Sickness benefit schemes: Challenges and approaches

Sickness benefit schemes: Challenges and approaches

Sickness benefits are an essential component of social health protection, promoting the human right to health and social security, by preventing impoverishment due to the loss of income during sickness. The COVID-19 crisis has brought sickness benefits into the spotlight as a major measure to mitigate the spread of the disease and ensure income protection for those who fall sick. At the same time, the pandemic has emphasized coverage gaps and key concerns that need to be addressed for sickness benefits to attain their purpose.

Social security exists to respond to life-cycle risks, covering all measures providing benefits, whether in cash or in kind, to secure protection, among others, from lack of work-related income (or insufficient income) caused by sickness. Cash sickness benefit schemes have historically been among the first social security measures put in place. The original objectives of cash sickness benefit schemes were to provide income replacement and prevent poverty in the case of temporary bad health, to enable a proper recovery before return to work and to reduce employer liabilities.

Since the beginning of the coronavirus crisis, such schemes received renewed attention, and governments adapted the coverage, scope, eligibility conditions and implementation approach of existing schemes at a rapid pace.

The pandemic also exposed adverse effects of sickness benefit coverage gaps. A lack of coverage prompts people to go to work when sick or when they should self-quarantine, increasing the risk of spreading the disease, as the loss of income during sickness enhances poverty risks for workers and their families.

As part of national strategies to counter the impact of COVID-19, cash sickness benefits have proven to be key instruments to prevent poverty and job losses due to absence from work. Still, many challenges lie ahead. This article provides a brief overview of the priorities that need to be addressed.

Key notions and distinctions

The notions that are often used in this context are sick leave, sick pay, and sickness benefits, which can be distinguished as follows (Vanhercke, Bouget and Spasova, 2017):

  • Sick leave concerns the right to be absent from work during sickness and return to one's job when recovered.
  • Sick pay is the continued, time limited, payment of (or part of) the worker’s salary by the employer during a period of sickness.
  • A sickness benefit is provided by the social protection system and is paid as a fixed rate of previous earnings, or a flat-rate amount. Sickness benefits guarantee that an adequate income is provided during sick leave when earnings are suspended.

Sickness benefits are distinct from other social security benefits, which cover similar or related social risks (ILO, 2020a). Medical care benefits include care and treatment of a curative and preventive nature or provide cash payments that enable access to such care in the event of sickness. Invalidity or disability (long-term) benefits are granted in case of inability to engage in gainful activity when it is permanent or persists after the exhaustion of sickness benefits.

The temporary measures implemented during the pandemic blurred the distinction between sick pay and sickness benefits, due to the increased participation of the State, either through refunds of payments made by the employers or by providing direct access to sickness benefits. COVID-19 sick leave concerned not only illness, but also mandatory quarantine and/or the need to self-isolate.

Even before the pandemic, there have been some noteworthy innovations in terms of income protection during sickness. Foremost among them are short-term benefits for those unable to work because they must care for a sick child or dependent family member. These can either be stand-alone benefits (which exist in Canada and 10 European countries), or provisions allowing access to the main sickness benefit in such circumstances (possible in 10 countries from Europe, Asia and Africa) (ISSA country profiles). (Read also our analysis on Childcare benefits and compensation during COVID-19)

Sickness benefits and social health protection

The purpose of social protection in the case of sickness is to ensure access to health care and adequate financial protection. Sick leave, sick pay by employers and sickness benefit schemes are key social protection instruments to “replace loss of income during periods of ill health. Sickness benefits and sick leave are crucial to addressing deteriorating health, health-related poverty and loss of productivity” (ILO, 2015).

At international level, sick leave with adequate sickness benefit is enshrined in the International Labour Organization’s (ILO) Social Security (Minimum Standards) Convention (No. 102), the ILO Medical Care and Sickness Benefits Convention (No. 130), which emphasises standards of benefits, the ILO Decent Work Agenda, the Social Protection Floor Initiative led by the ILO and the World Health Organization (WHO), the Universal Declaration of Human Rights (Articles 22 and 25), and finally the International Covenant on Economic, Social and Cultural Rights (ICESCR, Article 9).

According to the conventions and guidelines, sickness benefits should be extended to all, provided in the most effective and efficient way based on broad risk-pooling and solidarity, for example through universal benefit schemes, national social insurance schemes, social assistance schemes or some combination of these. The cost of such benefits and their administration should be borne collectively, not by the employer or worker alone (ILO, 2021).

Sickness benefit schemes: various means and approaches

Income security during sickness is provided worldwide through a variety of means and approaches. The ILO estimates that 62 per cent of the global labour force, representing 39 per cent of the working-age population, is legally entitled to some income security via paid sick leave through an employer’s liability, sickness benefits (provided by social insurance or assistance) or a combination of both mechanisms. There are wide regional differences, with high levels of legal coverage in the Arab States, Central Asia and Europe, and lower levels in Africa and the region of Asia and the Pacific (ILO, 2021).

  • The first provisions put in place at the national level established the responsibility of employers to continue paying salaries during sick leave, usually via a clause in the labour code. In these conditions, statutory paid sick leave is the responsibility of individual employers (otherwise known as "employer liability"). Based on the latest data from the ISSA Country Profiles (2018-2019), 59 (32 per cent) of the 184 countries and territories1 surveyed only provide sick pay (rather than sickness benefits).

    Employer-liability systems present a certain number of limitations. In terms of coverage, by definition they exclude the self-employed. Depending on national definitions, they may also exclude temporary or casual workers, and workers paid hourly wages, inadequately protecting workers with multiple jobs. Their implementation can be hindered by gaps in employers' and workers' knowledge of the labour code, the limited capacity of labour inspectorates, and a double burden on employers to pay the absent worker, while also paying for his or her replacement. In addition, these benefits are usually only available for a short duration, with roughly half of the countries guaranteeing up to six weeks of sick pay and most of these requiring full pay. This hinders their ability to protect against serious illnesses.
  • Sickness benefits offer an alternative way to guarantee income protection in case of illness. Of the 184 countries surveyed, 112 (61 per cent) offer some form of sickness benefits – typically via a social insurance system (106 countries or 95 per cent), a mixed system, or another arrangement.

    Sickness benefits offer stronger protection for a number of reasons. First and foremost, sickness benefits are funded by contributions or state revenues, reducing pressure on companies’ immediate cash flow balances. Second, regular contributions can increase awareness of rights and responsibilities, encouraging eligible workers to claim benefits. Finally, these systems tend to have wider coverage. Concretely, of the 112 countries offering cash sickness benefits, most cover self-employed workers either on a mandatory or voluntary basis (68 and 18 countries, respectively). Thailand even covers informal sector workers in addition to the employed persons in the formal sector. Only a minority formally exclude self-employed workers (26 countries). Similarly, it is very rare for casual or temporary workers to be formally excluded, though these groups may lack effective coverage due to insufficient qualifying periods.

When it comes to qualifying periods, country approaches differ widely. While a third of countries have no qualifying period, the remaining two thirds establish periods ranging from less than three months to more than nine, as shown in figure 1.

Figure 1. Minimum qualifying period2 for cash sickness benefits (no. of countries = 112) ​Figure 1. Minimum qualifying period for cash sickness benefits (no. of countries = 112)​

Similarly, benefit levels and duration vary widely. The vast majority of countries calculate benefits as a percentage of former wages (101 countries or 90 per cent). This rate varies from 38 per cent to 100 per cent of previous earnings as shown in figure 2 below. The wage replacement rate may vary over time, either increasing (12 countries) or declining (eight countries). In addition, nine countries offer a higher wage replacement rate to workers with longer contribution periods. South Africa is unique in adjusting the wage replacement rate by income, so that lower-income persons receive a higher percentage of their earnings compared with their higher-income counterparts.

Figure 2.Wage replacement rate (no. of countries = 101)

Figure 2. Wage replacement rate  (no. of countries = 101)

There is also a wide variation among countries in the duration of sickness benefits with some countries offering benefits for as few as seven days, while others offer up to three years or even until full recovery (see figure 3). The most typical duration for sickness benefits is six months (38 countries), followed by 12 months (21 countries). Presumedly, after this time, affected workers can apply for invalidity benefits.

Figure 3.Benefit duration (no. of countries = 102)

Figure 3. Benefit duration (no. of countries = 102)

The relevance of sickness benefits during COVID-19

The COVID-19 crisis drew this short-term benefit scheme to be at the center of government measures to address the health, economic and social impact of the coronavirus crisis, going well beyond the original purpose of cash sickness benefit schemes (read our analysis COVID-19 crisis: a renewed attention to sickness benefits (ISSA, 2020)).

In addition to ensuring the provision of benefits to workers who have contracted the illness, a number of countries have extended such provision to cover workers in quarantine or caring for sick relatives. Some countries have also lifted certain requirements for entitlement to benefits, reduced waiting periods, increased benefit levels or extended benefits payment duration to ensure a broader coverage and a better protection.

  • In Ireland the waiting period to access cash sickness benefits was waived for persons who are infected by the coronavirus or medically required to self-isolate. In addition, the benefit amount was raised substantially. Other countries that have waived waiting periods include Canada, Denmark, Sweden and the United States.
  • Measures in Japan included the extension of access to cash sickness benefits for persons who were in quarantine or diagnosed with the coronavirus, and the requirement for obtaining a medical certificate was waived in these cases. In Spain, special measures were taken for independent workers to ensure income replacement in the case of coronavirus infection or quarantine.

The measures reported are temporary and meant to be in force only as long as the pandemic is ongoing. In most cases, these measures have not affected the overall functioning of sickness benefit and sick pay schemes but have only applied to circumstances directly linked to COVID-19, such as infection, quarantine or self-isolation due to the virus.  

Also, in a number of countries, COVID-19 infections contracted at the workplace or during the performance of work activities have been recognized (or treated) as occupational diseases or accidents at work (Baptista et. al, 2021). (Read our analysis Can COVID-19 be considered an occupational disease?)

Recent developments

Several countries are improving their sickness benefits services as sickness affects all people, regardless of the type of employment contract and irrespective of whether they are employed, unemployed or inactive. Yet, as shown above, the access to sick pay and sickness benefits differs for people in these categories.

Even if sickness benefits are specified in the Health Insurance Act in the Republic of Korea, several attempts to implement the scheme remained unaccomplished, partly due to a lack of budget. The pandemic put the statutory sickness benefits high on the agenda, as part of the Republic of Korea’s version of the New Deal for economic growth. During the pandemic in 2020, the spread of infectious diseases worsened because of the worker's presenteeism, the phenomenon of continuing to work while being in poor health. Apart from the danger of contaminating other workers, it can lead to a loss of productivity and a longer absence from work at a later stage, resulting in chronic diseases (Vanhercke, Bouget and Spasova, 2017). Starting in 2022, the Republic of Korea is planning to implement a pilot project in six regions and three different types of sickness benefits, with replacement rate of 60 per cent of the minimum wage. An electronic operating system is also being developed by the National Health Insurance Service (NHIS).

Accelerating the process of digitalization in many countries, the COVID-19 crisis has forced social security institutions to process citizens’ claims for sickness benefits in a faster and more efficient way with the use of information and communication technology (ICT). During the first wave of the pandemic, social security institutions were confronted with a substantially increased number of cash sickness benefit applications and updated eligibility conditions. To cope with this, simplified application systems (in France), telephone-based or online medical assessments (in Germany and Norway), as well as efforts to strengthen online information and communication channels (in Italy) were developed and implemented quickly.

  • Finland, which has a high level of digitalization, provides sickness benefits through online services. According to the Social Security Institution (KELA), online applications reached 73.5 per cent (2020), making e-services easily available for citizens and increasing the operational efficiency in the process of the benefit claims.
  • Turkey has a developed an online system. It allows to transfer the health reports electronically to the Social Security Institution (SGK) and simultaneously to employers, avoiding delays in e-payments.

Within the context of the COVID-19 health crisis, one-stop shops – defined as a single point of access to several social security organizations for the provision of services in a given area – have proven to be a valuable and promising way of efficiently and effectively maximizing access to social security services. This single point of access can be very useful, especially when faced with the inability to carry out formalities in person, for example in the case of illness when applying for sickness benefits.

In Peru, EsSalud – Social Health Insurance Institute (Seguro Social de Salud) rolled out a virtual integrated platform for insured persons (Ventanilla Integrada Virtual del Asegurado – VIVA) (Social Health Insurance Institute, 2020). VIVA does not seek solely to provide beneficiaries with a new channel through which to conduct operations and consult their EsSalud data, but also to enhance service quality, reducing the time it takes to carry out insurance and benefit procedures (ISSA, 2021a).

Further, digitalized processes offer tools to better control and monitor fraud, errors and abuse. As discussed during the ISSA Webinar on Sickness Benefits (ISSA, 2021b), according to the National Sickness Insurance Fund (Caisse nationale de l'assurance maladie – CNAM) in France, about eight per cent of sickness benefit payments are calculated incorrectly. Different mechanisms, such as identity theft, false payrolls with an inflated income, or unjustified medical prescriptions are used to defraud the system. France developed effective prevention measures with unique digital identifiers and improved detection tools.  

Sickness benefits can also contribute to avoid long-term sickness benefits and labour market exit. Increasing rates of long-term sickness absence are a worldwide problem. Therefore, countries developed rehabilitation and labour market reinsertion programmes as part of their policy approaches to absence from work due to sickness. At an early stage such programmes are key to prevent the permanent exit from the labour market through early retirement or disability pensions of people affected by long-term illness. (Read our analysis Rehabilitation challenges in ageing societies: the need for a holistic approach)

Ideally, sickness benefit policies should be supported by a comprehensive prevention agenda, especially related to mental disorders and rehabilitation benefits for sicknesses (or injuries) that impair working capacity.


The pandemic has served to highlight the importance of having access to health care without hardship and income security in times of sickness, both of which are central objectives of social protection systems. Schemes have received renewed attention and governments have adapted the coverage, scope, eligibility conditions and implementation approach of existing schemes at a rapid pace, with temporary measures.

It has proven important to establish sickness benefit schemes and extend sickness benefit coverage to non-standard forms of employment, particularly during the COVID-19 pandemic. Globally, countries are gradually expanding sickness benefits to workers in non-standard forms of employment. However, implementing them involves several challenges and requires ongoing adaptations to a rapidly evolving context.

It is essential to share national experiences to ensure that countries implementing or improving their sickness benefit systems, can learn from the experiences and challenges of others.


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