republic of Latvia Cabinet of Ministers (Latvijas Republikas Ministru kabinets, MK) approved amendments to the law on maternity and sickness insurance. The changes stipulate that, from 1 January 2009, employers shall pay sickness benefits to employees in the event of temporary work incapacity for a period not exceeding 10 days.

The employers’ demands were supported by the Ministry of Economics (Ekonomikas ministrija, EM). The Minister of Economics, Kaspars Gerhards, informed the press that payment of sickness certificates comprises 4.5% of total labour costs on average. If this was paid from state funds, the competitiveness of private companies would increase.

Trade unions did not express an opinion on the issue of work incapacity certificate procedures. This is understandable as, so far, the discussion concerns the division of responsibility rather than the amount of benefits. The World Bank and the International Monetary Fund (IMF) have recommended that Latvia reduce sickness benefits to 60% of the average social insurance wage – the current level is 80%; however, these proposals have not been subsequently discussed.

Commentary

The employers have a point that it is unsatisfactory from their perspective that they are forced to pay for the inability of state institutions to properly monitor the issuing of work incapacity certificates. LDDK reports that in Latvia the number of work incapacity days paid for by employers is greater than in the other Baltic states of Lithuania and Estonia, where the state begins paying sickness benefits from the second day of illness. These unequal conditions undermine the competitiveness of Latvian employers in the Baltic labour market.

Raita Karnite, Institute of Economics, Latvian Academy of Sciences

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