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

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

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.

Rente, capital ou alternative : comment optimiser sa retraite ?

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*:

1 - 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.

2 - 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.

3 - Self-insurance

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.

Absences maladie : quelles solutions pour transférer le risque financier ?

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 Qualibroker-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

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 Qualibroker-Swiss Risk & Care’s Corporate Business Unit.

Our related services

Absences CareDesk

Monitoring of your employees’ absences and claims from A to Z to free your HR department of heavy administrative tasks.

Unipro

Our internally developed software, Unipro, allows simple and efficient management of your employees’ absences due to illness or accidents.

The Abs & Claims Mobile Application

Freedom and flexibility in monitoring absences with our mobile application.

Our associated articles

01 Aug 2016

The captive insurance company

An internal reinsurance company, known as a "captive insurance company", allows risk management to be optimised for a large company. Explanations.

15 Sep 2017

Digital HR services: everyone wins

With the digitalisation of tools and processes, the arrival of generations Y and Z in the labour market and companies refocusing their strategies on employees, human resources departments must adapt to societal changes. Focus on the digitalisation of HR services.

Our news

19 Oct 2021

Loss of earnings insurance in the event of illness (APG): a deteriorating system

The system of insurance for loss of earnings in the event of illness needs to undergo a full overhaul.

21 Apr 2021

Cross-border workers – non-occupational accidents: changes in reimbursement policy

Discover the impact of the new system of electronic data exchange between the social insurance institutions of EU countries and Switzerland on the reimbursement of non-occupational accidents.

30 Mar 2021

Are you well insured for skiing accidents?

Before hitting the slopes, it is important to check your insurance coverage in case of an accident.

03 Apr 2020

Covid-19: What does the health insurance cover?

Qualibroker-Swiss Risk & Care answers frequently asked questions

01 Jul 2016

Health insurance for border-area workers

Signing of a new France-Switzerland Agreement as part of health insurance for border-area workers in Switzerland living in France

Talk to an expert
Phone
E-mail
Our branches