Sickness Absence Limitation Act and Incapacity for Work of Safety-Netters

Underlying Idea of the Legislator

A reliance on sickness benefits is open to sick employees who, in short, do not have an employer any more or of whom it is assumed that they have a high sickness risk (because of organ donation, pregnancy or a specific medical past; the so-called ‘no risk policy’). In the Explanatory Memorandum to the bill, the government identifies the problem that these ‘safety-netters’ already account for half the influx into the Dutch Work and Income Incapacity for Work Act ("WIA"), while they constitute a considerably smaller part of the insured individuals. These people are mainly flexible labor force, such as employees on temporary contracts and temporary workers. As opposed to ‘permanent employees’, their influx has not decreased in the past years in absolute terms. Moreover, according to the government, they resume work less often than employees on permanent contracts. The government wishes to fight these problems by, on the one hand, strengthening the ‘activating effect of the Sickness Benefits Act’ and, on the other hand, strengthening the financial incentives to prevent sickness or to achieve reintegration. The most important measures are described below. Their effective date is not final yet, but it looks like the legislative amendments will enter into effect partially on 1 January 2013 and partially on 1 January 2014.

Premium Differentiation Employer

At present there is a separate financing system for the ZW (Sickness Benefits Act), the WGA (resumption-of-work scheme) for employees with permanent employment ("permanent WGA") and the WGA for flexible labor force ("flexible WGA"). The permanent WGA is financed through an employer's contribution which depends on the disability burden that can be attributed to the individual employer. In order to stimulate employers to make an effort to prevent sickness and reintegrate flexible labor force, this system of individual premium differentiation will also become applicable to the ZW and the flexible WGA. The premium amount paid by an employer every year is made dependent on (i) the total wage bill and (ii) the number of former employees who were receiving ZW or WIA benefits two years earlier. Incidentally, this system of individual attribution will only apply to large employers (wage bill ≥ 100 times the average wage bill; the average wage bill in 2012 is €30,200). Small employers (≤ 5 times the average wage bill) will be paying an amount determined for the industry concerned. For medium-sized employers, the premium will be determined partially per industry concerned and partially individually. The new premium differentiation system is intended to enter into effect on 1 January 2014.

As an alternative for paying a differentiated premium, employers may choose to bear the excess of the insurance. In that case, they will be responsible themselves for the reintegration of former employees. This possibility already exists for the permanent WGA. According to the bill, as of 2014 employers may also choose to bear the excess of the ZW risk. This rule will not apply to the flexible WGA until 2016.

Tightening of Entitlement to ZW Benefits and Reintegration Obligations of the Employee

Currently, in order to be eligible for ZW benefits, the safety-netter must be incapacitated for the work he was most recently performing. The ZW benefits stop after two years of sickness. Next, the safety-netter may rely on WIA benefits if he is unable to earn more than 65% of the income that healthy persons with a similar education and experience usually earn with generally accepted work (the WIA examination). The amendment of the law introduces a similar examination after already one year of sickness as a condition for continued eligibility for ZW benefits. This means that a safety-netter who still wants to be eligible for ZW benefits after one year of sickness must have a minimum loss of earning capacity due to his sickness.

Furthermore, the reintegration obligations of the safety-netter who is entitled to benefits will also be tightened. For instance, the safety-netter who is entitled to benefits will be obliged to undergo adequate treatment, to apply for jobs, to become (re-)educated and to tackle any addiction or debt problems. If the person involved does not meet these requirements, the UWV (Employee Insurance Implementing Body) may either suspend or end the benefits. The tightening of the entitlement to ZW benefits and of the reintegration obligations is intended to enter into effect already on 1 January 2013.

Adjustment of Amount and Term of ZW Benefits

As of 2014, the WIA will also be followed with respect to the amount and duration of the ZW benefits. Currently, the ZW entitles safety-netters to benefits of 70% of their last-earned salary. As a consequence of the amendment of the law, the benefits of the safety-netters will be divided into a pay-related part and a follow-up part. The duration of the pay-related phase depends on the employment history of the safety-netter, but has a minimum of three months. During this phase 70% of the last-earned salary will be paid out. During the follow-up phase the safety-netter will only receive 70% of the minimum wages applicable to him. This constitutes a retrenchment of the entitlement to ZW benefits. The Dutch Senate has requested these amendments not to enter into effect until 1 January 2014.

Tips

  • Employers will get a financial interest in preventing that after the end of their employment, flexible labor force must rely on ZW or WIA benefits. It is therefore essential to also conduct a proper sickness absence policy for this group of employees.
  • Because ZW and WIA costs are attributed to the last employer, it is important to keep a proper administration of all employees who have left the employment while they were sick. This is already important at present: the amount of the premium in 2014 will probably be based on benefits starting this year.
  • In principle, after the end of their employment sick employees only have reintegration obligations towards the UWV. By means of the excess bearer status the employer will take reintegration into its own hands and can have more influence on their recovery.
  • Additional arrangements may be made with employees about their reintegration after the end of the employment.