Sick Leave for Employees Over 65 Years Old at Employer’s Expense

In anticipation of the announced pension reform and the extension of age conditions for acquiring the right to a pension, it is desirable for the proposers of regulations to make an effort to harmonize all regulations governing the work and social status of older workers. The regulations currently in force, due to horizontal inconsistencies, may increase costs for employers that they may not have anticipated.

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According to Article 112 of the Labor Law, an employee who reaches 65 years of age and has at least 15 years of insurance coverage has their employment contract terminated by law, unless the employer and employee agree to continue the employment relationship. They can also agree differently, which actually allows for the employment relationship to continue after the employee turns 65. In some specific public sector regulations, the age for termination of the employment relationship by law is determined differently for certain employees, so that, upon meeting the prescribed conditions, the employment relationship does not terminate at 65 years of age, but later (state and local officials, university professors, teachers, and educators).

What to Watch Out For

If the employer does not need to continue the employment relationship after the employee turns 65, they inform the employee about the termination of the employment relationship and deregister them from the pension and health insurance system. If there is mutual willingness, the employer and employee can agree that the employee’s employment relationship lasts even after the conditions for termination of the employment contract by law have been met, i.e., after reaching the age of 65.

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If this happens, it is in the employer’s interest to contract a limited duration of the employment relationship with the employee, either by agreeing on a duration until a specific date, in time units (e.g., six months, one year, until a specific date) or by tying it to the occurrence of some circumstance (until the completion of the project the employee is working on, while the need for work lasts, etc.). Here’s why. What must the employer consider when retaining an employee over 65 years old? An employer who retains or subsequently hires an employee over 65 years old must be aware that, according to health insurance regulations, any potential sick leave compensation for the entire duration of the sick leave falls on their burden. For that employee, the employer is obliged to pay contributions for mandatory health insurance at the prescribed rates and within the same deadlines as for other employees, but the burden of salary compensation in the case of potential work incapacity due to the employee’s illness is borne by the employer, not the Croatian Health Insurance Institute. Of course, an employee over 65 years old has the right to salary compensation for the hours (days) they would have worked had they not been prevented from fulfilling the obligations agreed upon in the contract due to illness.

Without Exception

According to the regulations on mandatory health insurance, the amount of salary compensation for sick leave cannot be less than 70 percent of the average salary paid to the employee in the six months preceding the month in which the sick leave began. If the amount of salary compensation for sick leave is more favorable for the employee in the collective agreement or work regulations, the employee has the right to that more favorable amount of salary compensation, but unlike other employees for whom the salary compensation for the first 42 days is borne by the employer’s funds, and from the 43rd calendar day of sick leave by the HZZO, an employee who has reached 65 years of age and has 15 years of pension insurance does not have the right to salary compensation at the expense of the HZZO, but for the entire duration of the sick leave, they are entitled to salary compensation at the employer’s expense. No exception is prescribed even for sick leave caused by a work-related injury.

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Salary, Tax, Contributions

The employer is obliged to pay the employee salary compensation for sick leave no later than the 15th of the month for the previous month, with the salary compensation at the employer’s expense being treated for tax purposes as equal to salary and subject to the obligation of contributions from salary, contributions on salary, and income tax and possible surtax. The employer’s cost is not only the net amount paid to the employee but also the corresponding contributions and income tax. All other rights related to treatment and work incapacity due to illness for employees over 65 years old are realized under the same conditions as for other persons insured for health based on employment. The authorized doctor is obliged to issue a certificate of the expected duration of the sick leave and a certificate of the length of the sick leave (sick note), but they do not have the right to salary compensation at the expense of the HZZO.