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The intention of the employer co-financing scheme was to create
economic incentives for employers to prevent and counteract long-
term sick leave among their employees. The incentives were designed
so that they would encourage the prevention of sickness absences,
rehabilitation and other measures to facilitate the absentee’s return to
work, either on a full or part-time basis.
The co-financing represented 15 percent of the employee's sickness
benefits during the time the employee was on sick leave full time.
The employer did not pay the co-financing fee if the employee was
instead on partial sick leave or was granted a disability pension, or
received other forms of sickness benefits, e.g., rehabilitation benefits.
There was also a floor below which employers were exempted from
paying the co-financing fee (
fribelopp
), as well as a ceiling on the co-
financing fee. The floor meant that many small firms did not pay any
fees.
One effect of the reform could thus have been the return of
employees on sick leave to work. Another effect could have been the
replacement of full-time absences by part-time sick leave, since
employers benefited from employees being on part-time, rather than
full-time, sick leave.
However, with their increasing financial responsibility for the costs of
sickness insurance, one side-effect might have been that employers
became more selective in the hiring process in order to avoid
potential future costs. Groups of workers with high expected rates of
sick leave may thus have been disadvantaged in the labour market, as
their job opportunities may have been worsened because of the co-
financing fees. The reform may also have led employers to encourage
the separation of employees who were on long-term sick leave, with
the employees either applying for a disability pension or leaving the
workplace.
The aim of this study
While relatively much is known concerning the economic incentives
for workers regarding sickness insurance, there is little evidence
regarding the impact of firm incentives. The purpose of this analysis
is to investigate how the introduction of the employer co-financing
scheme correlates with changes in the duration of sickness leave
periods and the probabilities of transitions between full-time and part-