Now is the opportunity to reduce sick leave costs for employers

Recently, a segment about sick leave in Croatia, which is very costly for entrepreneurs, was aired on the news of a national television station. It is true that this, unfortunately, is a perennial topic, but we must return to it from time to time because, despite all reasonable appeals over the last decades, all governments have remained silent to the cries of employers who must bear the costs of sick leave for up to 42 days.

All of us who have written about this before knew that these costs are too high; however, I must admit that I was shocked a few months ago when I interviewed the CEO of Hrvatska pošta, Ivan Čulo, by his words that this state company loses between 12 and 15 million euros a year due to unjustified sick leave! That is the sum of all monthly salaries of its employees. And what about the justified sick leaves?! He also stated that ten percent of Hrvatska pošta’s employees are constantly on sick leave. That is a frightening statistic.

Specific Question

Although the company constantly sends requests for sick leave control to the Croatian Health Insurance Institute (HZZO), it often happens that the sick leave is closed at that very moment, which further intensifies the suspicion that many are cheating. And now we should ask whether HZZO can be more agile in those first 42 days when it does not bear the cost of sick leave. This could be discussed with people at the Institute, but the state can also help in another way to relieve employers of this, as one of them told me a few years ago, parafiscal burden.

Let us be specific and pose the question to the government of Prime Minister Andrej Plenković: Has the time finally come to radically shorten the excessively long 42 days of sick leave at the employer’s expense? Recently, the Association of Entrepreneurs (UGP) wrote a letter to Plenković requesting that employers bear the cost of sick leave for the first five days, while the rest should be covered by HZZO. UGP believes it is absurd for the employer to pay for the first 42 days of sick leave for an employee, especially since they pay health insurance of 16.5 percent on every gross salary monthly, reminding that in other EU member states the number of those days is much lower. Lithuania has the least sick leave days at the employer’s expense – only two; Bulgaria and Italy three days, Estonia, Ireland, and Romania five days, Slovakia ten, the Czech Republic fourteen, Sweden and Norway fifteen days.

– At this moment, Croatia is significantly above the EU average in terms of sick leave payments at the employer’s expense, as well as in terms of the number of so-called false sick leaves, and far below the Union average in terms of labor productivity. This must change immediately – they say in UGP.

Opportunity for Reform

There are four reasons to limit the burden of sick leave for employers to five days. The first is that it would reduce the financial burden on entrepreneurs – especially for small and medium-sized enterprises. At the same time, this would increase the competitiveness of the Croatian economy because in the surrounding countries, e.g., Austria, Germany, Slovenia, sick leave does not fall so heavily on the employer. The other two reasons concern the state because it would encourage more responsible management of the healthcare system since the state would take greater control over the issuance and duration of sick leave, which would (if we assume that the responsibility and conscientiousness of those in HZZO are at a high level) reduce abuses. The logic of the latter is that if the state finances a larger part of the sick leave, it will also have a greater interest in controlling its justification.

Let us be open, the cost of sick leave for employers for 42 days is indeed a parafiscal burden. It is true that it is not easy to break and make such a decision to drastically reduce the number of days (at least to ten) because it will significantly increase the item of HZZO’s costs. However, we often hear Prime Minister Plenković boasting about the achievements of his government, how our economy is growing, so if that is really the case, then now is the opportunity to embark on this reform. Namely, reforms are undertaken when the economy is doing better, not waiting for a recession to come when it is too late for them.

POST SCRIPTUM

Four years ago, when the story about healthcare reform in Croatia was gaining momentum, the Ministry of Health proposed the opposite idea – that HZZO be relieved of the obligation to cover salaries for employees while they are on sick leave. We wrote about this in ‘Pravda’, wondering who would then bear the costs. If it were insurance companies, then employers would again pay this as part of premiums, which might even be higher if someone were on sick leave multiple times. The second option was, as reported in the media, that employers pay the entire cost of sick leave, but the then Plenković government assessed that this would be too radical a move, so fortunately, it was abandoned. Nevertheless, this example shows how difficult it will be for employers to rid themselves of this parafiscal burden.