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Major risk of incorrect compensation for high sick pay costs

The design of the system for compensating employers for high sick pay costs presents a major risk of incorrect payments. The Swedish National Audit Office recommends more controls and better opportunities to share information between agencies. In addition, the obligation of employers to provide information should be strengthened, and combined with financial penalties.

In the foreground, a coffee table with paper scraps, a fever thermometer, and a glass of water can be seen. In the background, which is blurry, a person is lying on a sofa with a computer.

Photo: Viktor Holm

Employers that are affected by high sick pay costs can receive compensation from the state. The Swedish National Audit Office’s audit shows that the system is inefficiently designed, leading to a high risk of incorrect payments.

“For correct payments to be made, it is essential that the compensation is calculated using correct information. Effective action is needed to counteract employers submitting incorrect information,” comments Deputy Auditor General Claudia Gardberg Morner.

The current division of responsibility between the Swedish Tax Agency and the Swedish Social Insurance Agency prevents efficient controls. The Swedish Tax Agency collects the information on which the compensation is based, but it is the Swedish Social Insurance Agency’s task to check that it is correct. At the same time, the Swedish Tax Agency has access to information that can facilitate performing controls, but which the Swedish Social Insurance Agency is not permitted to access.

“The agencies do not collaborate well enough in this area. Besides, there are legal obstacles to their ability to share relevant information with each other,” explains Carlos Arreyes, project leader for the audit.

The audit also shows that the risk of incorrect payments would diminish if the Swedish Social Insurance Agency took over the responsibility for calculating the sick pay costs from the employers. This, in turn, means that the Swedish Social Insurance Agency needs to be given access to more information from the employers.

The Swedish National Audit Office finds that the Government has not done enough to ensure that the system functions effectively. This includes matters such as the division of responsibility between agencies and the design of the regulatory framework.

Recommendations in brief

In the Budget Bill for 2024, the Government proposes that compensation for high sick pay costs be abolished. As long as the current regulatory framework is in force, recommendations to the Government include the following:

  • consider expanding opportunities to exchange information between the agencies
  • propose an expansion of the obligation for employers to provide information
  • introduce a penalty fee for providing incorrect information
  • transfer the responsibility for calculating the sick pay cost from the employer to the Swedish Social Insurance Agency
  • give the Swedish Social Insurance Agency and the Swedish Tax Agency a special coordination remit to reduce the risk of incorrect payments.

See the report for the full recommendations.

Facts: Compensation for high sick pay costs

Since 1992, it has been the employer’s responsibility to pay the first 14 days of employees’ sick pay. A compensation system was introduced to protect smaller employers from high sick pay costs. The system has undergone various changes and its current design was introduced in 2015. To make it easy to use the system, employers do not need to apply for compensation. Instead, the compensation is calculated based on employers’ returns and disbursed by the Swedish Tax Agency, on behalf of the Swedish Social Insurance Agency.

Press contact: Olle Castelius, phone: +46 8-5171 40 04.

Presskontakt: , telefon: 08-5171 42 06.

Updated: 20 November 2023

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