Compensation for Sick Pay Costs to be Phased Out – Here's What You Need to Know

<span id="hs_cos_wrapper_name" class="hs_cos_wrapper hs_cos_wrapper_meta_field hs_cos_wrapper_type_text" style="" data-hs-cos-general-type="meta_field" data-hs-cos-type="text" >Compensation for Sick Pay Costs to be Phased Out – Here's What You Need to Know</span>

Please be aware that this article primarily pertains to Swedish rules and regulations, which may not necessarily apply or be valid in jurisdictions outside of Sweden.

Changes are on the horizon concerning companies' sick pay costs. If the government has its way, financial support for employers will be discontinued by the summer of 2024. Here’s what you need to know.

Before we go into the new proposal, a brief recap is needed. What does the current regulation look like? When employees fall ill, their employer is responsible for paying sick pay for up to 14 days (after which sick pay from the Swedish Social Insurance Agency applies). In their monthly employer’s declaration to the Swedish Tax Agency (AGI), companies report their sick pay expenses. If eligible for compensation, it’s automatically paid into the company’s tax account without the need for a formal application.

This support has been intended to mitigate the financial blow that high levels of employee absence due to illness can have, especially on small businesses. Essentially, it’s a type of high-cost protection. However, should the government get its way, this support is expected to be discontinued (article in Swedish). One reason is the prevalence of fraud and errors related to the payments. At the same time, the compensation represents a tiny portion of the total sick pay costs borne by employers (about five percent).

Impacts on Payroll Reporting

It now falls to the Riksdag (the Swedish Parliament) to pass the government's proposal, and if all goes according to plan, the support for high sick pay costs will be eliminated at the end of June 2024.

This means employers can apply for the compensation in their employer’s declaration until June 30, 2024. Since the support is paid out retroactively, companies will also be able to benefit from it during 2025.

Once the support is phased out, employers will no longer need to report their sick pay expenses in the employer’s declaration. The field for sick pay in the declaration will be removed from the July 2024 report. Here at Flex Applications, we will ensure that our payroll systems are updated to accommodate these upcoming changes.

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