Countries should ensure that their social protection programmes for sick workers are financially sustainable and promote buy-in from employees and employers.
About two out of three OECD countries organise and fund their statutory sickness programmes through a combination of employer-provided sick pay and social insurance (Figure 7.1). Four OECD countries use a combination of employer-provided sick pay and taxes. Three countries only rely on employer-provided sick pay, and six OECD countries only rely on social insurance. Employer-provided sick pay obligations are an important instrument to provide financial incentives to firms to promote their workers’ return to work.
Countries that use social insurance to fund sickness benefits all provide earnings-related benefits. This is no coincidence. The social contributions to fund sickness insurance are in all OECD countries with such a system a fixed percentage of earnings (Table A D.3). In this way, participants insure themselves against earnings loss during temporary sickness. The link between earnings and sickness payment levels can be made less strong by means of minimum or maximum contribution rates and/or payment levels.
Conversely, countries using taxes to fund sickness benefits offer fixed-amount payments, unrelated to earnings. These countries are Australia, Denmark, Iceland and New Zealand, who have essentially opted for a social assistance scheme. The United Kingdom is the only country providing fixed-amount payments through employer-provided sick pay rather than taxes as the funding source.
Finland, Israel, Italy, Mexico and Portugal are the only OECD countries with dedicated sickness benefit contribution rates (Table A D.3). The sum of employer and employee contribution rates in these countries varies between 1% and 2.5% (no information for Israel). Sickness insurance contributions are sometimes part of larger employment insurance or health insurance systems. Canada, Hungary, Ireland and Norway combine contributions for sickness, unemployment, and maternity benefits, as well as workers’ compensation benefits in the latter three countries. Costa Rica, Germany, Japan and Slovenia combine contributions for sickness and health insurance, as well as maternity benefits in the first two countries.
Contribution rates for employers and employees are at a similar level in 13 OECD countries. In 12 OECD countries, employers pay a higher share of the total. This is more often the case in countries, in which insurance covers multiple types of social benefits. For instance, in Spain, employers contribute 23.6% of earnings and employees only 4.7% to the insurance scheme that covers sickness, disability, maternity, and pension and survivors’ benefits. In France, employers contribute 13.3% to sickness, disability, maternity, and survivors’ benefits insurance, while employees do not contribute. In Chile and Poland, only employees contribute to the insurance that covers sickness and maternity benefits.