Contact

Claims hotline

Daily sickness allowance: is your team properly insured?

Sep 1, 2020.

If employers want to protect their employees from economic losses in the event of illness, daily sickness allowance insurance is the method of choice. But be careful: the conditions are not always a perfect fit for every company. Find out why paying attention to the details can pay off when taking out daily sickness allowance.

More and more attention is being paid to health-related absences, not only since Covid-19. In 2019 alone, Swiss companies lost around 197 million working hours due to illness or accidents – this corresponds to 70 per cent of all absences. Overall, the absence rate has increased by nearly 20 per cent since 2010.

 

Generali expert Andrea Juric says, “It’s high time for employers to review their employee insurance schemes and optimise them where necessary. In our day-to-day advisory work, however, we notice that many companies still know too little about the stumbling blocks associated with daily sickness allowances, for example. Those who understand them can effectively protect themselves and their employees against illness. They can also safeguard everyone involved from the financial consequences, which often go beyond the period of sick leave prescribed by a doctor.”

 

Several different laws govern daily sickness allowance. Which applies to my company?

VVG – Swiss Insurance Policies Act

Under this law, everything depends on how the daily sickness allowance is insured. For example, Generali offers daily allowance insurance policies based on the principles of the Swiss Insurance Policies Act. These largely consist of group insurance policies for the whole company, which are significantly cheaper than individual policies. The Swiss Insurance Policies Act, or VVG for short, governs all private insurance contracts. It allows contracting partners a maximum amount of autonomy. “This means that flexible solutions are possible, which can be adapted later if necessary,” adds Andrea Juric.

 

KVG – Federal Health Insurance Act

The situation is somewhat different with respect to daily allowance insurance policies that are subject to the Federal Health Insurance Act (KVG). In such cases, the General Policy Conditions (GPC) or the regulations of the competent health insurance company determine who is entitled to daily sickness allowance, when and to what extent. There is a series of laws and ordinances to observe, including:

  • Federal Act on General Aspects of Social Security Law (ATSG)
  • the associated ordinance (ATSV)
  • the Ordinance on Health Insurance (KVV)

 

A “maze of regulations” makes it difficult for some companies to get their bearings when taking out voluntary daily sickness allowance insurance.

 

A comparison of legal bases

In practice, there are a number of differences between the two legal bases, which only become apparent when you take a closer look. For example, the VVG entitles you to a daily sickness allowance per claim, i.e. after a certain illness. The KVG, on the other hand, lumps several illnesses together for the duration of the benefit.”

 

Another example: in accordance with the KVG, daily allowance benefits are granted for a maximum of 720 days within a 900-day period. The VVG, provides for a maximum of 730 sick days rather than 720, which offers a bit more security in terms of the number of daily allowances. In the event of disability, this will simplify the transition from a daily sickness allowance concluded in accordance with the VVG to a disability pension under occupational pension insurance.

 

Good to know: insurance contracts concluded on the basis of the VVG are not subject to the conditions of the KVG – and vice versa.

“With tailor-made daily sickness allowance insurance, employers protect not only themselves and their company, but also their employees from the financial consequences that could arise.”

Andrea Juric, Team Leader Underwriting Generali Switzerland

Continued payment of salary in the event of illness: what does the law say?

Whereas insurance to cover salary replacement in the case of accidents is compulsory in Switzerland, no such compulsory insurance obligation exists for illness. Yet it is precisely in this area that a lot of action is needed. The “Saldo” business portal estimates that the number of health-related absences due to illness is around eight times higher than for absences due to accidents.

 

Hence, daily sickness allowance insurance is the solution of choice to prevent employees from getting into financial difficulties in the event of illness. Andrea Juric: “This is where the employer has to step in. Because even if an employee already has his or her own daily sickness allowance insurance, the employer is still required to continue salary payments. Companies are therefore always well advised to take out daily sickness allowance insurance for their employees in good time, as this can offset the follow-up costs of the statutory continued salary payment obligation.”

 

What does the Swiss Code of Obligations say about continued salary payments in the event of illness?

The basis for continued salary payments in the event of illness is set out in Article 324a of the Swiss Code of Obligations (OR). It states that if there is no daily allowance insurance, the employer must pay an employee’s full salary for a certain period of time, including appropriate compensation for loss of payment in kind. In practice, this somewhat vague wording means that the duration of continued salary payments depends on the employee’s years of service (including training and trial periods). In the first year of employment, the salary will continue to be paid for three weeks. For ten years of service, it is 16 weeks. Otherwise, different regulations apply depending on the region where the company is located. Switzerland uses three different tables: the Zurich, Basel and Berne scales. A detailed overview of the regional scales for continued salary payments can be found on the website of the State Secretariat for Economic Affairs (SECO) or at www.tinyurl.com/Lohnfortzahlungsskalen.

 

 

Daily sickness allowance: these requirements must be met

In practice, taking out daily allowance insurance noticeably lessens the burden on both the employer and the employee and protects both parties if the employee becomes entitled to continued salary payments due to illness – even over extended periods.

 

The following minimum statutory requirements apply:

  • The employer pays at least half of the monthly premium – the employee’s share is generally retained from his/her salary.
  • The waiting period is set on an individual basis.
  • The insurance agreement provides for continued payment of at least 80% of the salary – for 720 days of illness (usually 730 days, or two full years, in practice).

 

 

Important: check the collective labour agreement

In addition to the general statutory provisions, the industry also plays an important role. Many sectors of the economy have collective labour agreements that require the conclusion of a daily sickness allowance for employees. Details can be found in the collective labour agreement applicable to the respective sector.

 

Here is an overview of all collective labour agreements in Switzerland.

 

 

Daily sickness allowance – from when, how long and how much?

A harmless cold is over quickly, but many illnesses have a long-term impact, and it is hard to predict how long they will last. That makes it important to consider the benefits of daily sickness allowance insurance throughout the entire conceivable cycle of an employee’s illness. After all, the coverage gap between the initial sick leave prescribed by a doctor and, in the worst-case scenario, a disability can only be bridged with daily sickness allowance.

The chart shows how the daily sickness allowance applies during the course of an illness:

  • Once the illness has been reported for the first time, a waiting period begins, which could be 14, 30, 90 or 180 days, for example, depending on the policy. During this time, the employer continues to pay the salary from its own pocket. The waiting period begins as soon as an employee is on sick leave for at least 25% of his/her normal working hours.
  • Without daily sickness allowance insurance, the continued salary payment obligation would amount to 100% of the employee’s salary by law. If voluntary insurance is taken out, the amount depends on the agreed daily sickness allowance. Generally, this means that only 80% or 90% of the salary has to be paid. Depending on the waiting period and the employee’s years of service, this may translate to significant savings compared to the full amount of the continued salary payment to which the employee is entitled.
  • Daily sickness allowance insurance will be payable after the end of the waiting period – for up to 730 days. The insurance company makes the continued salary payments. The insurance payments are usually sent to the employer, which then transfers them to the employee. The employer is exempt from making continued salary payments during this time.
  • Depending on the diagnosis, the employee must be registered with the disability office after a period of 365 days. The disability office then takes over the insurance and examines the employee’s entitlement to a disability pension.
  • If a disability pension is approved by the disability office, pension benefits begin once the daily sickness allowance has expired.
  • Once the employee reaches retirement age, the disability pension is converted into a normal AHV pension.

 

This cycle of “all-round” protection has advantages not only for employees. Employers benefit as well. In practice, particularly important specialists who can and still want to work part-time even despite an illness or disability can be kept in the company. In other words, the company does not have to forgo this employee’s expertise, but it does not enter into any financial risks, either.

 

 

Key personnel: think about the operational consequences of illness too

All too often, each and every employee counts when it comes to fulfilling orders and carrying out projects, and not only in small companies. But what if an urgently needed specialist is sidelined? Somebody who is pivotal during peak times or for a major order?

 

Andrea Juric: “In cases like these, continued salary payments are often the least of an employer’s problems. Instead, they run the risk of losing customers or even opening themselves up to claims for damages if contracts cannot be fulfilled in full or in time. Often, a company needs to find somebody to replace the ill employee quickly to prevent situations like these from arising.” Supplementary insurance can cover unforeseen follow-up costs if key personnel are unable to work. These not only include wages for people hired to replace them, but also fixed costs, such as rent for the business premises.

 

Also good to know:

  • with daily sickness benefits, employees, managers and the self-employed can insure an annual salary of up to CHF 300,000 per person.
  • For employees, the daily allowance is usually 80% (optionally up to 90%) of their salary; for business owners up to 100% is insured.
  • After an employee leaves the company, he/she is still covered for a one-month period.

 

 

who can be insured?

All employees who have been with the company for at least three months are entitled to continued salary payments, which can be covered by daily sickness allowance insurance.

 

Unless otherwise agreed, all of the company’s workers are considered employees. That also includes

  • apprentices
  • employees during the trial period
  • part-time workers

 

as well as everybody covered by compulsory accident insurance. Also staff on secondment abroad or cross-border commuters who have a cross-border commuter permit.

 

Self-employed workers can also be included by name in the company’s insurance contract. That applies even if they are not covered by compulsory accident insurance.

 

 

Comparing policies pays off: check daily sickness allowance insurance

The amount of daily sickness allowance insurance premiums and the benefits agreed are important cost factors when taking out social insurance for employees. But self-employed individuals should also consider offers from the various insurers in good time. Most contracts have a notice period of three months to the end of the year. If they want to switch to a different insurer, that means the old contract must be regularly terminated at the end of September. Exception: the previous insurer announces a premium adjustment for the following year – in this case, a special right of termination exists until the end of November.

 

Generali tip: it’s worthwhile checking the amount of the premium and also comparing the benefits provided under the terms and conditions of the policies. And, what’s more, only cancel once the new insurance is settled.

The expert

Andrea Juric is the Team Leader of Underwriting at Generali Switzerland. Thanks to her many years of experience, she makes a major contribution to the success of tailored insurance strategies for companies of all sizes and in all industries. Our agents and our brokers alike trust Andrea Juric’s expertise when it comes to finding the best business solutions in the insurance segment. Based on that expertise, they are able to give our business customers the best possible advice.

MORE ARTICLES ON THE SUBJECT

Compulsory accident insurance in seven steps

A compact compilation of everything you need to know about accident insurance

The latest in desk ergonomics for a healthy workstation

When it comes to safety at work, desk ergonomics are a big deal. Here's our pick of the latest ergonomic products.

Home office – blessing or stress trap?

How to avoid suffering from health complaints when working from home.

Suitable Generali solutions