Less generous payment rates may have negative effects on health and increase contagious presenteeism. The payment-rate increase in Germany in 1999 during the first six weeks of sickness absence did not affect self-assessed health of workers. On the other hand, groups with higher sickness absence, such as those with low self-assessed health and with disability certificates, substantially increased their total sickness absence. A reform in Spain that reduced benefit generosity substantially at the beginning of a sickness spell revealed some negative effects on health, including an increased likelihood of relapses for infectious diseases. This suggests that low payment rates at the beginning of a sickness spell may lead to contagious presenteeism, much like in the case of a waiting period (Marie and Vall Castello, 2020[85]; Ziebarth and Karlsson, 2014[82]).
Less generous payment rates can lower labour costs and increase employment, though the effects are likely small. The cut in employer-provided sick pay in Germany from 100% to 80% during the first six weeks of sickness absence reduced annual employer-provided sick pay expenditures by 7%, with a potential increase in jobs of about 0.2% (Box 5.1). The reform in Germany was undone three years later, which had mirror image effects of about the same size. This latter re-reform did not increase layoffs, which may be due to strong employment protection legislation in Germany. However, there is evidence that employers reacted by hiring fewer unhealthy employees and letting healthy employees work more overtime (Ziebarth and Karlsson, 2014[82]; Ziebarth and Karlsson, 2010[84]).
While less generous payment rates may lower sickness expenditures, it may increase expenditures on other social benefits. The 2012 benefit rate cut in Spain at the beginning of the sickness spell led to large increases in workers’ compensation claims, cancelling out about half of the gains in sickness absences from the reform (Box 5.1) (Marie and Vall Castello, 2020[85]).6
Payment rates for sick pay or sickness benefit depend on past earnings in most OECD countries. In many countries, benefits replace earnings fully during the beginning of a sickness spell, although there can be benefit caps. The statutory system has 100% income replacement initially in 15 OECD countries, and in a few other countries such as France, the Netherlands, and Sweden, collective agreements include top-ups to 100% for many employees. Ireland, still lacking statutory sick pay, is the country with the least generous earnings-dependent payment at the beginning of a sickness spell, setting four fixed amounts of sickness benefits for four earnings brackets; the payment levels vary between EUR 93 and EUR 208 per week.7 Canada offers sickness benefits at 55% earnings replacement throughout the sickness spell, identical to its unemployment benefit and run under the same Employment Insurance.
Payment rates differ over the course of a sickness spell in about two-thirds of OECD countries (Table A D.2). Payment rates decrease with duration of absence in 12 OECD countries, including Continental European countries such as Austria, Belgium, and Germany, as well as Northern European countries such as Denmark, Finland, and Sweden. Replacement rates generally drop to about 50-80% of previous earnings, not including any top-ups in collective agreements as well as benefit caps. In eight countries, payment rates increase over the course of a sickness spell. This is the case for instance in Greece, Portugal, and Spain.
Many countries have benefit caps that can reduce replacement rates for persons with high earnings. Benefit caps vary substantially and may be only binding after a certain length of sick leave. Canada is an example with a more stringent benefit cap of CAD 638 (around EUR 440) per week.
There are only a handful of OECD countries, which provide fixed-amount payments unrelated to earnings. The United Kingdom is the only country that offers a fixed amount from the start of a sickness spell, in the form of employer-provided sick pay of GBP 96 (about EUR 110) per week (see (Patel and Jung, 2022[86])). Other countries, such as Australia and Denmark, offer fixed-amount sickness benefits, which employees receive after having exhausted employer-provided sick pay that fully replaces their earnings. The fixed amounts are AUD 287 (about EUR 187) per week in Australia and DKK 121 (about EUR 16) per contractual working hour, which would sum to about EUR 600 per week for a fulltime employee. New Zealand also offers fixed amount payments that may be received together with employer-provided sick pay, at a level of NZD 227 (about EUR 135) per week. The benefits in Australia and New Zealand are not exclusive to persons with temporary sickness, but are also offered to, for instance, unemployed persons.
The payment level in Korea’s 2022 Pilot Project for Sickness Benefits is extremely low in international perspective. The proposed fixed amount of KRW 41 860 or about EUR 31 per workday, or about EUR 153 per work week, makes it one of the least generous, together with the United Kingdom, New Zealand, and Ireland. The payment level would be well below the level for Korean public officials who receive 70% to 100% at the beginning of their sickness spell (Box 2.2). It is also lower than the minimum benefit level recommended in the ILO convention on sickness benefits, which stipulates 60% of the person’s previous earnings instead of a fixed amount of 60% of the minimum wage.