Voluntary collaboration by employers in the management of sick leave benefits comes to an end

The approval of Royal Decree-law 28/2018 has done away with voluntary collaboration by employers in the management of sick leave benefits due to common contingencies – non-occupational illnesses or accidents-. Voluntary collaboration shall continue, where authorized, only in respect of contingencies resulting from occupational accidents or illnesses (professional contingencies).

The form of collaboration known as “delegated payment” enables companies to pay their workers financial sick leave benefits – on behalf of the managing entity or mutual insurance company that collaborates with the social security system – and subsequently offset the amount thereof when assessing the social security contributions they are required to pay in.

Until now, there had also been voluntary collaboration, which some companies meeting certain requirements had signed up for, whereby they opted to assume not just the costs (the financial benefits and, where applicable, the health care benefits) but also the responsibility for the management function. As compensation, they withheld the corresponding portion of the amount payable or, in the case of common contingencies, applied reduction coefficients to their contributions which were approved annually by the Ministry of Employment and Social Security.

Under this system, collaborating companies had their own funds with which to finance the benefits they were responsible for paying, unlike the companies which collaborated by obligation, which had to advance the payment of the sick leave benefit to their workers and then offset it.

The Court of Auditors, having detected inefficiencies in this system, included a recommendation to the General Directorate of Social Security Organization in its Audit Report, following which it was decided to eliminate this collaboration option in respect of benefits for common contingencies as from March 31, 2019.

A 3-month transitional period – the deadline is June 30, 2019 – has nevertheless been established, to enable the companies affected to settle accounts with the General Directorate of Social Security Organization in respect of the operations in which they have collaborated.

If the result of this settlement is positive, the corresponding amount must be paid in to the Social Security General Treasury along with the stabilization reserve (into which companies transferred surplus balances resulting from their collaboration). If the result is negative, it may be deducted from the balance of the stabilization reserve, until it has been used up.

For situations of temporary disability ongoing at the date of elimination referred to above, collaborating companies will continue to be responsible for the payment of the related subsidies until such situations come to an end. Companies cannot offset these costs in the corresponding assessments of Social Security contributions, but if the result of the assessment is positive, they can set up a provision of funds to cover the payment of such benefits.

The question we are left asking ourselves is whether this measure will mark the beginning of the end of the system of voluntary collaboration by companies in the management of sick leave benefits due to professional contingencies, or whether, to the contrary, it will be accompanied by a reform and much-needed modernization of the system and replacement of the old regulations contained in the Ministerial Order of November 25, 1966.