FLEXIBILITY IN SICK LEAVE
Charles Mulvey and Ross Kelly
the Centre for Labour Market Research
The University of Western Australia
CLMR DISCUSSION PAPER SERIES 02/1
The authors would like to acknowledge the Commonwealth’s funding of this research, however,
the views expressed in the report do not necessarily reflect the views of the Commonwealth
the Centre for Labour Market Research, The University of Western Australia, Crawley WA 6009
Tel: (08) 9380 8672 Fax: (08) 9380 8671 email: email@example.com
The Centre wishes to acknowledge the support of The Western Australian Department of Training
This paper examines the origins of paid sick leave as an award condition and its
subsequent development. The emergence of the broader concept of sick/family/carer’s
leave in the 1980s and 90s is discussed. The provisions which entrench employees’
entitlement to paid sick/personal/carer’s leave in legislation, awards and agreements are
also documented. Examples of innovative and flexible approaches to the provision of
sick/personal/carer’s leave in awards and agreements are provided. International
practice in relation to paid sick leave is considered with the experience of the UK, USA,
Sweden and Canada being examined in some detail. The paper also looks at the costs and
incidence of sick leave in Australia and considered the options for flexibilities in the
provision of sick/personal/carer’s leave which can work to the benefit of employees and
their employers. In particular the option of cashing-out sick/personal/carer’s leave is
argued to be optimal.
SICK LEAVE IN AUSTRALIA
Traditionally, paid sick leave in Australia has been defined as leave to which an
employee, other than a casual, is entitled without loss of pay because of his or her illness
or injury. Increasingly, broader concepts of paid leave for personal and family
emergencies are being accepted and the terms “personal leave” and “carer’s leave” now
have extensive currency. Paid sick/personal/carer’s leave generally includes sick leave,
leave taken to care for a sick family member and bereavement leave. In Australia this
formal broadening of the concept of sick leave resulted from the decision of the AIRC in
the Family Leave Test Case (1994)1, the Personal/Carer’s Leave Test Case (1995)2 and
subsequent State test cases and legislation.
Traditionally, absence claimed as sick leave has been classified as either3:
• unavoidable and involuntary – resulting from a medical condition which renders
the employee unfit to work;
• avoidable – when employees who are not medically unfit to work take time off
anyway – the traditional “sickie”.
This classification is too narrow and too rigid to be of practical value in addressing the
issues which face human resource managers in managing employee absence. First, as
noted above, it is increasingly accepted that broader concepts of personal leave are
needed to permit employees to manage their work and family responsibilities.
Demographic changes in the labour force have rendered the traditional concept of sick
leave largely obsolete. Second, there is an increasing acceptance that absence from work
may be a response to job dissatisfaction or organisational factors at the workplace. “..it
has long been known that sick workplaces may create sick employees.”4
Management must address this issue by improving organisational health and devising
appropriate absence management strategies. Thirdly, the traditional model of sick leave
actually provides incentives for employees to take “sickies”. The inflexibility of that
conventional model makes it difficult to dilute or remove these incentives.
Absence claimed as sick leave costs the Australian economy many millions of dollars
each year. All three of the issues identified above need to be addressed if the costs of sick
leave are to be managed effectively. An important approach to that task is the
introduction of more flexible concepts of sick leave. Much progress has already been
made in this respect in Australia but there is scope for further innovation.
In this report we first examine the origins of paid sick leave as an award condition and
how it developed in subsequent years. We then discuss the emergence of the broader
concept of sick/family/carer’s leave in the 1980s and 90s. The provisions which entrench
employees’ entitlement to paid sick/personal/carer’s leave – in legislation, awards and
agreements – are then documented. Examples of innovative and flexible approaches to
the provision of sick/personal/carer’s leave in awards and agreements are then discussed.
International practice in relation to paid sick leave is considered with the experience of
the UK, USA, Sweden and Canada being examined in some detail. The costs and
incidence of sick leave in Australia are then discussed. The remainder of the report
considers the options for flexibilities in the provision sick/personal/carer’s leave which
can work to the benefit of employees and their employers. In particular the option of
cashing-out sick/personal/carer’s leave is argued to be optimal.
Let us begin by considering the origins and rationale for paid sick leave and then examine
the evolution of the institutional arrangements which govern its application.
Origins and Rationale
Paid sick leave was first introduced into awards in Australia in 1922. Prior to that time
the courts had held that, under common law, employees hired by the week were entitled
to be paid for apparently unlimited absences due to sickness or injury.5 In order to protect
employers from potential costs arising from abuse of this common law entitlement, a paid
sick leave entitlement limited to one week was inserted into the Engineers’ Award. The
relevant clause was “No employee shall be entitled to payment for non-attendance on the
grounds of personal ill-health for more than six days in one year”.6 Curiously, therefore,
the introduction of paid sick leave into awards was intended to protect employers rather
than to provide a benefit for employees. Paid sick leave clauses were subsequently
quickly adopted in almost all awards at the standard set in the Engineers’ Award.
The rationale for sick leave then and now is that it is designed to protect employees who
are sick or injured from loss of pay or position. However, industrial tribunals have taken
the view that “sick leave is not a ‘right’ an employee gains by virtue of his or her duties;
rather it exists to meet the fact that sickness visits everyone.”7
The Development of the Sick Leave Standard
The six day restriction on sick leave equated to one week of work at that time and
remained the standard for many years. In the mid-1970s the sick leave entitlement was
expanded by increasing the entitlement to paid sick leave after the first year of
employment. The federal standard adopted was 40 hours in the first year of employment
and 64 hours in each subsequent year.8 While in some industries more generous provision
was made to reflect hazardous working conditions, this standard continued to have
general application up until quite recently.
Definition, Eligibility, Accrual, Scope and Payment of Sick Leave
An overview of sick leave can be given by considering its main characteristics. Sick
leave has nine key characteristics which are summarised below and expanded on
throughout the remainder of this report: 9
• it is leave with pay for a prescribed period and then unpaid leave after the
• it usually accrues monthly and/or annually so that there is a certain entitlement
available to each employee for every year of service. Usually there is a qualifying
period of employment before sick leave can be obtained, such as three months or
accrual of a certain number of hours. After the qualifying period, retrospective
payments can be made;
• the entitlement accrues either on the anniversary of the employment of each
employee or as a set “sick leave year” as defined (e.g. 1 July to 30 June);
• sick leave is available when an employee is too ill to work and the illness is due to
a cause which does not entitle the employee to workers compensation benefits.
Incapacity due to wilful and personal misconduct, such as injuries received in a
brawl, may preclude granting of sick leave;
• in certain cases, entitlement may accumulate for a prescribed number of years or
for an unlimited period, but there is usually a maximum amount of leave
prescribed as being available in any one year;
• it is generally contrary to the intention behind sick leave to pay employees for
untaken leave although such a provision may be found in some awards or
• sick leave is an award (or agreement) provision sometimes supplemented by
• in cases where the delay of a medical or dental check-up, cosmetic surgery or
elective surgery would not result in the employee becoming too ill to work or
disabled, sick leave is normally not justified. Some sick leave clauses may,
however, cover such occurrences [see Amalgamated Engineering Union vs The
Metal Trades Employers Association (1944) 53 CAR 509]; and
• sick leave benefits cease on termination of employment.
Sick leave is normally intended only to ensure that workers who suffer temporary and
short-term bouts of sickness do not lose pay or position as a consequence. Workers who
suffer chronic or long-term illnesses may be eligible for sickness allowance or a disability
pension from Centrelink. Sickness allowance comes into consideration only after paid
sick leave has been exhausted and workers eligible for the disability pension are judged
unable to continue at work. Workers who are injured at work or who contract a work-
related disease may be eligible for worker’s compensation. Workers’ compensation
applies only to work-related injuries or illnesses. Workers’ compensation is administered
under state legislation and different regulations and levels of compensation apply in
different jurisdictions. Accordingly there is little connection between these arrangements
and the paid sick or personal/carer’s leave provided by employers.
The Emergence of the Personal/Carer’s Leave Concept
In the mid-1990s, mainly in response to the dramatic increase in the number of families
in which both partners work, the Family Leave Test Case and the Personal/Carer’s Leave
Test Case and subsequent State test cases led to the establishment of a safety net system
of paid leave to deal with family emergencies and responsibilities. This safety net
standard of paid personal leave has been incorporated into the award simplification
process and generalised as a result. The main features of the personal leave package are:
• A personal/carer’s leave entitlement was established by aggregating sick leave
and bereavement leave entitlements ;
• an employee must be entitled to sick leave to be entitled to personal/carer’s leave;
• An employee is entitled to take up to 40 hours of this total entitlement in the form
of carer’s leave in order to care for a sick member of his/her immediate family [in
NSW an employee may take all of their sick leave entitlement as personal/carer’s
• An employee is entitled to take up to 16 hours of total personal leave entitlement
as bereavement leave but bereavement leave may not accumulate if unused;
• An employee is entitled to take up to 76 hours [dependent on length of service] of
the total personal leave entitlement as paid sick leave;
• Sick leave may not substitute for bereavement leave nor vice versa;
• Personal/carer's leave is a substitute for the other forms of leave, not an addition
to them. Therefore, if a day of personal/carer's leave is taken, the employee's sick
leave accrual is correspondingly reduced by one day.
• An employee may, by agreement with his/her employer, take short term annual
leave in single, or part of single, days leave [in place of the traditional award
requirement that annual leave be taken in one or two blocks];
• An employee, by agreement with his/her employer, may take time off in lieu of
• An employee, by agreement with his/her employer, may take time off during
ordinary hours and make up the time at a later date and during the spread of
• An employee, by agreement with his/her employer, may take rostered days off at
any time, or create a bank of rostered days off to be drawn upon by the employee
at times mutually agreed and subject to reasonable notice;
• Unused personal leave may be accumulated to a maximum of 760 hours.
This personal/carer’s leave package is intended to introduce flexibility into the paid leave
system in order to permit employees to respond to personal emergencies in ways which
are appropriate to the emergency. It was, in effect a recognition that employees have both
work and family responsibilities and that they require flexibility in the use of paid sick
and bereavement leave in order to be able to attend to these responsibilities.
Increasingly, therefore, it is not practical to talk of sick leave as a self-contained element
in the conditions of employment. Although some workers continue to be entitled only to
sick leave, the standard provision in awards and agreement nowadays is a package of sick
and Personal/Carer’s leave. Accordingly, in the subsequent discussion we shall generally
refer to this package rather than sick leave alone.
Legislation, Awards and Agreements
The safety net standard described above is not the only provision for personal/sick leave.
In Australia today, paid sick leave is provided for in:
• legislated minimum conditions of employment in most states
• Enterprise Agreements
• Australian Workplace Agreements and state Workplace Agreements.
Legislated Minimum Sick Leave and Personal Carer’s Entitlements
Legislated minimum sick leave entitlements are generally less generous than the standard
award entitlements. In NSW legislation provides that the minimum paid sick leave
entitlement of employees covered by awards or agreements, other than casuals, shall be
one week per year. In Queensland the minimum entitlement is 8 days per year for all
employees except casuals, while in South Australia and Western Australia the minimum
entitlement is two weeks/10 days. Victoria’s industrial relations powers have been, of
course referred to the Commonwealth but the minimum conditions of Victorian workers
are covered by the Workplace Relations Act 1996 and this provides for one week of paid
sick leave per year. The Northern Territory’s industrial relations powers were retained
by the Commonwealth at the time of granting self-government. Tasmania has no
legislated minimum sick leave standard. Detailed extracts from the relevant legislation in
each state are listed in Appendix A.
NSW has also legislated to make discrimination against carers unlawful. Inter alia the
Anti-Discrimination Amendment [Carers’ Responsibilities] Act 2000 permits employees
to take time off work to act as carers without fear of reprisals from their employer.
Minimum standards for bereavement leave are also provided for in the WA and
Sick and Personal Carer’s Leave Provisions in Awards
Provision for sick leave in awards has traditionally been fairly standard but there have
been some variations.10 The standard provision is for 40 hours paid leave in the first year
of service and 64 hours in subsequent years. As noted earlier, one significant recent
development has been that the AIRC has developed a “Personal leave model framework
clause” in the course of the award simplification process in relation to the Hospitality
Industry – Accommodation Hotels, Resorts and Gaming Award 1995.11 The clause is set
out in Appendix B. This model clause reflects the trend towards the concept of “Personal
Leave” in place of the separate categories of sick leave, carer’s leave and bereavement
Certain awards have incorporated non-standard provisions for sick leave. One notable
example was the provision that unused sick leave could be cashed-in on termination of
employment in certain awards in NSW. This practice was abolished effective from
February 1993.12 Moreover, in an important decision in 1996 the Industrial Relations
Court upheld an appeal by the AMWU against the Tweed Valley Fruit Processors EFA.13
This agreement proposed to cash-out paid sick leave by increasing the basic wage rate in
return for eliminating the entire sick leave entitlement. It was held that this contravened
the public interest aspect of the “no disadvantage test”. The award provision was for 61
hours paid sick leave.
The CCH Human Resources Management Resource Book reports that “Family/carer's
leave provisions may be found in industrial awards and agreements, including federal
Certified Agreements and Australian Workplace Agreements. As at July 1999, there have
been “test case” decisions in the Federal, New South Wales, Queensland, South
Australian and Tasmanian jurisdictions…..
…The New South Wales decision of 30 August 1996 varied all New South Wales awards
to include personal/carer's leave provisions from that date, with the following exceptions:
• awards which do not contain sick leave provisions;
• employees under the then Local Government (State) Award 1995 , (which expired
in May 1997); and
• contract determinations within the meaning of the NSW Industrial Relations Act
The decision also exempted from its provisions various awards which already had their
own personal/carer's leave provisions.
The Queensland, South Australian and Tasmanian test cases also resulted in model
provisions to be inserted into awards upon application, although the South Australian
decision noted that it was necessary to consider the specific circumstances of each award
before adopting the provisions. In Queensland, carer's leave became available to all
employees (except casual employees and pieceworkers) when the relevant provisions
(sec. 39 of the Industrial Relations Act 1999) commenced on 1 July 1999.”14
Non-award employees may not be covered by any sick leave provision. For example, the
legislated minimum entitlement in NSW affects only those covered by awards or
agreements. Similarly, in the Federal jurisdiction and in Tasmania, sick leave
entitlements derive from awards or agreements. Whether non-award employees in these
jurisdictions have an entitlement to paid sick leave or not will depend on an interpretation
of their common-law contract of employment. It may be that the courts would hold that
such employees are, in fact, entitled to unlimited sick leave as was held in 1921
Flexible Paid Sick and Personal/Carer’s Leave Provisions in Enterprise Agreements
Enterprise Agreements offer greater opportunities for employees, their unions and
employers to devise paid sick/personal/carer’s leave arrangements which are tailored to
their particular requirements. While it appears that most agreements have simply
incorporated the award standard in this respect, many have increased the quantum of paid
sick and person/carer’s leave and some have developed innovative approaches. The
ACTU has documented a number of examples current in 1995.15
Some agreements extend the amount of sick leave in the event of chronic illness or
injury. The CSR Plane Creek Mill and Distillery Agreement extended sick leave
entitlement by an additional 7 weeks for chronic conditions [defined as an illness
requiring more than 5 days absence]. The extended leave can not be accumulated. The
Melbourne Tug and Queensland Tug and Salvage Agreement provides for one weeks
leave in the first six months of employment, a further week in the next six months and
three weeks [accumulating] in subsequent years.
Some agreements provide for a bank of sick leave so that workers who exhaust their
personal sick leave entitlement may draw on the unused entitlement of other workers.
The essential idea here is that workers can pool their sick leave entitlements and draw on
the bank as required. A trial sick leave bank was provided for in The Legal Aid
Commission of Victoria Agreement. In that agreement workers could voluntarily
contribute any days over thirty days accrual of sick leave to the bank.
Sick leave is normally payable at the base rate only so that workers who normally earn
overtime and penalties will have lower take home pay while sick. Some agreements
provide that sick leave should be based on annualised salaries or rolled-up weekly rates
of pay so that workers will receive their normal pay while on sick leave. The Alcoa
Australia Agreements provide for sick leave to be based on an inclusive annual rate of
Some agreements permit employees to cash-in some or all of their sick leave. The
CFMEU and BSL Ultimate Bricklaying Service Agreement provides that employees may
trade up to ten days of accrued sick leave for cash each year on the anniversary of their
appointment. When an employee leaves the company, up to ten days unused sick leave
can be paid out. The Stewart and Sons Enterprise Agreement provides that any balance of
sick leave over an accumulated amount of 160 hours can be paid out at the rate of 75% of
its cash value. When an employee leaves the company, unused sick leave can be paid out
at the rate of 75% of its value.
CCH reports an [unnamed] agreement in which the concept of Incidental Leave is
introduced.16 The incidental leave provision merges sick leave, family leave, bereavement
leave, leave without pay and other special leave. In the case cited, the total of sick leave
and family leave is equivalent to 7.5 per cent of the employee’s total annualised hours
and is designated as accruable incidental leave. Non-accruable incidental leave, merging
bereavement leave and leave without pay, is equivalent to 2 per cent of total annualised
Survey of Sick/Personal/Carer’s Leave Provisions in Enterprise Agreements
Certified agreements under the WR Act are estimated to cover around 80 per cent of
federal award employees. There are two main types of enterprise agreement under the
Workplace Relations Act 1996 – s.170LJ agreements which are agreements between an
employer and one or more unions and s.170LK agreements which are agreements made
directly between employer and employees. Both types of agreement are subject to the ‘no
disadvantage test’ so that virtually all certified agreements will incorporate at least
minimum award conditions in respect of sick leave.17 Certified agreements which do not
specifically provide for sick leave are likely to provide for basic conditions of
employment, including paid sick or personal/carer’s leave through State or Federal
awards or in State legislation. Only 22 per cent of employees are presently paid the award
rate only, the remainder being covered by certified agreements, over-award unregistered
agreements or other arrangements.18
Aggregated data regarding the conditions of work provided for in certified agreements is
contained in a recent report.19 Sick/personal/carer’s leave was explicitly provided for in
60 per cent of s.170LJ agreements and in 72 per cent of s.170LK agreements.20
The Department of Employment, Workplace Relations and Small Business maintains its
own database of certified agreements, known as the Workplace Agreements Database
(WAD). The WAD includes 9,150 federal certified agreements which form the basis of
the following analysis. These were agreements certified between the December Quarter
of 1997 and the September Quarter of 2000, and which expired on or after 31 December
There is a range of family-friendly provisions which offer employees flexibility to take
paid and unpaid leave to attend to personal or family problems. The following table lists
each of these provisions and their incidence.
Table 1 Incidence of family-friendly provisions in federal workplace agreements
Family-friendly provisions Percentage of agreements
Flexible annual leave 6
Access to single days 14
Career break 2
Unlimited sick leave 1
All purpose paid leave 6
Family / carer’s leave 33
Access to other leave for family 24
Extended unpaid parental leave 1
Regular part-time work 9
Job sharing 3
Home-based work 2
Family responsibilities 5
Child care provisions 1
Paid family leave 5
Paid maternity leave 10
Paid paternity leave 3
Paid adoption leave 2
Source: Workplace Agreements Database (WAD), supplied by DEWRSB. Data refer to CAs certified
between the December Quarter 1997 and the September Quarter 2000, which expired on or after 30
Altogether, 49 per cent of agreements in the above sample contained at least one family-
friendly provision. If flexible hours provisions22 are included, the percentage of
agreements containing family-friendly provisions increases to 78 per cent of agreements.
Sick/Personal/Carer’s Leave Provisions in Australian Workplace Agreements
Unlike certified agreements which are collective agreements, AWAs are individual
agreements. They are individually signed, even in cases where a company employs a
large number of employees in terms of the same agreement (data provided by the Office
of the Employment Advocate indicate that 18 per cent of all AWAs relate to one
employer who lodged one agreement!).
The Workplace Relations Act has provided for AWAs since 1997. Australian Workplace
Agreements [AWAs] are subject to the no disadvantage test. Accordingly, award-
standard sick/personal/carer’s leave provisions are the benchmark provision in AWAs.
However, 26 per cent of AWAs provide for higher levels of sick/personal/carer’s leave
than the award while 9 per cent provide lower levels.23 In addition, a variety of flexible
provisions in relation to the use of other forms of leave and hours of work are available in
Table 2 Sick leave provisions in Australian workplace agreements
Provision Percentage of agreements
Sick leave provided – with pay 76
Sick leave provided – without pay 14
Insurance scheme for days sick 4
Bonus incentive to limit sick leave 2
Partial payout of accumulated leave 3
Payout of accumulated leave on termination 3
Unlimited sick leave available 3
Unlimited accumulation of leave 36
Casual agreement – no explicit sick leave entitlement 11
All purpose leave available 71
Insufficient information to classify 6
The OEA provides a sample of 100 AWAs for examination.25 We have examined this
sample of AWAs in relation to sick/personal/carers’ leave provisions. Table 2 sets out the
In some respect it appears that AWAs are less innovative in providing for
sick/personal/carers’ leave than certified agreements. More three-quarters of AWAs
provide for a standard period of paid sick leave. Very few AWAs provide for insurance
against sickness, for bonus incentives to limit sick leave or for any form of payout of
accumulated leave. However, it is worthy of note that 71 per cent of AWAs provide for
all-purpose leave – where sick, bereavement and carers’ leave are combined - and this
offers considerable flexibility.
SICK LEAVE – INTERNATIONAL PRACTICE
Summary of Paid Sick Leave/Personal/Carer’s Leave Provision in Selected
Patterns of absence from work are similar for Australia, Canada and the UK. Typically,
higher rates of absence are observed for women, public sector employees and unionised
workplaces. A number of OECD countries recorded slight declines or relative stability in
absence rates during the mid 1990s. For Austria, Germany, Italy and Sweden this was
attributed to poorer economic conditions, although for Germany the decline coincided
with a reduction in the statutory benefits payable under their sick leave scheme (Kalisch
et al. 1998).
Sick leave entitlements among OECD members vary considerably. Some models involve
public funding of sick leave, while others have a composite of employer and public
funding. A common theme of policy change over the last decade or so for OECD
countries, has been to shift the cost of paid leave for short-term illness onto employers
and away from publicly managed and financed schemes. There has also been a shift
toward increasing the duration of short-term leave that employers are obliged to cover.
This effectively serves as a ‘wedge’ and puts the onus back onto employers to actively
manage sickness and sickness absence from the workplace (Ibid. 1998).26
Another significant development over the same period has been the move toward tighter
monitoring of claimants under the various schemes and less generous benefits. Austria,
for example, has reduced the maximum sickness benefit duration and provided for better
checks on workers who are absent due to sick leave. Italy and Germany have reduced
benefit levels, while collective agreements in Finland have been following a trend toward
less generous allowances for sick leave absence. These types of policy initiative are
designed at increasing the cost of absence from work from the perspective of the worker
and highlight the importance of the role of incentives in managing absence and abuse of
absence. Monitoring is clearly an institutional feature and is no less relevant at the level
of the firm. However, increased monitoring comes at a cost at both the firm level and for
responsible government agencies, as such it is not clear whether steps to increase
monitoring have necessarily been cost efficient in lowering absence rates due to sick
leave in countries where it has been introduced.
Norway, Poland, Spain, Sweden and the Netherlands have introduced, or are taking steps
toward, measures aimed at lowering absence periods. Primarily, this has been in the guise
of increased monitoring and supervision of benefit claimants. In the UK there has been a
shifting of responsibilities for sickness benefits back onto employers which has resulted
in employers taking action to manage absence levels (Kalisch et al. 1998).
Of all the OECD countries reviewed, the US has the most flexible arrangements for how
they manage their paid sick leave entitlements. The system that operates in the US does
not require mandatory sickness benefits for employees. However, employees are entitled
under the Family Leave and Medical Act 1995 (FLMA) to receive 12 weeks of unpaid 12
leave for illness or to care for sick family members.27 Sick leave entitlements, then,
essentially form part of the wage and conditions negotiated between employer and
Experience of Paid Sick Leave in Sweden, Canada, the UK and USA
In Sweden sickness benefit is covered under the National Insurance Act and is payable in
cases of illnesses where working capacity is reduced by at least 25 per cent. The benefit
is paid depending on the extent of the loss of working capacity (NISB 2000a).
Sickness benefits also accommodate ‘reasonable’ payments for additional costs of
transport to and from work in order to facilitate return to work after illness. They also
cover preventative medical treatment in order to prevent or shorten an illness. A medical
certificate is required from the seventh day of absence and a special certificate must be
produced after the 29th day of absence (NISB 2000a).
A sickness period is the period of time over which an insured person repeatedly either
receives sickness benefit or is entitled to preventive sickness benefit or rehabilitation
allowance. During the first days of the sickness period (the first 14 days in 1992-1996,
the first 28 days 1st January 1997-31st March 1998 and the first 14 days since 1st April
1998) the employer pays sick pay to employees. A self-employed person may opt for a
waiting period of three or 30 days (NISB 2000a).
Sickness benefit is payable for an unlimited period and is financed mainly through
statutory social insurance contributions from employers and self-employed persons. Self-
employed persons who have a waiting period in their sickness insurance pay lower
premiums. Payment levels for full sickness benefit as of 1998, are 80 per cent of the
income qualifying for sickness allowance and is payable over the entire sickness period
Since 1999 sickness insurance fees have been used to finance sickness benefit,
rehabilitation compensation, closely related person’s allowance, pregnancy allowance,
disability pension from supplementary pension (ATP), disability pension from basic
pension for disability pensioners with ATP, and the administration of these benefits
Prior to 1998 medicine costs were also financed through the sickness insurance fees. The
government picks up any shortfall between fees collected and the liabilities incurred by
the system. Surplus costs are covered by government funds (NISB 2000b).
From 1994 to 1997, sickness insurance reported a surplus after having been under-
financed for a number of years. The national sickness insurance contribution increased
income from fees while at the same time a number of cost-cutting regulatory changes
reduced the size of payments. In 1997, the surplus amounted to approximately $Au 4
billion, which was added to the central government budget.29
Since 1998 the social insurance offices have been obliged to finance the part of their
administrative costs relating directly to sickness insurance. Expenditure for sickness
insurance is expected to increase considerably in the coming years, primarily due to the
increased costs of sickness benefits (NISB 2000b).
In 1940 the Canadian government enacted legislation that provided unemployment
insurance to cover the loss of income workers faced when out of work. It was stated by
the then labour minister that the system was to insure against unemployment, not
sickness. The scheme was funded by employer and employees in equal part with the
government contributing a further one fifth of the combined employer-employee total.
The first step toward including sick leave was in 1953, when the scheme was extended to
allow for people who were unemployed, but too sick to take on new employment, to
continue to claim unemployment insurance. In 1971 legislation was enacted that extended
the coverage to include interruption of earnings because of illness. A medical certificate
was required for proof of illness and the maximum time on sickness benefits was 15
weeks. The 15-week maximum for entitlements was established by reference to practice
in the private sector and overseas as well as in consultation with medical practitioners
(Dingeldine et al. 2001).
The system as it currently operates is covered by the Employment Insurance Act, with
employer premiums set at 1.4 times the employee contribution.30 Temporary loss of
income due to illness is still covered although it is now possible for employers to receive
a discount on their premiums where they have an approved (and registered) supplemental
benefit plan incorporating sick leave benefits (Bedard 2001).
There are fourteen jurisdictions in Canada, including the federal jurisdiction. Of these,
only four have mandated sick leave entitlements- none of which are paid. In the federal
jurisdiction, employee entitlements come under the Canada Labour Code, covering
around 10 per cent of the Canadian workforce. Under the code protection is provided
against dismissal, lay-off, suspension, demotion or discipline because of absence due to
illness and covers all employees who have worked at least three months with the same
employer. Employees are covered for a 12 weeks absence and must obtain a medical
certificate within 15 days after return to work, if requested by the employer.
Newfoundland only provides for 5 days per year, with at least 6 months of continuous
employment with the same employer required before the entitlement is available (HRDC
The main feature of the entitlement, across all jurisdictions where it is provided, is to
provide job security. Like the US, there is no requirement for paid leave of absence due
to sickness in any of the Canadian jurisdictions. Employers are required to maintain their
contributions to other benefit plans, such as pension, health and disability benefits, and
seniority, while the employee is absent (HRDC 2000).
Depending on the jurisdiction there is also provision for parental care/family
responsibility leave to be taken. For example, in British Columbia employees are entitled
to 5 days unpaid leave each year to meet responsibilities related to the care of a child or
family member, whether for health, or education (in the case of children). For most
jurisdictions, however, this leave entitlement relates to the birth or adoption of a child
Incidence of Sick Leave
In 1997, the average number of working days lost due to personal reasons per full-time
paid worker in Canada was 7.4 days. Of the 7.4 days, 6.2 days was lost due to illness or
disability, and 1.2 days was lost due to personal or family responsibilities. These figures
exclude maternity leave, a major factor in lost working time by women due to personal or
family responsibilities. Apart from maternity leave, the average days of absence for
women were 9.1 days, which was approximately one and a half times the average for
Absenteeism was also higher for unionised workers relative to non-unionised workers in
1997. For example, unionised full-time workers lost 10.7 working days, almost twice the
5.6 workdays lost by non-unionised full-time workers. This can be attributed to the fact
that most or all collective agreements contain paid sick leave entitlements. In public
administration, and transportation and communication (highly unionised industries), the
average days of absence was 8.9 days, while less-unionised industries, such as agriculture
and trade, had comparatively lower days of absence with 5.5 and 5.8 days respectively
(Statistics Canada 1998).
Workers in large companies (with more than 500 employees) lost 9.0 days on average,
while workers in firms having less than 20 employees lost a comparatively lower 6.2
days. This is due to the higher likelihood of union coverage and therefore paid sick leave
entitlements, for workers in large firms. It was found in the 1995 Survey of Work
Arrangements that work absence rates are higher among employees with paid sick leave
entitlements (Statistics Canada 1998).
Paid sick leave entitlements are highest among full-time workers. As shown in Figure 1,
about 65 per cent of full-time workers received sick pay in 1995 as compared to less than
20 per cent of regular part-time workers (Statistics Canada 1997).
Figure 1 Percentage of employees who receive sick pay, 1995
Full-time Job Share Part-time
Source: Statistics Canada (1997)
Absence rates31 between 1984 and 1997 for full-time employees in Britain were around
3.2 per cent and, although they display a high degree of seasonality, were relatively stable
over the period. Rates generally peak in December and January, with their low point
occurring in August of each year (Barmby et al. 1999).
The absence rate is highest for females, employees with trade union membership, and
public sector employees. This is a pattern that is also found for Canada and Australia.
The lowest absence rate is found for people who work from home. This can be
attributable to the fact that absence from work due to illness for such employees will only
occur when the employee is prevented from doing any work at all by the sickness
(Barmby et al. 1999).
Studies of the cost of absenteeism to the UK economy show that it is rising.32
Absenteeism resulted in a cost of $Au 35.4 billion for UK businesses33 in 1996, which is
equivalent to an average cost of $Au 1 574 per employee on an annual basis. It was found
that 187 million working days (an average of 8.4 working days off per employee) were
lost during 1996, or the equivalent of 3.7 per cent of working time. Average days of
absence per public sector employee were 10.2 days, compared to 7.3 for private sector
employees. The two main causes of absenteeism are sickness and family responsibilities.
About 98 per cent of the time spent absent from work was considered by companies to be
genuinely due to sickness. The balance was attributed to family responsibilities (Gilman
Prior to 1994 Statutory Sick Pay (SSP) in the UK was funded by the Department of
Social Security (DSS), while the employer was only responsible for administering it.
However, since 1994, the employer has effectively funded SSP. The employer must now
bear the cost and only has limited recovery of SSP. It is only after 28 weeks that the State
takes over the provision of the benefit (Blythens 1997).
Table 3 SSP rates, 1997/98, £
Average weekly earnings SSP rates
Under $183 Nil
$183 or more 164.45
Since April 1997 employers have been able to opt out of SSP if they provide
Occupational Sick Pay (OSP) entitlements in employment contracts, so long as the
amount of OSP is no less than SSP entitlements. Employers also have the option of
paying SSP to some employees while paying OSP to others. One of the advantages of
employers suing the OSP option is that SSP records are generally not required, thus the
administrative burden is reduced (Blythens 1997).
Sick pay as it operates in the US covers temporary absence from work, due to sickness,
injury or disability. However, it excludes disability retirement payments, worker's
compensation, medical expenses and payments unrelated to absence from work. Sick pay
received is regarded as taxable wages for durations of absence up to six months (Tinder
Under Federal law in the US, employers are not required to provide paid sick leave.
Where employees have sick leave entitlements and terminate employment prior to using
these, the employer is not obliged to payout the unused portion. Unpaid leave for
employees who work for firms employing more than 50 employees is mandatory and
covered under the Family and Medical Leave Act 1995 (USDOL, 2001). Employees are
allowed to substitute paid sick leave in place of their FMLA leave entitlements to care for
a seriously ill family member only if the employer's leave plan allows paid leave to be
used for that purpose (USDOL, 2001).
The flexibility in the rules on sick pay allows the employer to use several sick pay plans.
These plans can be classified under two broad categories. Under the employer-
funded/self-insured plan, the employer pays the sick pay and is responsible for reporting
wages and taxes. However, under the third party plan, the employer relies on a third party
to pay the sick pay (Tinder 2000).
In 1997 about 93 per cent of full-time employees were covered by unpaid family leave,
up from 84 per cent in 1995. This is due mainly to the continued implementation of the
Federal Family and Medical Leave Act of 1993. This act requires employers with more
than 50 employees to provide12 weeks of unpaid leave each year to employees for illness
or care associated with family member illness.
The Bureau of Labour Statistics (BLS) survey of medium and large enterprises in the US
shows that the average number of days of paid sick leave increases with service. The
average number of sick leave days available to employees in 1997 was 11 after one year
of service and 21 days after 25 years.34
THE INCIDENCE AND COSTS OF SICK LEAVE
Estimated Costs of Sick/Personal/Carer’s Leave in Australia
Before attempting to quantify the costs of paid sick/personal/carer’s leave it is helpful to
consider the nature of any such costs and on whom they fall. At first blush one might be
tempted to think of paid leave as a cost borne by employers. In fact, of course, it must be
a cost which is largely borne by employees. Employees would be paid a higher rate of
pay if they did not have the benefit of a paid leave entitlement.
The textbook account of this situation runs as follows.35 Employees will be paid a wage
rate which is less than their marginal product by an amount equivalent to the cost of paid
leave. Let us assume that each employee is entitled to four weeks paid annual leave and
one week paid sick/personal/carer’s leave. Let us also assume that each employee is paid
$100 per day. Now the actual work year is about 260 days [52 weeks x 5 days] so that an
employee who is entitled to 25 days of paid leave [5 weeks x 5 days] actually works only
235 days per year or 90 per cent of the potential work year. Accordingly, the employee
who is paid $26,000 per annum is actually earning $110.63 per day [$26,000/235]. This
implies that the employee must produce output equivalent to $110.63 per day for 235
days per annum in order for the firm to be able to afford to give him/her 25 days paid
leave per year. If the employee produced less than $110.63 per day the firm would have
to reduce the wage rate or reduce the paid leave entitlement in order to bring the value of
daily output into line with the daily rate of pay. Since both the rate of pay and the paid
leave entitlement for any period of time are fixed in advance, firms will make estimates
of the likely amount of paid sick leave that will be taken by an employee or group of
employees [based on past experience] and fix the wage rate accordingly.
The situation of causal employees illustrates this proposition. Casual employees are paid
a salary loading [usually around 20 - 30 per cent] in lieu of entitlements to paid sick and
recreational leave, among other things. The loading, therefore, makes up their pay to the
value of their full marginal product with no reductions to fund paid leave.
This analysis explains why it is that firms have, in some instances, cashed-out paid sick
leave entitlements. Cashing-out of the leave entitlement involves increasing the hourly
rate of pay in exchange for the elimination of the paid sick leave entitlement.36
In the discussion above it is implied that both employers and employees are indifferent as
to whether days are worked at $100 per day with no paid leave or paid at $110.63 with 25
days paid leave. This is not the case. When fixed amounts of leave with pay are available,
employees will always have an incentive to take as much of it as they can, even if they do
not value it highly.37 Paid time off may be regarded as a means by which firms force their
employees to take leave. It is a simple matter to show that it is always possible to
construct flexible paid leave packages which are preferred by both employer and
employee to packages in which there is a fixed leave component. Essentially, employee
utility will be maximised where choice exists as to whether particular days are worked for
additional pay or taken as paid leave. From the perspective of the firm, it too will benefit
from flexibility in the work/paid leave package. This is because the firm can generally
offer employees a rate of pay which is higher than the rate at which the employee values
time off but lower than the value of the employee’s marginal product. Accordingly, each
hour worked rather than given as paid leave will yield profits for the firm. The
implication of this conclusion is that cashing-out of paid leave, including
sick/personal/carer’s leave will always yield higher levels of utility for both employers
It is only recently that cashing-out provisions have been included in agreements. In the
past cashing-out and cashing-in of sick leave has been attempted in some awards and
agreements in Australia [see above] and it has been frowned on by the AIRC and
Governments. Paid sick/personal/carer’s leave has been viewed as a community standard
which must be protected. However, there is another consideration which supports the
notion of a compulsory period of paid sick/personal/carer’s leave. Where firms offer
incentives for employees to come to work rather than take leave when they are sick [or a
member of their family is sick], there is a serious risk that the employee will be induced
to come to work even when they are sick or when they feel they should really be at home
caring for a relative. Sick or guilty workers are likely to be less than fully productive and
end up costing the firm money. Likewise, the worker in this situation will be dissatisfied
that he/she has been induced to go to work when they actually felt they ought to have
stayed at home. Hence, flexibility in the paid sick/personal/carer’s leave package must
avoid inducing workers who are too sick to be productive [or carers of sick family
members] to come to work.
The discussion above leads to a number of important conclusions:
• the costs of paid leave will largely be borne by employees in the form of lower
rates of pay than would obtain if no paid sick leave was provided;
• where a fixed amount of paid sick leave is provided, employees will always have
incentives to take all of it, whether or not they are actually sick;
• flexible provisions for sick leave will benefit employees since it may give them
the ability to choose whether to work for pay or take leave;
• flexible sick leave provisions will also generally benefit firms since they can
induce workers to work for rates of pay less than their marginal product rather
than take leave, so long as workers value time-off less than they value the day’s
• flexible sick leave provisions must avoid inducing workers who are too sick to be
productive from coming to work.
Paid sick/personal/carer’s leave taken when an employee is ill or caring for a sick family
member results in a loss of output to the firm and to the economy. So, while the costs of
employee sickness are mainly borne by employees themselves in the form of reduced
wage rates, employers also forego profits and the economy loses potential output. Paid
sick/personal/carer’s leave taken when an employee or a family member is not actually
sick is also paid for mainly by the employee. Again in this case employers lose profits,
the economy loses potential output but, in addition, employees also lose any difference
between their own valuation of the days of leave and the rate of pay they could earn by
Estimating the costs of sick leave to the economy is a rough and ready exercise. Different
categories of employees, on different salary levels, take sick leave at quite different rates
and for different durations [see tables 2 – 11]. It would be impractical in an exercise of
this kind to try to construct an estimate of the costs of sick leave which reflected all of the
different characteristics of the employed labour force and their associated sick leave
patterns. Instead, it is more practicable to estimate the percentage of the workforce which
is absent on average on any workday and compute the cost of absence on the basis of the
salary of the average worker.
The salary of an absent employee is used to measure the cost of lost output.39 This is
because we assume that employees are paid their marginal product. Clearly this is only an
approximate device. For example, employers may be able to cover, in whole or part, for
the absent employee and lost output may only be a fraction of the marginal product.
Conversely, complementarities in the production process may mean that an absent
employee may be vital to the work of others so that the production of other workers who
come to work is lost as well as that of that of the absentee.
Global estimates of rates of absence from work in Australia tend to indicate that about 3
per cent of all employees are absent from work without prior approval on any given day.
For example the 1995 AWIRS asked management respondents “On an average working
day, what percentage of all employees here are typically away from work or on sick leave
without leave being approved in advance?”40 The responses averaged over all workplaces
with more than 20 employees were 3 per cent. From ABS data we know that the vast bulk
of unapproved absences are taken as sick leave.41 Total employee compensation in
Australia in 1997-98 was $270 billion.42 On the basis of an estimated 3 per cent of the
workforce being on sick leave each day, total employee absenteeism cost the Australian
economy $8.1 billion in 1997-98. This cost translates into a figure of $952 per employee
The estimates of the cost of sick leave made above are actually the sum of the cost of
employee sickness plus the cost of any abuse of sick leave. Since reliable estimates of the
proportion of sick leave which is taken for reasons other than genuine illness are hard to
come by, it is difficult to estimate the costs to the Australian economy of abuse of sick
leave. However, Morgan and Banks have estimated that unscheduled absences that are
not due to actual illness cost Australian businesses $2.56 billion a year.43 This translates
into a cost of $305 per employee per annum.
One issue which is worth considering here, however, is whether or not the loss of output
due to any abuse of sick leave actually constitutes a cost to the economy and to society.
We noted earlier that paid sick leave must be largely financed by employees. The
mechanism by which this happens is that the wage rate paid to an employee entitled to
paid sick leave will be lower than would be the case if no paid sick leave was available.
Hence, if employee sickness was predictable, employers might be able to arrange for
temporary employees to be available to cover for employees who were sick.44 In this
situation sick leave would not result in lost output either to the firm or society. Sickness
amongst employees is not, however, generally predictable and covering for sick workers
is therefore often not possible. It is this unpredictable characteristic of sickness and sick
leave which causes output to be lost. It is not only sick leave due to sickness that is
unpredictable but also sick leave taken when the employee is not genuinely ill.
Accordingly, all sick leave is likely to result in lost output which reduces the private
product of the firm and the social product of the Australian economy.
The Incidence of Sick Leave
The number of days taken off work as sick leave varies between public and private
sector, between industries and from state to state. In general, it appears that the private
sector displays lower levels of sick leave than the public sector.
Table 4 Sick leave in Australia by industry sector 1996-7
Industry/Sector Average days of sick leave per year
Finance and Insurance 4.5
Service and other 3.7
Australian public sector 6.8
Source: Get Better Soon: the Management of Sickness Absence in the WA Public Sector. Report No.5
Auditor General, WA 1997 p.9.
There are also variations in the level of sick leave between the public sectors in different
states. For example, in 1994-95 the average number of days sick leave per year in the
South Australian public sector was 5.4 while in WA it was 6.1 in the period 1995-96 and
6.8 in the Australian public sector overall in 1996-97.
The number of employees absent from work increased between 1993 and 1997.45 Table 5
shows that the increase in the percentage of employees taking sick leave was slight. This
may be attributed to the fact that there was a marked improvement in labour market
conditions over this time, which has generally been associated with changes in the level
of absenteeism (see, for example, Kalisch et al. 1998). Over the period, there was a 14
per cent increase in the number of males who were absent from work. The corresponding
figure for females was 19 per cent. Around 75 per cent of these were paid during their
absence. Ill health, pregnancy, disability and recreation are some of the reasons given for
work absence. Women with children under the age of 12 were more likely than men (with
children under 12 years old) to be absent.
Table 5 Employees taking sick leave, Australia, 1993-1997, per cent
Source: ABS Working Arrangements, Australia, Cat. No. 6342.
ASBS also collect data on the duration of employee absence. Table 6 below shows the
duration of work absences in 1997.
Table 6 Absence by duration, Australia, 1997 [Number of days absent in last two
weeks – number of employees]
Absent for: 000s Percentage
1 day 513.9 41
2 days 210.2 17
3 days or more 429.2 34
Other 102.5 8
Total 1 256.0 100
Source: ABS Working Arrangements, Australia, Cat. No. 6342.
Of the 1 256 000 who were absent, around 691 400 used sick leave to cover their
absence, or 55 per cent.
Table 7 below shows the percentage of absenteeism that was accounted for by sick leave.
For full-time employees there are clear differences in the amount of absence that has been
attributed to sick leave compared to that reported for employees who are defined as being
in casual employment. This is particularly so for males and also applies to employees
who work on a part-time basis.
Table 7 Percentage of absence attributed to sick leave, Australia, 1997
Male 57.6 28.9
Female 60.7 42.3
Persons 58.8 32.2
Male 63.6 33.8
Female 60.3 42.0
Persons 60.7 39.6
Source: ABS Working Arrangements, Australia, Cat. No. 6342.
Table 8 shows the percentage of total employees who report an absence as being due to
sick leave. In all cases the incidence is considerably higher for employees who have
permanent status. A higher percentage of females take sick leave than men, with the
difference being most pronounced for permanent employees.
Table 8 Percentage of employees taking sick leave, Australia, 1997
Full-time 10.8 4.9
Female 13.6 6.2
Persons 11.8 5.2
Male 10.9 4.0
Female 11.8 5.6
Persons 11.7 6.1
Source: ABS Working Arrangements, Australia, Cat. No. 6342.
When the percentage of absences attributed to sick leave are examined on the basis of
whether employees are union members or not, there is a marginally higher percentage of
sick leave absences for union members than for non-union members, with the exception
of male part-time workers. It should be noted that these cross-tabulations do not control
for factors which may be correlated with both union membership and the propensity to
take sick leave. Accordingly, it should not be assumed that union membership causes any
particular incidence of sick leave.
Table 9 Percentage of absence attributed to sick leave by trade union membership,
Male 58.4 52.2
Female 63.7 57.5
Persons 60.2 54.2
Male 38.9 42.5
Female 55.0 50.3
Persons 52.1 48.6
Source: ABS Working Arrangements, Australia, Cat. No. 6342.
The percentage of the total employees who take leave due to sick leave is consistently
higher for union members than for non-union members. Typically, this is of the order of a
3 percentage point difference, although for male union members who are part-time
employees the difference is only 1.5 percentage points.
Table 10 Percentage of employees taking sick leave by trade union membership,
Male 12.0 9.2
Female 15.8 11.7
Persons 13.2 10.0
Male 6.6 5.1
Female 11.3 7.3
Persons 10.4 6.8
Source: ABS Working Arrangements, Australia, Cat. No. 6342.
Table 11 below, shows that the vast majority of self-reported casuals do not receive sick
leave entitlements. Less than 2 per cent of the casuals do receive sick leave entitlements,
while just over 2 per cent report that they do not know.
Table 11 Sick leave by employment characteristics, Australia, 1998, 000s
Employees Self- Other Owner Total
with leave identified employed managers of
entitlements casuals persons incorporated
Receives paid sick 4930.4 27.2 30.6 236.9- 5225.1
Does not receive - 1421.8 197.6 288.7 1908.1
Does not know - 32.0 34.3 11.0 77.3
Source: ABS Forms of Employment Survey, Cat. No. 6359.0.
Note: Self-identified casuals are those employees who report that they are in casual employment but do not
receive both paid sick leave and paid holiday leave entitlements.
States and Territories
Although the incidence of sick leave varies from state to state within Australia, useful
insights are to be gained from examining the experience of sick leave within the WA
public sector, which happens to be very well documented. Although this cannot be
considered fully representative of the experience of all states, it offers a very useful
general indication of how the incidence of sick leave varies with a whole range of
characteristics within the public sector labour force. Time and space constraints preclude
a detailed examination in all of the states and territories.
The Incidence of Sick Leave within the Western Australia Public Sector
In 1997 the Western Australian public sector employed around 105,000 staff, or
approximately 90,000 full-time equivalents (FTE). The most common sick leave
entitlement is 10 days full pay and 5 days on half pay, with unused sick leave carrying
over to the following year (AG 1997).
The annual cost of sick leave absence in the Western Australian public sector has been
estimated at $80 million to $100 million dollars (current dollars) in 1997 (AG 1997). To
put this in perspective, the annual payroll cost is about $4 billion. Thus, the costs
represent 2 to 2.5 per cent of payroll costs. As noted by the Auditor General, however,
this underestimates the true cost of absenteeism as it does not take into account the cost
of relief staff. Based on average annual salary costs of $40,000 per FTE, a reduction of
15 hours per year sick leave (33 per cent) for 60,000 FTE would result in savings of $20
million per year.
The incidence of sick leave varies by employee characteristics. There is, however,
virtually no difference between males and females in the mean number of days taken as
sick leave and the difference in costs is also negligible.
Table 12 Average days sick leave and average cost by gender, W.A., 1999
Gender Average days Average cost
Male 2.7 $465
Female 2.8 $424
Combined 2.7 $445
Description: Average days and cost of sick leave taken by sex for full-time permanent employees during
the 6 month period 1 January 1999 to 30 June 1999.
Source: Profile of the Western Australian State Government Workforce, June 1999.
Table 13 shows that, as might be expected, full-time and permanent employees take, on
average, more sick leave than either part-time or fixed term employees and the cost of
sick leave for the former categories is also significantly greater.
Table 13 Average days sick leave and average cost by employment status, W.A.,
Employment status Average days Average cost
Full-time 2.6 $413
Part-time 2.2 $277
Permanent 2.7 $410
Fixed term 1.6 $219
Description: Average days and cost of sick leave taken by employment status for current employees during
the 6 month period 1 January 1999 to 30 June 1999.
Source: Profile of the Western Australian State Government Workforce, June 199.
Figure 2 below shows that there is an inverse relationship between the incidence of sick
leave and salary level. In general, the lower the level of pay, the more sick leave that is
taken. Presumably this is accounted for by the likelihood that the lower the level of pay,
the less rewarding the job is likely to be. In addition, the absence of employees at high
levels within the employment hierarchy is likely to be more visible and more disruptive
to the functioning of the organisation and such employees will tend to take sick leave
only when absolutely necessary.
Figure 2 Sick leave absence by salary, January 1999 to June 1999, 000’s
Description: Average days paid sick leave taken by salary for full-time permanent employees during the 6
month period 1 January 1999 to 30 June 1999.
Source: Profile of the Western Australian State Government Workforce, June 1999.
Not unexpectedly, older workers take more sick leave than younger workers. Figure 3
shows that, while sick leave taken is quite stable up to age 50, workers aged over fifty
take significantly more sick leave than their younger counterparts.
Figure 3 Sick leave absence by age, January 1999 to June 1999
Description: Average days paid sick leave taken by age for full-time permanent employees during the 6
month period 1 January 1999 to 30 June 1999.
Source: Profile of the Western Australian State Government Workforce, June 1999.
The report Get Better Soon: the Management of Sickness Absence in the WA Public
Sector. Report No.5 Auditor General, WA 1997 reveals that variations in the level of sick
leave taken also occur in respect of many other categories:
• average sick leave varies between large sized agencies [500+ FTEs] of the WA
public service from less than 20 hours per year at six agencies to over 70 hours at
• large sized agencies have higher average levels of sick leave than medium sized
agencies [100-499 FTEs];
• different occupational groups within the same agency claim quite different levels
of sick leave – only 27 per cent of medical practitioners in one agency claimed
any sick leave while 87 per cent of cleaners in the same agency claimed sick leave
and managers/administrators take the lowest levels of sick leave [31 hours] while
drivers/operators take the highest levels [60 hours];
• females in the age ranges 22-34 and 44-53 take more sick leave than males in
these cohorts while in other cohorts sick leave levels for males and females are
about the same;
• there is a 1000 per cent difference between sick leave levels of clerks in different
agencies – clerks in the Ministry of Justice average 90 hours per year while clerks
in the Department of Environmental Protection average only 9 hours per year;
• some staff groups take frequent short absences while others are absent less often
but for longer periods [WA Police Service];
• sick leave varies by work unit or district – sick leave for teachers in WA varied
from 5.9 days per year in Albany to 1.4 days in Geraldton south.
These data reveal considerable variation in the incidence of sick leave both across and
within agencies. Since there is no reason to suppose that the health of employees can
account for these variations independent of the work situation, it is very likely that work-
related factors play a significant role in determining levels of employee sick leave.46
Some possible candidates are:
• the nature of the work;
• availability of flexible leave for personal/family purposes;
• the pay and conditions;
• poor job satisfaction and poor organisational health;
• state of the labour market;
• different approaches to sick leave management;
• inadequate dispute and grievance resolution mechanisms.
These issues require to be addressed as part of a management strategy for dealing with
employee absence. Flexible provision for sick leave will be an essential feature of that
It is worth noting here that the variations in sick leave experience noted above between
similar organisations and similar categories of employees show that dramatic
improvements are possible. For example, it has been estimated that if all agencies in the
WA public sector managed absence as effectively as the best performing agencies do,
savings of up to 30 per cent or $20 million in sick leave payments would be achieved.47
Hence there are quite significant gains to be made for employers, employees, taxpayers
and the economy as a whole from effective absence management. However, one reason
why agencies display low rates of absence may be because they provide employees with
benefits and conditions which discourage the taking of sick leave. Since these measures
are likely to be costly, the estimated savings of $20 million may be an over estimate of
THE NEED FOR FLEXIBILITIES IN THE PROVISION OF PAID SICK LEAVE
Up until the 1980s in Australia, paid sick leave was provided for in awards in a highly
standardised way and with little scope for flexible use of the leave by either employees or
employers. There were two main reasons why this was not satisfactory. First, the
traditional concept of paid sick leave became increasingly inadequate to meet the
requirements of workers in the modern labour market. Many workers and employers now
seek means to permit employees to balance work and family responsibilities in a
workforce with high rates of participation by parents of dependent children. Second, sick
leave has, in many instances, come to be regarded as a leave entitlement whether or not
the worker is really sick and this leads to a loss of income on the part of both firms and
From Sick Leave to Personal/Carer’s Leave
Paid sick leave was intended to safeguard a worker’s income and position when illness
struck. It was like an insurance scheme in which the employer was a self-insurer although
it is employees who will pay the premiums. It was a concept of sick leave which
developed at a time when the typical family had a sole breadwinner. It did not explicitly
recognise that illness might strike a member of the worker’s immediate family and that
the worker might have to absent him/herself from work to care for that relative. This
issue became acutely important as labour force participation rates amongst women,
particularly married women, increased dramatically. In 1961 only 17.3 per cent of
married females participated in the labour force. By 1981 this had risen to 44.3 per cent
and by 1999 had risen again to 54.4 per cent. Moreover:48
• in 93 per cent of two-parent families with dependants one or both partners were
• in 61 per cent of two-parent families with dependants the female parent was
• the parent was employed in just over half (51 per cent) of one-parent families with
A survey conducted by the Australian Institute of Family Studies in 199249 found that:
• 46 per cent of parents with children have to take time off to take time off to look
after sick children each year;
• the average time taken off work to care for sick children is about 3.8 days per year
or mothers and 2.5 days for fathers.
Moreover, Vandenheuvel (1993) found that:
• working parents take an average of 9.9 days off per year to care for children;
• 3.5 of these days was taken off to care for a sick child;
• almost 33 per cent had taken time off in the previous year to care for a family
Clearly this is a vastly different landscape from that which obtained at the time that paid
sick leave was initially introduced. The family is now integral to the workforce. Sickness
or injury to any member of many families is now an unavoidable reason why an
employee may require leave from work. From the point of view of employees, therefore,
a broadening of the scope of sick leave to encompass paid leave to care for a sick
member of the immediate family is an important flexibility.
From the point of view of employers it is also important that paid leave should recognise
the new realities of the labour market. Paid sick leave was designed to ensure that
employees had peace of mind that when occasional illness struck they would not lose
their job or their income as a result. It was also intended to ensure that sick employees did
not come to work. It is not in the interests of firms to have employees who are worried or
stressed at the prospects of becoming ill. An employer who respects and caters for the
wellbeing of employees is much more likely to have loyal, committed and productive
employees. By extension, the wellbeing of employees must now be viewed in the context
of their family responsibilities and it is in the interests of employers to offer sufficient
flexibility in the provision of paid leave to ensure that workers have peace of mind that
they will be able to respond to a family crisis without loss of position or income.
The introduction of paid bereavement leave was the first extension of the paid sick leave
concept to recognise that matters other than the employee’s own illness should attract
paid leave. However, the extension of the concept of paid sick leave to that of paid
personal/carer’s leave introduced significant flexibilities for both employers and
employees. There is a perception that paid sick leave entitlements are not generally fully
used or not fully used by genuine sick leave for most workers. Accordingly, making all or
part of the paid sick leave entitlement available for carer’s leave where required may
result in a better utilisation of the entitlement than when it is dedicated to sick leave
alone. However, since it is likely that the total number of days, in the aggregate, which
are taken as personal/carer’s leave will exceed the total which would be taken as sick
leave alone, there is likely to be a net additional cost resulting from this broadening of the
scope of paid personal leave.
Employee Abuse of Paid Sick Leave
“…the great Australian sickie – a cultural practice which, somewhat perversely, has been
marketed to the rest of the free world through Neighbours … Not for nothing, it would
seem, is Australia renowned as the land of the long weekend.”51 Much as we cherish the
uniqueness of our Australian culture we tend to underestimate the extent to which many
of our icons are actually universal phenomena. One of the researchers on this project
discovered this when carrying out a weekly check of the local newspaper of the town of
his birth. The following headline “In Sickness and in Work” was followed by “Whether
you use it as a day for doing housework or sunning yourself at the beach, sickies are
costing industry in this country an absolute fortune”52 No, not Australia – Scotland. A
casual glance at the professional literature on paid sick leave confirms that concern over
abuse of sick leave is a world-wide phenomenon and that many HR managers are
devoting, time, energy and ingenuity to address the problem.
In some cases, paid sick leave is believed to have become institutionalised and is
considered to be an entitlement to paid leave whether or not the worker is actually sick.53
This is sometimes called an “absence culture” in the sociological literature.54
We have already noted that it is easy to demonstrate that where paid time off work is
available, workers will have strong incentives to take that time off. Accordingly, it likely
that the system of paid sick leave is subject to abuse. Workers who are not really sick
may nevertheless take time off, often to the full extent of their entitlement to sick leave.
While accurate figures on this phenomenon are not available, the WA Auditor General
reports that research suggests that as much as 50 per cent of paid sick leave in
organisations with high levels of absenteeism can be eliminated by good management
practices.55 However, so long as the worker values the time off less than the firm does, it
will always be possible to construct incentive schemes which makes both the worker and
the firm better off if the (well) worker comes to work rather than take the time off. There
are some problems in this however. Schemes which provide workers with incentives to
come to work rather than to take sick leave must be designed to avoid creating incentives
for sick workers to come to work. It is not in the interests of either the firm or workers
that workers should be induced to come to work when they are sick. However, there may
be marginal cases where the effect of the incentive is to encourage sick workers to come
to work, to the detriment of both the worker and the firm.
In addressing the issue of abuse of paid sick leave, we again require to consider flexibility
in the provision of paid sick or personal/carer’s leave. The problem of abuse of sick
leave, in part at least, derives from the inflexibility of the traditional model. A certain
number of days are allocated as available for paid sick leave and if they are not taken
[over some accrual limit] they disappear. There is no incentive, other than a moral one,
not to take the full allocation of paid sick leave.
Employees take paid sick leave because:
• they are too sick to come to work;
• a family member is sick and the employee stays home to care for them;
• they are well but choose to take time off anyway.
The first two of these reasons represent, of course, the circumstances which
sick/personal/carer’s leave is intended to accommodate. The last is an inappropriate use
of sick/personal/carer’s leave which will be costly to both firms and their employees.
However, it may well be mainly due to deficiencies in “organisational health” rather than
mere shirking. ABS gathers extensive data on employee absence from work and the
reasons why employees take paid sick leave. However, it is not possible to distinguish
from these data voluntary (avoidable) and involuntary (unavoidable) absence. Indeed
Dawkins and Kenyon (1990) have suggested that it is difficult, if not impossible, to make
such a distinction empirically.56 However, some such data have been published overseas.
It is useful to consider one UK report which, inter alia, addresses the issue of sick leave
abuse within the context of a more general analysis of the management of sickness
The Management of Sickness Absence in the UK
A recent study in the UK has surveyed a large sample of HR managers and gathered
useful data on the causes of sickness absence and management policies to address the
issue.57 IPD surveyed HR managers in 1,684 organisations in the UK. The main findings
of interest to us from the survey are:
• the average level of sickness absence is 4.1 per cent of working time;
• the average cost of sickness absence is £485.60 [A$1117.00] per employee per
year and costs are particularly high in the public sector;
• the most common causes of sickness absence are minor complaints such as colds
• among non-manual workers stress is the second most common reported cause of
absence and stress is an especially important reported cause of absence in the
• HR managers consider that 34 per cent of sickness absence was not genuinely due
to illness and, in some industries, estimate that around 50 per cent of absence is
The IPD survey also investigated management responses to sickness absence. They found
• Most employers do not benchmark sickness absence performance;
• Most organisations have a written absence policies;
• Return-to–work interviews, provision of sickness absence data to line managers
and disciplinary procedures are the most common elements of sickness absence
• Return-to-work interviews are considered the most effective sickness
management tool in relation to short-term absence;
• Home visits to absent employees were also considered particularly effective by
the small proportion [5 per cent] of managers using this approach58;
• The involvement of health professions is the preferred approach to dealing with
longer term absence;
• Provision of family-friendly leave arrangements can reduce the amount of
It is of some interest that the IPD survey found that 27 per cent of HR managers ranked
“home/family responsibilities” as one of the five main causes of sickness absence for
non-manual employees and 24 per cent had the same view in respect of manual
employees. 58 per cent of the respondent organisations had family-friendly initiatives in
place. These were much more prevalent in the public sector however, with 84 per cent of
public sector employees covered by family-friendly leave arrangements compared with
47 per cent of those in the private sector. However, only 34 per cent of respondents
considered that family-friendly policies had had an impact on sickness absence rates,
with 37 per cent reporting no effect and 29 per cent unsure.
ISSUES AND OPTIONS FOR FLEXIBILITY IN SICK LEAVE
We have argued that paid sick leave of the traditional kind is too inflexible either to
discourage abuse of the entitlement or to meet the requirements of both employees and
employers in the modern labour market. We have already noted that major changes have
occurred during the last decade in sick leave provisions in response to these problems and
these have mainly involved introducing more flexible provision for sick leave.
Issue 1 - The most common reason why employees take sick leave is because they
are ill and unfit to come to work
Sick leave provisions must be sufficiently flexible to make it possible for employees to
stay away from work for a period of time necessary to recover from short-term bouts of
illness without loss of pay or position. It is not generally argued that existing sick leave
provisions are inadequate or too inflexible to accommodate the short-term illnesses of
individual employees. However, employers should consider how they might contribute to
reducing the incidence of sickness amongst their employees by adopting appropriate
• Promote a healthy lifestyle amongst their employees;
• Create high levels of motivation and job satisfaction;
• Eliminate stress and other negative influences on health from the workplace.
These are aspects of the management of sickness absence and are the responsibility of
Issue 2 - Some employees also take sick leave when they are not genuinely sick
We noted earlier that British evidence suggests that somewhere between one-third and
half of absence on sick leave is not genuine.59 Moreover, the WA Auditor General notes
that “Research elsewhere suggests that good management can lead to reductions of 40 per
cent to 50 per cent in sick leave at organisations with high levels of absence”.60
We have already noted on a number of occasions that provision for a set period of paid
sick leave acts as an incentive for an employee to take the available leave whether or not
they are sick. This problem may be exacerbated by restrictions on the ability of
employees to accrue sick leave entitlements. In addition, voluntary or avoidable sick
leave absence can result from:
• Poor organisational health, where job satisfaction and commitment to the
organisation are low;
• The presence of an “absence culture”;
• Inadequate management of sickness absence.
The monetary incentives to take leave can be countered by monetary incentives to come
to work. These may be supplemented by more flexible arrangements for the accrual of
sick leave entitlements. Absence from work which is due to organisational factors must,
however, be addressed as part of an absence-management strategy. “Absenteeism is like a
fungus. It thrives in dark corners. The more you leave it, the more it spreads.”61 Flexible
approaches to sick/personal/carer’s leave, within the commercial constraints of the
business, are likely to form part of such a strategy.
Effective management of sick leave can achieve dramatic savings. An example is
afforded by the South Australian public service. A three year campaign to reduce levels
of sickness absence in SA resulted in a fall in average sick leave claimed from 6.3 to 5.4
days on average per annum. In the WA public sector it is estimated that if average
claimed sick leave across the whole public sector could be reduced to the levels already
attained in the 16 best performing agencies, savings of $20 million per annum would be
Issue 3 - In Australia today over 60 per cent of two parent families with dependent
children have both parents in the labour force
Paid sick leave which is available for individual employees’ illness only is inadequate in
a situation in which most workers are required to balance their work and family
commitments. This proposition is well recognised by employers, unions and
governments. Accordingly, the notion of sick/personal/carer’s leave has largely overtaken
the traditional concept of sick leave and has been extensively incorporated in one form or
another into legislation, awards and agreements. Indeed, Australia is a world leader in
introducing flexible or “family-friendly” provisions for sick/personal/carer’s leave across
“Family-friendly” provisions for sick/personal/carer’s leave should be seen not only as
progressive social initiatives but also as means by which organisations achieve efficient
human resource management outcomes. The ACCI has expressly promoted a “Best
Practice” approach to this issue on the grounds that “An employee’s family is often his or
her most important priority. Problems at home, unhappy family situations, often spill
over into the workplace and damage workplace performance. On the other hand, stable
family life can be a foundation for a good employment relationship.”63 Firms must make
judgements about the efficiencies to be gained from adopting flexible approaches to
sick/personal/carer’s leave relative to their costs. These will tend to vary from
organisation to organisation and the measures adopted are therefore best to be tailored to
the circumstances of each organisation and its employees.
Already there is extensive provision for employees to aggregate sick and bereavement
leave entitlements and to use these in a flexible manner to attend to personal illness,
illness on the part of another family members and for bereavement purposes. The model
clause which the AIRC has introduced in the award simplification process establishes a
general framework for such an approach [see Appendix B.]. More particular initiatives
have been pioneered in individual awards and agreements.
Option 1 - Cashing out of paid sick/personal/carer’s leave entitlement
The ultimate form of flexibility in sick/personal/carer’s leave is cashing-out of the
entitlement. Full cashing-out will involve removing any entitlement to paid
sick/personal/carer’s leave in return for an increased rate of pay. The exact calculation of
the appropriate increase in pay will be a matter for the parties themselves but will,
presumably, be based on the cost of the full entitlement to sick/personal/carer’s leave.
The advantages of cashing-out for the employee are mainly that for any period of time
during which the employee takes less sick/personal/carer’s leave than previously
provided for, they will earn more pay. Consider the following example.
Say that an employee is entitled to two weeks sick/personal/carer’s leave per year. They
are paid $100 per day or $26,000 per year. The potential cost to an employer of the two
weeks sick/personal/carer’s leave each year is $1000. In any year in which the employee
is actually off work on paid sick/personal/carer’s leave for the full two weeks entitlement,
their real rate of pay is $104 per day. Accordingly, the employee must be producing $104
per day for the firm during the 50 weeks they are at work in order to make it possible to
pay them $26,000 for 50 weeks. If the employer and employee agree to cash out the
entitlement to two weeks paid sick/personal/carer’s leave, the annual rate of pay can be
increased to $27,040 [260 days @ $104]. Now let us say that the employee takes one
week [5 days] sick/personal/carer’s leave. The leave is not paid for by the employer so
that the employee loses $520 in pay. The employee’s income for the year is nevertheless
$26,520, which is still higher than under the original scenario where two weeks paid
sick/personal/carer’s leave entitlement was available and the salary was $26,000. Where
an employee takes the full two weeks or more off in sick/personal/carer’s leave they will
earn exactly the same as they would when they had an entitlement to two weeks paid
Other advantages of cashing-out sick/personal/carer’s leave for employees are:
• They are free to choose whether to work or take sick/personal/carer’s leave
according to the valuation they place on each activity;
• They are not induced to take sick/personal/carer’s leave when there is no genuine
reason to do so;
• They are free to choose the mix of sick, personal, carer’s, bereavement etc. leave
which they wish to take.
The main advantage of cashing-out sick/personal/carer’s leave for employers is that they
can expect employees to take fewer days of sick/personal/carer’s leave each year and
they will therefore earn higher profits [since each day of work per employee earns a
profit]. The other main advantage for employers is that employees are offered flexibility
and choice in taking sick/personal/carer’s leave and are likely to be more satisfied and
more productive as a result.
Cashing-out will need to be accompanied by a provision entitling the employee to a
certain number of days of unpaid sick/personal/carer’s leave so that their position is
protected but not their income.64 Employees who are risk averse or who are unwilling to
contemplate the sudden loss of income which might occur in the event of illness would
be free to take out private insurance. This is already common in the USA and there are a
number of instances of employees in Australia who have insured against loss of income
through illness. The self-employed are generally in the same position as “cashed-out”
workers in relation to sick leave and private insurance is commonly used by them to
protect against loss of income.
A disadvantage to both employers and employees of cashing-out sick/personal/carer’s
leave is that it provides incentives for employees to come to work when they are not well.
This problem is best dealt with as part of the human resource management approach.
Ultimately, managers may have to make judgements about the capacity of an employee to
be effective in the workplace when they are affected by illness, concern about a family
member or other personal or family matter. Management may have to retain an ability to
send an employee home or refer them for medical assistance or counselling where they
are judged to be unwell or otherwise affected by illness or personal concerns.
Casual employment constitutes a form of cashed-out sick leave in Australia today. The
casual pay loading of around 20 per cent is intended to compensate casual workers for
their lack of access to paid recreation and sick leave, among other things. Hence,
approximately 30 per cent of the Australian labour force are already operating under a
cashed-out sick leave regime.
Option 2 – Adopt “family-friendly” initiatives
It is widely accepted that a certain amount of sickness absence is taken to attend to family
emergencies. Significant progress has been made already in addressing this issue but
there is scope for further improvement. Cashing-out of sick leave entitlements together
with agreement on the quantum of hours which may be taken to attend to personal/family
matters and the times at which these hours may be taken addresses most of the issues.
However, even without cashing-out, there are many options which can generate
considerable flexibilities which will benefit both employers and employees.
ACCI list the elements of what they call “Simple, reasonable common sense approaches”.
• Allowing employees to take time off to care for a family member and make up the
• Some flexibility in starting and finishing times where employees have to deliver
or pick up a child at school;
• Allowing employees to work from home or bring a child to work;
• Allowing employees to transfer to part-time work;
• Recognition of family needs when scheduling work travel or holidays;
• Allowing personal phone calls and visits;
• Allowing single days annual leave to be taken;
• Provide work-based childcare.
All the above are subject to not interfering unduly with the requirements of the business.
There appears to be a broad willingness on the part of employers, government, unions
and individual employees to seek flexible initiatives in providing for sick/personal/carer’s
leave. This is evidenced by sentiments of the kind expressed above on the part of the
ACCI and the extent to which ‘family-friendly’ provisions are now found in awards and
In a recent speech to the Sydney Institute, Cheryl Kernot, the Opposition spokesperson
on employment and training, canvassed a number of initiatives which could further
advance the “family friendly” character of the workplace.65 A number of the initiatives
which she proposed are similar to those listed above which were previously canvassed by
the ACCI. Others were more far-reaching including:66
• Parents to be allowed to work from home in the afternoon;
• Parents to be allowed to buy extra days of leave to use during school holidays;
• More widespread adoption of family-friendly measures [extended, particularly, to
less well paid, less well educated employees];
• Establishment of child-care centres closer to workplaces.
Subject to the commercial imperatives of the organisation, employers would generally be
well advised to consider a range of initiatives of these kinds in consultation with their
employees in order to devise mutually beneficial packages. As the ACCI observes “Many
of these measures can be extremely important to employees, and there is often no reason
why they cannot be introduced into workplaces with a bit of care and discretion.”67
Option 3 – Offer incentives for employees to come to work rather take time-off on
We have already noted that provision of a set period of paid sick leave creates incentives
for employees to take time off work within that period whether or not they are really sick.
While cashing-out of sick leave entitlements wholly addresses this issue it is relatively
straightforward to devise incentives for employees to come to work rather than take sick
leave when they are well under the traditional paid sick leave model.
One approach adopted overseas to reduce employee absenteeism has been the use of
attendance incentives. In the UK 15 per cent of the companies surveyed by IDP reported
that they used attendance incentives.68 In one US study it was found that perfect
attendance rose from 8 to 34 per cent in the first year of the implementation of an
attendance incentive scheme for teachers, although the reduction in the use of sick leave
was accompanied by an increase in the use of personal leave days.69 One simple element
of flexibility designed to reduce abuse of sick leave is a modest bonus payment for those
who take no sick leave. For example, employees of Malaysian Tobacco Company
[MTC]70 in Kuala Lumpur who have taken no sick leave in a month are paid a monthly
bonus of RM10 [A$5]. Management at MTC consider that abuse of sick leave is
insignificant as a result.
Another approach which is quite commonly found overseas as well as in some
agreements in Australia is cashing-in arrangements. These provide that employees may
cash-in unused sick leave entitlement at rates less than full pay. In a few instances the
cash-in provision is applied annually but it is more often applied to accrued sick leave at
termination. One Australian company, Murchison United NL, offers employees shares in
the company in settlement of outstanding sick leave entitlements. A more exotic but
equally simple approach was offered by Tony Gilliard of Executive Focus, Austin, Texas
“Consider a barter program. At the end of the year, an employee can trade 100% of their
sick leave for a vacation package. I purchased 25 trips to Jamaica (air and hotel) for $99
each. The $99 cost to you is a lot less costly than several days of abuse. This type of
program does a couple of things. It does reward people for staying healthy. It also allows
some employees to take vacations that they might ordinarily feel that they could not
afford.”71 An effective incentive will offer employees a reward which exceeds their
marginal valuation of a days leave when healthy but not exceed their valuation of a day
required to attend to illness on their own part or on the part of a relative.
As discussed in relation to cashing-out above, it will be necessary to ensure that the
incentives which are intended to discourage employees from taking sick leave when they
are not sick does not encourage them to come to work when they really are unwell.
Option 4 – Encourage firms and organisations to adopt strategic absence
An effective absence management strategy will consist of both proactive and reactive
approaches.72 The proactive approach will ensure that issues concerned with the health of
the organisation, the commitment of its employees and their job satisfaction are
addressed. In addition the proactive program will:
• Utilise flexible work practices;
• Pay attention to job design, payment systems and communications;
• Utilise employee assistance programs to provide counselling for employees;
• Promote a healthy lifestyle;
• Offer rehabilitation programs;
• Provide access to medical and paramedical services.
More generally, firms may seek to develop strategies which encourage employees to
identify their own interests with those of the firm. This can be done through active human
resource management policies, including such measures as profit-sharing and employee
share ownership schemes.73
The reactive approach will seek to monitor sickness absence and to engage with
employees either during or after a period of sickness absence in order to discover and
document the causes of the absence and to find ways of minimising it in future. Common
tools of a reactive approach are:
• Computerised systems for recording absence and the reasons for it;
• Benchmarking of absence performance;
• Return-to-work interviews.
It is important to recognise that the proper management of sickness/personal/carer’s
absence is central to ensuring that the requirements of employees to attend to their own or
their relatives’ need for care are catered for within the commercial constraints of the
employing organisation. Flexibilities in the provision of leave are no more than a tool
available to managers to achieve this end.
The traditional model of sick leave has served Australia reasonably well over most of the
20th century. However, it has patently been too rigid and too focussed on an obsolete
concept of the employee to continue to be serviceable. Changing market circumstances
have already forced major changes in the way in which sick leave is provided. Further
changes are necessary. In particular, the traditional model of sick leave has become
increasingly unable to accommodate the new realities of the modern labour force. The
extraordinary growth of female labour market participation rates over the last twenty-five
years has required most employees to balance work and family responsibilities. An
expanded concept of sick leave has been central to this task.
An important reason why Australia has been able to develop these more flexible
arrangements for sick leave has been the scope afforded by enterprise and workplace
agreements. However, while Australia has been a world leader in developing the kind of
flexibilities that are required to accommodate the work/family balance, there has been
less obvious progress on measures designed to discourage employee abuse of paid sick
It has long been commonly believed that sick leave has been abused by employees in
Australia. Keenoy and Kelly describe the traditional “sickie” as being “socially endorsed”
by employees in Australia.74 The “absence culture” of which this is a part does not sit
well with the focus on efficiency that has been urged on industry by successive
governments over the last two decades. However, it should be noted that Keenoy and
Kelly point out that “..careful scrutiny of international surveys shows the Australian rate
of absenteeism is no worse than average for an advanced industrial society.”75
One single measure which would deal with both issues at once is cashing-out of sick
leave. One early attempt to do this in the Tweed Valley Fruit Processors EFA was
resisted by unions and ultimately prevented by the AIRC. This was a curious outcome
since most employees would be likely to benefit from cashing-out and none would need
to be worse off. Perhaps the implications of cashing-out were not well enough understood
at that time. However, it is now possible to make cashing-out arrangements under current
legislation and a number of firms have done so.
Within the more traditional model of sick/personal/carer’s leave, there is further scope to
broaden the range of family–friendly provisions in awards and agreements. In general, it
would be in the interests of both employers and employees to consider a very wide range
of options in this regard so long as they do not unduly compromise the efficiency of the
business. Accordingly, the sorts of options canvassed in the previous section should be on
the table in discussions between employers and their employees and unions in agreement
In relation to employee abuse of sick leave, there are a number of possible options
designed to make it more attractive for employees to come to work than stay home when
a worker is not really ill. Again, it is appropriate that these should be introduced by
agreement between employers and their employees and, where relevant, their unions.
Finally, the importance to firms of implementing strategic absence management
strategies cannot be over-emphasised. Labour absence is a management issue in all its
aspects. A sound strategic management approach to the issue will be multi-layered,
imaginative and flexible. It will reflect the requirements of the business, the needs of its
employees and their mutual interests in constructing a package of provisions for
sick/personal/leave which both satisfies the employees and provides the basis for the
efficient and profitable operation of the company.
57 IR 22.
62 IR 48.
See for example, Get Better Soon: the Management of Sickness Absence in the WA Public Sector. Report
No.5 Auditor General, WA 1997 p.1.
Keenoy, T and Kelly, D. The Employment Relationship in Australia, Marrickville, 1996 p.299.
See for example, 1921 AR(NSW)44. Cited in Deery, S.J. and Plowman, D.H. Australian
IndustrialRelations, Sydney, McGraw Hill, 3rd Edition, 1991 p.346.
16 CAR 285 Cited in Deery, S J and Plowman, D H Ibid.
Human Resources Management, CCH, pp.34-100. 2000.
Deery, S J and Plowman, D H op cit.
Human Resources Management, CCH, 2000 pp.34-100.
For example the National Building Trades Award provides for 80 hours sick leave for workers after one
years service. Moreover, public service employees have traditionally enjoyed more generous arrangements,
in the Commonwealth public service, for example, the entitlement is 10 days on full pay and 10 days on
See NSW Industrial Relations Act 1996, Sec. 27.
CCH Human Resources Management op cit pp.34-170.
ACTU Research and Information: Sick Leave. August 1995.
CCH Human Resources Management op cit pp.34-280.
It is open to the AIRC to approve a certified agreement that does not pass the no disadvantage test in
limited circumstances provided that it is not contrary to the public interest.
Joint Government’s Submission to the Safety Net Review – Wages. DEWRSB 2000.
Agreement Making in Australia under the Workplace Relations Act 1998 and 1999 DEWRSB, 2000.
Ibid. Table 2.4.3.
This sample of agreements does not include agreements which have nominally expired but which
continue to operate.
Flexible hours provisions are make up time, time off in lieu of overtime at either ordinary or penalty
rates, hours averaged over an extended period of time, compressed working weeks, flexible start and finish
times, flexitime, negotiable hours of work, hours of work decided by the majority of employees and
banking / accrual of rostered days off.
Ibid. Table 3.3.3 Those AWAs providing for less sick/personal/carer’s leave than the award often
involved cashing out of leave benefits.
Ibid. See also Australian Workplace Agreements: Helping make Better Workplaces. Office of the
Employment Advocate 2000 for many detailed examples.
The sample “is representative of agreements which have been approved by the Employment Advocate
over the past three years. The sampling methodology ensures that the number of sample AWAs in any
given industry is directly proportional to the distribution of employees with AWAs by industry” (OEA,
For a brief summary of the duration of sick leave covered by employers, see appendix C.
This is for employees in firms where there are 50 or more employees.
See table 19, appendix C for the contribution sick leave costs make to total compensation costs in the US.
See appendix C, table 13 for 1999 data on income and expenditure for the scheme.
The premium covers all benefit entitlements, including unemployment, under the Employment Insurance
Hours reported absent due to illness as a proportion of total contracted work hours (Barmby et al 1999).
The Confederation of British Industry (CBI) report (April 1997). There were 691 organisations surveyed
employing a total workforce of 1.5 million.
Bevan & Hayday (1998) put it at $Au 30.5 billion for the same period.
See appendix C, table 18.
This analysis is adapted from Lazear, E P Personnel Economics for Managers, New York, Wiley 1998
See for example the Tweed Valley Fruit Processors EFA Print M4371.
For many workers moral considerations will outweigh financial incentives to take leave when they are
not sick. There are also constraints imposed by management on the ability of workers to take unwarranted
sick leave. Strict requirements for medical certificates are one such constraint.
See Lazear Ibid pp.436-437 for numerical examples of this conclusion.
39 This produces a minimum estimate since there are also likely to be some indirect variable wage costs and
some loss of profits may result from employee absence on sick leave.
AWIRS Changes at Work, Longman, 1997, table A 4.9.
ABS data show that sick leave accounted for around 59 per cent of all absences in 1997, including
approved leave for recreation, long service, maternity etc. purposes, and that other leave not approved in
advance accounted for only 3.7 per cent of all leave. See table 6 below and ABS Working Arrangements,
Australia, Cat. No. 6342.
ABS Australian System of National Accounts, National Income Account 29.10. [5204.0]
Morgan and Banks study - New Workplace, 4(1), 1998 p.3.
In the case of recreation leave, which is predictable, this is often what happens and temporary
employment agencies owe their existence to this sort of phenomenon.
The measure used for work absence by the Australian Bureau of Statistics is absence greater than 3 hours
for the fortnight prior to the survey reference week (ABS Cat. 6342.0).
The classic model of labour absence in the industrial psychology/organizational behaviour literature is
Steers R.M. and Rhodes S.R. ‘Major influences on Employee Attendance: A Process Model’, Journal of
Applied Psychology 63(4) 1978 pp.391-407.
Get Better Soon: the Management of Sickness Absence in the WA Public Sector. Report No.5 Auditor
General, WA 1997 p.2.
Data from Australian families and the labour force – ABS 6224.0 November 2000.
Cited in CCH Human Resources Management op cit pp.65-140.
Vandenheuvel, A. When Roles Overlap, Workers with Family Responsibilities, Australian Institute of
Family Studies, Monograph No. 14. Melbourne 1993.
Keenoy, T. and Kelly, D. The Employment Relationship in Australia, Marrickville, 1996 p.298.
Aberdeen Press and Journal, 7 November 2000.
Bunnings, WA, for example claimed that 85% of sick leave was not verified by a medical certificate and
that 65% of it was taken on Mondays. Keenoy, T. and Kelly, D. op cit p.299.
See for example Martocchio, J.J. ‘The Effects of Absence Culture on Individual Absence’, Human
Relations, 47(3) pp.243-62 1994.
Get Better Soon: the Management of Sickness Absence in the WA Public Sector. Report No.5 Auditor
General, WA 1997 p.7. See also Employee Absence IPD Survey Report 13. Institute of Personnel
Development, London, May 2000. However, in 1998, a Morgan and Banks survey of 400 Australian
finance, retail and transport workers found most workers took up to five sick days a year and 12 per cent
admitted to taking sick leave when they were not genuinely ill.
Dawkins P. and Kenyon P., The Incidence, Causes, Monitoring and Management of Labour Absence,
WA Labour Market Research Centre, Discussion Paper 1/90. Perth.
Employee Absence IPD Survey Report 13. Institute of Personnel Development, London, May 2000.
Some Australian companies are apparently using this approach also. For example, a report in the Sun
Herald on 22 October 2000 claimed that Telstra supervisors were calling at the homes of employees absent
on sick leave to ensure that they were genuinely sick.
IDP op cit.
Get Better Soon: the Management of Sickness Absence in the WA Public Sector. Report No.5 Auditor
General, WA 1997 p.7.
Effective Sick Leave Management, PSMO, WA. Cited in Ibid p.6.
Get Better Soon: the Management of Sickness Absence in the WA Public Sector. Report No.5 Auditor
General, WA 1997 p.12.
Work and Family Issues: A Challenge for the Private Sector. ACCI 2000.
The need for medical certificates would become unnecessary under such an arrangement.
Daily Telegraph, 15 November 2000.
However, all of the initiatives proposed by Ms Kernot are already being implemented in some Australian
Workplace Agreements. See Australian Workplace Agreements, Office of the Employment Advocate,
ACCI op cit p.2.
IDP op cit.
Jacobson, S.L. “The effects of pay incentives on teacher absenteeism”, Journal of Human Resources,
24(2) 1989 pp.280-86.
MTC is now part of the Rothsman group.
Response to a HRNet bulletin board enquiry on discouraging abuse of sick leave.
Useful discussions of this issue in an Australian context may be found in Erwin, P.J. and Iverson, R.
‘Intervention Strategiers for the Management of Absenteeism’, in Haworth, N. Hill, M. and Wailes, N.
Divergent Paths, AIRAANZ 1993 pp.176-83; Deery, S. ‘Absenteeism: A Consideration of the Causes,
Consequences and Controls’ in Managing Absenteeism: Analysing and Preventing Labour Absence, Eds.
Riedel, P. and Preston, A., Industrial Relations Research Series, Number 18, February 1995, Department of
Industrial Relations and in Wooden, M. ‘The “Sickie”: A Public Sector Phenomenon?’ Journal of
Industrial Relations, 32(4), pp.560-76.
See for example Submission to the Inquiry into Employee Share Ownership in Australian Enterprises,
DESBWR, June 1999 pp.23-24.
Keenoy and Kelly op cit. p.299.
Legislated Minimum Standards for Paid Sick Leave
The minimum conditions of employment in New South Wales are provided for in the
Industrial Relations Act 1996:
“26 Minimum sick leave entitlements
(1) Sick leave when set by an award must include provisions under which:
a) each employee is entitled to not less than one week of sick leave on full pay for
each year of service with an employer, and
b) sick leave accumulates from year to year for at least 3 years, that is, sick leave not
taken in each year of service will be available to the employee for a period of at
least 3 years from the end of each such year.”
In Western Australia The Minimum Conditions of Employment Act 1993 provides that:
Full-time and part-time employees receive 10 days each year of paid sick leave. Part-time
employees receive sick leave proportionate to their hours of work. This leave does not
accrue from year to year and a doctor's certificate may be required.”
An employee is entitled to receive up to 2 days paid leave when a family member dies. A
family member is defined as a spouse, child or stepchild, parent, step-parent or someone
who lives with the employee as a member of the family.”
In Queensland, under the Industrial Relations Act 1999:
• at least 8 days sick leave on full pay for each completed year of employment with
an employer; and
• for each completed period of employment of less than a year – at least 1 day’s
sick leave on full pay for each completed 6 weeks of employment with an
6. Sick leave accumulates, unless an industrial instrument provides otherwise.”
In South Australia the Industrial and Employee Relations Act 1994 provides:
“Schedule 3 Minimum Standard for Sick Leave
2. Application of standard
This Schedule does not apply to a person who is engaged and paid as a casual employee.
3. Accrual of sick leave entitlement
(1) An employee's entitlement to sick leave accrues as follows—
a) for the first year of continuous service—entitlement to sick leave accrues at the
rate of 5/26 of one day for each completed week; and
b) for each later year of continuous service—an entitlement to 10 days' sick leave
accrues at the beginning of each year.
(2) An employee's sick leave credit is worked out by adding any unexpended sick leave
entitlement that had accrued to the employee before the employee became subject to this
Schedule and any unexpended entitlement that accrues under this Schedule.”
The Workplace Relations Act 1996 provides for minimum conditions of employment for
employees in Victoria:
“Schedule 1A—Minimum terms and conditions of employment
1 Minimum terms and conditions of employment
(1) The minimum terms and conditions of employment are:
(b) paid sick leave for each year worked of the number of ordinary hours required to
be worked in any 1 week period during that year.
This leave accrues on a pro-rata basis and is cumulative.”
H0008 Dec 1533/97 M Print P7500
AUSTRALIAN INDUSTRIAL RELATIONS COMMISSION
Workplace Relations Act 1996 and
Workplace Relations and Other Legislation Amendment Act 1996
Application under s.113 of the Workplace Relations Act 1996
and Item 49 of Schedule 5 of the Workplace Relations
and Other Legislation Amendment Act 1996
Australian Hotels Association
(C No. 90061 of 1997)
THE HOSPITALITY INDUSTRY - ACCOMMODATION,
HOTELS, RESORTS AND GAMING AWARD 1995
(ODN C No. 02782 of 1986)
[Print M7207 [H0008]]
Liquor and accommodation employees
PERSONAL LEAVE MODEL FRAMEWORK CLAUSE
1. Amount of Paid Personal Leave
1.1 Paid personal leave will be available to an employee when they are absent due to:
1. personal illness or injury (sick leave); or
2. for the purposes of caring for an immediate family or household member who is
sick and requires the employee's care and support (carer's leave); or
3. bereavement on the death of an immediate family or household member
1.2(i) Personal leave of:
[sum of current sick leave plus bereavement leave award entitlement] will be available in
the first year of service;
[sum of current sick leave plus bereavement leave award entitlement] will be available
per annum in the second and subsequent years of service.
1.2(ii) In any year unused personal leave accrues at the rate of the lesser of:
a) [current award sick leave entitlement] less the amount of sick leave taken from
the current year's personal leave entitlement in that year; or
b) the balance of that year's unused personal leave.
1.2(iii) Personal leave may accumulate to a maximum of [insert current award maximum
sick leave accumulation limit].
2. Immediate Family or Household
2.1 The entitlement to use personal leave for the purposes of carer's or bereavement leave
is subject to the person being either:
2.1(i) a member of the employee's immediate family; or
2.1(ii) a member of the employee's household.
2.2 The term "immediate family" includes:
2.2(i) spouse (including a former spouse, a de facto spouse and a former de facto spouse)
of the employee. A de facto spouse means a person of the opposite sex to the employee
who lives with the employee as his or her husband or wife on a bona fide domestic basis;
2.2(ii) child or an adult child (including an adopted child, a step child or an exnuptial
child), parent, grandparent, grandchild or sibling of the employee or spouse of the
3. Sick Leave
3.1 An employee is entitled to use up to [current award entitlement] of the current year's
personal leave entitlement as sick leave in the first year of service and [current award
entitlement] in the second and subsequent years of service.
3.2 An employee is entitled to use accumulated personal leave for the purposes of sick
leave where the current year's sick leave entitlement has been exhausted.
3.3 [insert any notice, certification etc. provisions]
4. Bereavement Leave
4.1 An employee is entitled to use up to [current award entitlement] personal leave as
bereavement leave [on each occasion/annually as prescribed in existing award].
4.2 Where an employee has exhausted all personal leave entitlements, including
accumulated entitlements, they will be entitled to [current award entitlement] unpaid
4.3 [insert any provisions for overseas deaths, notifications, proof of death etc.]
5. Carer's Leave
5.1 An employee is entitled to use up to five days personal leave each year as carer's
5.2 [insert requirements regarding proof, notification etc]
5.3 An employee may take unpaid carer's leave by agreement with the employer.
Duration of sick leave paid by employer- Selected OECD countries
Austria has increased employer liability to cover the first two weeks of absence, up from
one week in the 1980s. In the Netherlands employers have been required to pay for the
first six weeks of absence due to illness since 1994. This has since been increased to 52
weeks. It has been a requirement for employers to pay sick leave to its employees for
some time, however, in 1996 the requirement was extended to cover all employees
equally. At the same time the level of benefits was reduced from 100 per cent of the wage
to 80 per cent of the wage. In Belgium there is a requirement for employers to pay the
first 30 days of sickness, whereas for Sweden the current regime is for employers to pay
for the first 15 days. It is of some interest that prior to January 1997 the requirement was
for the first 15 days to be paid by the employer, this was then extended to 28 days and,
since April 1998, has reverted back to 15 days. The UK required firms to pay for the first
8 weeks up until the mid 1980s, this was then extended to the first 28 weeks. However,
under the arrangements in the UK most of the costs were reimbursed during this period.
In 1991 the refunds paid to employers were cut from 100 to 80 per cent and since 1994
have been abolished altogether.
In some instances, such as Sweden, sick leave entitlements are funded directly by the
employer up to a fixed duration and subsequently are funded out of a common fund for
the remainder of the sickness duration. The common fund is financed by employer
contributions. The scheme also operates in much the same way for the self-employed.
Table 14 Sickness insurance income and expenditure for Sweden, 1999, $A million
Sickness insurance fee 11 813
Government funds 2 913
Sickness benefit and rehabilitation 5 289
Disability pensioners 8 881
Total expenditure 14 7262
of which, fee-financed acc. to rules 13 891
Surplus during the year -
Extent of coverage of expenditure 85 %
Source: NISB (2000b)
1. Pregnancy allowance and closely related person's allowance.
2. Including national old age pension fees.
Note: Income and expenditure figures have been converted to current Australian dollars.
Table 15 Sickness benefit and sick pay for Sweden, levels of payments as a
percentage of the daily wage, 1999
Day of the sickness period Sick pay Sickness cash benefit
1 0 0
2-3 75 75
4-14 75 75
Source: NISB (2000a)
Table 16 Private sector employees in selected benefits for US, 1996-97, per cent
Employment status Number of workers
Paid Leave All employees Full-time Part-time < 100 > 100
Personal leave 17 6 12 18
Sick leave 44 53 13 40 50
Family leave 2 2 1 2 2
Unpaid family leave 62 70 35 42 87
Source: Foster (2000)
Table 17 Full-time employees in selected employee benefit programs, medium and
large private establishments for US, 1997, per cent
Part-time Full-time employees in-
Employee benefit employees 1997 Medium and large Small
program establishments 1995 establishments
Paid time off
Personal leave 9 22 14
Paid sick leave 18 58 50
Unpaid time off
Family leave 54 84 48
Source: BLS 2000
Table 18 Employees in selected employee benefit programs in US, 1995-97, per cent
Employee All employees Professional, Clerical and Blue-collar
benefit technical, and sales and service
Paid time off
Personal leave 20 23 33 13
Family leave 2 3 3 1
Paid sick leave 56 73 73 38
Family leave 93 95 96 91
Source: BLS 2000
Table 19 Average days paid sick leave, full-time employees in medium and large
private establishments in US, 1997
Professional, Clerical and
Leave category technical, and sales Blue-collar
All employees related and service
Paid sick leave days after
Years of service specified
1 11.2 13.3 10.1 9.9
3 13.0 16.1 12.1 10.4
5 15.2 19.3 14.5 11.5
10 17.6 22.6 17.3 12.6
15 18.8 24.7 18.1 13.2
20 20.5 27.3 20.2 13.6
25 21.1 28.0 20.8 14.1
Source: BLS 2000
Table 20 Employer costs per hour worked for employee compensation and costs as a
per cent of total compensation for US, 2000
Governmentc All workers, Manufacturing Non-
Compensation private sector manufacturingd
component Cost Per cent Cost Per cent Cost Per cent Cost Per cent
Total 52.29 100.0 35.73 100.0 42.14 34.42 34.42 100.0
Total benefitsb 15.26 29.2 9.65 27.0 13.6 8.89 8.89 25.8
Paid leave 4.07 7.8 2.30 6.4 7.4 2.12 2.12 6.2
Sick leave 1.04 2.0 0.27 0.8 0.6 0.27 0.27 0.8
Source: BLS 2000
a. Includes wages, bonuses and overtime
b. Includes vacation leave, holiday leave and other benefits (severance pay and supplemental
c. State and local government employees only
d. Does not include government employees
Table 21 Recent Sickness Benefit Trends - Selected Countries
Country Benefit Trends as reported by Countries Policy Parameters and Relevant
Austria Sickness benefit expenditures: • Employer provides full wage for initial 4-
1995 $661m 12 weeks of illness, then statutory health
1996 $599m insurance will provide sickness benefit at
rate of 50-60% of prior wages.
• Poorer economic conditions since 1995
reduced claims for sickness benefits
because of more precarious employment
• No significant policy measures, only slight
reduction in maximum sickness benefit
duration and better checks on those
workers on sickness leave.
Belgium Number of days reimbursed by the benefits • Employer responsible for meeting first 30
insurance scheme for employees: days of costs for most employees (only 7
1992 21.077 million days days for blue-collar workers, then
1994 19.733 million days supplementary payment for further 23
1996 20.248 million days days).
Canada No growth in Sickness Benefits payable as • Maximum total sickness benefits remains
part of the Unemployment Insurance at 15 weeks, as it has since 1971. Sickness
scheme benefit rate differs according to total
earnings in previous 26 weeks and a factor
reflecting regional unemployment.
• Recent reform changed eligibility to 700
hours of insured employment in previous
52 weeks, to provide cover to part- time
workers and multiple job holders.
Finland Absence from work because of sickness • Daily allowances, paid according to
has remained stable. collective agreements by employers for up
to 1- 3 months are trending towards
Germany Decline between October 1996 and March • Difficult labour market environment
1997 of at least 15% compared to same discouraging use of sickness entitlements.
period in previous year. • October 1996: Reduction in value of
statutory payment from 100% of wage to
80%, payable by employers for first 6
• January 1997: Sickness benefit reduced
from 80% to 70% of wage and time
limited to maximum of 78 weeks in any 3
year period for same illness.
Greece Number of days reimbursed employees • The main scheme for employees (IKA)
(IKA): pays no benefit for the first 3 days of
1993 6,412,366 absence due to sickness. Thereafter,
1994 6,289,248 benefit is 25% of the reference wage for
1995 5,895,030 the following 15 days and 50% of the
reference wage for the next 15 days.
Italy Recent decline. • Tenuous overall labour market conditions
and reductions in average age of
employees discourages take- up of
• Some reductions in benefit levels,
particularly in public sector.
Netherlands Rate of Sickness Absence • 1994: Employers given responsibility for
(excl. maternity): paying first 6 weeks of sickness absence.
1993 6.2% • 1996: Employer responsibility extended to
1994 4.9% first 52 weeks.
1996 4.6% • Each company required to subscribe to
ARBO-services which monitors sickness
absence and provides advice/
recommendations to companies.
Norway Over the period 1990- 94, absences from • 1980s: Employer responsible for first
the labour force was reduced by 17%. week of sickness pay, extended to cover
Since then there has been some increase in first 2 weeks.
longer sickness absences. • 1990s: Government and social partners
have cooperated to try to reduce sickness
- intervention and research
programmes focused on common
illnesses and injuries
- greater attention to supervision of
those claiming benefits
- focus to get people back to work
Poland Over last 3 years has been relative stability • Currently investigating the processes,
in sickness absenteeism, but has been a including medical documentation and
switch towards social insurance fund conformity with sickness regulations.
responsibility for payment rather than • Employer responsible for payment for first
employers (now 60/ 40 rather than 40/ 60). 35 days in a calendar year (at rate of at
least 80% of salary, which collective
agreements can raise up to the 100%
Spain Some increase in expenditures on sickness • 1992: Employers have paid temporary
benefits, to 1992: incapacity benefit between 4th and 15th
1990 $5 201m days for non-work related accidents and
1992 $7 103m illnesses. Employee receives nothing for
1997 $5 330m first 3 days, as was the case previously.
• 1997: Recent measures to manage and
monitor temporary incapacity, including
greater opportunity to terminate absences
Sweden In recent years of increasing • 1991: Compensation 65% for first three
unemployment, the number of people days, 80% for day 4- 90, and 90%
receiving sickness benefit has fallen. thereafter. 1992: Employers pay first 14
• 1993: One day waiting period,
compensation reduced to 70% after a year.
• 1994: Reduced compensation to 75% day
2- 3, 90% day 4- 14, 80% day 15- 365.
• 1995: Reduced compensation to 75% day
4- 14, regulations were introduced to
increase powers of social insurance office
to investigate cases.
• 1996: Reduced compensation to 75%.
• 1997: Employers period extended to 28
• January 1997: Sickness benefit, sickness
pay and rehabilitation allowance increased
from 75% to 80% of previous income.
• Regulations introduced to increase co-
operation between agencies and make
rehabilitation more effective.
• April 1998: Employers responsible for
first 14 days of sickness pay (was 28
United Changes to expenditure on statutory • Statutory sick pay (SSP) paid by
Kingdom sick pay paid by employers (for absences employees was extended to cover absences
of < 28 weeks) for <8 to <28weeks in 1986.
1986/87 $792m • Refunds to employers reduced from 100%
1994/95 $1 034m to 80% in 1991 and then to nil in 1994.
• With changes to SSP, has been some
action by employers to manage absence