Article published in Insurance Inside No. 14. - June 2019

Sick leave: what solutions are available to transfer the financial risk?

Several solutions are available to help employers meet the legal obligation to replace workers on sick leave. Some of the less well- known ones can resolve these financial problems. Review of the various solutions.

Absences maladie : quelles solutions pour transférer le risque financier ? - Swiss Risk & Care
Absenteeism is an ongoing concern for business leaders as the consequences can be severe, especially in financial terms. One such cost is the replacement of workers. According to Article 324a of the Code of Obligations, employers are obliged to con- tinue to pay sick employees:

“If a worker is prevented from work- ing through no fault of his own due to causes inherent in his person, such as illness, an accident, the fulfilment of legal obligations or public duties, the employer must pay him his salary for a limited time, including fair compensation for lost wages in kind, as long as the employment relationship has lasted more than three months or has been concluded for more than three months.”

The duration of compensation is fixed using the Bern scale, which classifies the obligation to continue payment of the salary depending on seniority. In addition to the financial risks assumed by the employer, this non-transfer of risk puts employees in a precarious position.
Before the AI and LPP benefits come into play, an entire year can go by without compensation.

If employers wish to provide proper protection for employees who are off sick and coordinate their coverage, there are three solutions available to insure health-related losses*:



Traditional full transfer to an insurer as soon as the agreed waiting period has expired.
Any person who is absent for more than 14, 30 or 60 days is declared to the claims department of the insurance company. They will then manage the financial aspects and follow-up on the patient’s condition with the doctor and the employee’s return to work. This model is ideal for small and medium-sized businesses to enable them to budget for the costs associated with sick leave and transfer the financial risk. Furthermore, if the contract is profitable, the insurer may set up a profit sharing scheme, i.e. some of the premiums may be refunded. It should be noted that the salary is paid by the employer during the waiting period.


The « stop-loss » system
This is an unusual type of contract which must be underwritten by an insurance company. It is based on a financial deductible that must be paid by the company. This deductible is fixed according to the cost of absenteeism over previous years. If the cost of absenteeism exceeds this deductible, the insurer indemnifies the surplus. Companies draw two main benefits from this system: savings incurred by non-deduction of social security contributions from compensation provided by the stop-loss insurer, and the retained surplus in cases where the loss ratio is good.


This can be advantageous for large companies that want to optimize costs and maintain control over all aspects of absenteeism. It can be used to monitor employees’ conditions through a medical structure, guaranteeing the preservation of medical confidentiality and the salary costs of absent employees are charged immediately.
Self-insurance is useful as long as it is combined with an alternative system to save on social security charges: the reinsurance captive. As an alternative risk financing tool, the captive is an employer-specific insurance com- pany whose purpose is to provide reinsurance products which exclu- sively cover the company’s risks, including, in this case, sick leave.

In terms of financial optimization, the two alternative systems, “stop-loss” and self-insurance, clearly stand out. However, they are not suitable for all businesses. An analysis of the requirements and the scenarios of each model therefore becomes essential and requires the use of an insurance broker.

*Only illnesses (including pathological pregnancy) can be covered by loss of income insurance. Other causes of an inability to work, such as accidents, the fulfilment of legal obligations or public duties, are covered by other types of insurance.


Absentéisme - Swiss Risk & Care
Direct costs, such as the remuneration of absent employees, recruitment, training and wages for the replacement person, must be added to other costs such as loss of productivity, disruption of the team, delays and the deterioration of working conditions. These indirect costs are between 3 and 5 times higher than the direct costs.
«We always offer bespoke solutions to our customers.»

Including analysis, forecasts and advice, Yvan Roux, Director of the Corporate Business Unit, presents the services developed by Swiss Risk & Care to help you in choosing your personal insurance plan.

Why use a broker?

Personal insurance plans are onerous burdens for companies. Thanks to our knowledge of the insurance and reinsurance markets, we implement solutions to reduce the employer’s costs while maintaining maximum employee protection. In terms of health-related absences for example, «stop-loss» insurance and self-insurance enable financial optimization to be achieved. But these alternatives to the traditional sickness loss of income contract are not always suitable for the structure and expectations of a company.

How do you determine the best solution?

Depending on the rate of claims and the financing capabilities of the company, we have established several scenarios depending on the model. Assisted by our actuarial colleagues, we can also use the forecasts created by scientific studies to inform our insurance choices. Sometimes two different solutions can be combined: the direct savings generated by «stop-loss» insurance can, for example, be used as reserves for the future creation of a captive.

Do your actions have impacts on absenteeism?

Since corporate health and well-being is not our core business, our advice revolves around the transfer of financial risk and the savings that can be made through insurance schemes. The recommended measures will not have a direct impact on the rate of absenteeism, with the exception of those implemented by the recommended insurer. However, once a solution has been chosen, we can help HR departments to manage absenteeism via our Caredesk, and our Unipro software provides access to a multitude of HR indicators, including absenteeism. This enables us to track changes and adapt our coverage if needed.

Yvan Roux - Swiss Risk & Care
Holding a federal certification in private insurance and with nearly 25 years of experience in the insurance field at companies and brokerage firms, Yvan Roux is Director of Swiss Risk & Care’s Corporate Business Unit.