Executive summary

Sickness and disability policies in Slovenia have not really been changed for about 20 years. A fragmented social protection system and a lack of early intervention contribute to high and rising levels of long-term sickness absence and frequent early retirement of older workers with health issues, as well as inadequate social support for many persons with disabilities.

Slovenia has one of the largest disability benefit caseloads in OECD countries: despite a gradual decline in the past 15 years, still almost one in ten people of working age receive a disability payment. This high share is surprising because the average payment is relatively low (not least due to considerable insurance requirements) and because disability insurance can turn away applicants with incomplete medical treatment and rehabilitation. Without the backlog for health treatments and without unlimited sickness insurance, the disability caseload would arguably be even larger.

The adequacy of disability payments is an ongoing issue, despite recent reform. A large share of disability pensioners receive pensions below the basic minimum income, set at EUR 400 per month in 2019. Disability benefits granted to persons with partial work capacity while they look for a job are even lower than disability pensions. Some people with disabilities are not eligible for sickness and/or disability insurance and must rely instead on social assistance.

Frequent long-term absences are a growing issue in Slovenia: the share of sickness absences of one year or longer increased from 22% in 2014 to 31% in 2019. This large increase may have absorbed some of the decline in disability beneficiaries over the past decades. It is directly related to features of the sickness insurance programme. There is no maximum duration for sickness benefit payments which are very high and stay high for long and even limitless periods of sickness absence.

Claimants who receive sickness insurance for 12 months or longer are three times more likely to exit the labour force than those on sickness insurance for 6-12 months. Long-term sickness is associated with a more frequent exit from the labour force. Long-term sickness spells lead to a depreciation of work capacity, especially as there are no activation processes or measures in place to help maintain the working capacity of sickness insurance claimants.

Early activation is key for successful work reintegration. The Public Employment Service of Slovenia (PES) provides employment rehabilitation aimed at preparing persons with disabilities for a new job. The effectiveness of such rehabilitation halves with each additional year of unemployment. Similarly, the effectiveness of active labour market programmes falls sharply with the duration of unemployment. However, most people only participate in active labour market programmes two years after their registration at the PES.

Late intervention is also a major issue for the sickness and disability insurance systems. Vocational rehabilitation provided by the Pension and Disability Insurance Institute aims at activating persons that have been in the welfare system for some time, typically for many years. This explains why only about 5% of all accepted disability claims have undergone vocational rehabilitation. Likewise, employers get involved in rehabilitation matters only when their workers claim disability insurance benefits, often after many years without any contact; at this late stage, efforts to secure employment with the same employer are ineffective.

The current pilot of early participation in vocational rehabilitation can show how early intervention can improve labour market outcomes of persons with long-term sickness. This pilot, co-funded by the European Social Fund, aims at engaging persons on sickness absence for about three months through early vocational rehabilitation to show the potential of early activation for sickness beneficiaries.

Generous benefits and a lack of activation push older workers with health issues into early retirement. In Slovenia, the systems of disability and unemployment insurance are relatively more generous for older workers. Not surprisingly, therefore, most participants in vocational rehabilitation are under age 40. Early retirement of older workers with health issues is not limited to disability insurance: sickness insurance, too, appears to act as an early retirement pathway as the retirement age increases. The upward trend in long-term sickness is the result of longer and longer absences among older workers, aged 55 to 64.

Underpinning the facts is the need for greater co-operation between the main actors. The fragmented social protection system needs stronger co-operation to overcome its current deficiencies:

  • Different ways of assessing long-term sickness (by sickness insurance), disability (by disability insurance) and health barriers to employment (by unemployment insurance) create inequality and inefficiency. Long suggested plans for creating a joint assessment body promise to help harmonising the assessment process. However, change must go hand-in-hand with an end to the requirement of the completion of medical treatment and medical rehabilitation before any considerations of additional vocational interventions.

  • There is a duplication of disability recognition and vocational rehabilitation by the Pension and Disability Insurance Authority and the Public Employment Service. A uniform view on the assessment of similar risks to drop out of the labour market and on the entitlement to vocational rehabilitation, would ensure eliminating coverage gaps and unfairness between different groups of persons with disability.

  • Lack of data and limited sharing of information across public institutions lead to a duplication of administrative work and constrain the available evidence. This report used a unique data set with linked administrative data from various sources including employment and unemployment records, health status and sickness absence information, and disability and pension claims. Linking data across registers and institutions is possible, and key to monitoring and evaluating the labour market implications of sickness and disability programmes and services.

Experts and policy makers in Slovenia call for a joint body for assessing sickness and disability. The OECD proposes that this reform goes further than previously agreed in the 2016 White Paper on Pension Reform, in two ways. First, it should also involve the assessment of health barriers to employment under the responsibility of the Public Employment Service. Second, a new Joint Assessment Body should also be responsible for the assessment of the entitlement to vocational rehabilitation.

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