The presentation focuses on costs of work disability in Finland.

1. Costs of work disability in
Finland – Evidence from the
municipal sector
ICOH 31st International Congress on
Occupational Health
Seoul, June 4
Session: Work Disability and Integration
Pauli Forma
Director of Working Life Services
Keva, Finland

2. Aim of the presentation
• To present findings on calculations on costs of work disability.
• The presentation focuses on biggest municipal sector organisations
(cities and health care districts) in Finland.
– 20 percent of the Finnish labour force works in the municipal sector.
– Local authorities provide basic public services for the residents (child
care, education, health and medical care and care for the elderly).
– 75 percent of the municipal employees are women.
– Average age of the municipal employees is 46 years.
• Costs of sick leave, work accidents, occupational health care and
disability pensions have been calculated.
• Calculations are based on Keva’s service for customers, data comes
from the registers of Keva and the employers.
• In addition, practices of the employers on preventing and handling
work disability have been evaluated.
29.5.2015
2

3. Background
• Work disability causes substantial costs at the level of national
economies.
– On average, OECD contries spend 2 % (Finland 2.9 %) of their GDP and
around 10 % (Finland 12 %) of their public spending on sickness and
disability benefits (OECD 2010).
– In Finland, it has been estimated that overall costs of lost labour input*
is 25 billion euros a year (12.5 % of GDP) (Ministry of Social Affairs and
Health 2014).
• Less is known about the extent of work disability costs for employers.
– Better understanding of the costs could encourage employers to actively
diminish work disability.
• In addition to avoiding costs, lower level of work disability raises
productivity and wellbeing at work, and has a positive impact on
participation in working life and extending the length of careers.
29.5.2015 3
* Costs of occupational accidents and diseases, disability pensions,
sickleaves and presenteeism.

4. Costs of work disability
4
Direct costs:
• Administrating the absences
(statistics, rehabilitation,
reorganisation of work).
• Replacing absent staff (deputies,
overtime, extra-workers).
• Salaries and benefits related to
absent staff (salaries, vacations
etc.) *
• Costs of occupational
health care *
Indirect costs:
• Negative implications to service
production (productivity,
difficulties in delivery)
• Losses due to lower quality of
services (complaints, checking
and repairing of errors)
• Losses in wellbeing at work,
reputation and competitiveness of
the organisation.
Work accident (insurance fees)* Costs of disability pensions*
In this presentation, costs of components marked with * have been calculated. In
addition, overall costs (both direct and indirect) has been approximated.
Sick leave

5. Total costs of work disability in the
municipal sector in Finland
• Direct and indirect costs due to work disability are 12.7 % of
the payroll in the municipal sector (2.2 billion euros/year).
– With cost-structure of the ”best” employer, costs would be 18
% (410 million euros) lower.
– With cost-structure of the ”worst” employer, costs would be 25
% (550 million euros) higher.
• Costs are determined by age and occupational structure of the
organisations, but also actions and policies of the employers
are crucial.
– Early intervention, quality of occupational health care, rehabilitation and
return to work-policies, preventive culture to avoid work accidents are
important.
29.5.2015 5

6. Structure of work disability costs
61
7
6
25
Sick leave
Occupational health care
Work accidents
Disability pensions
Disability pensions 1.8 %
Sick leave 3.2 %
Occupational health care 0.5 %
Work accidents 0.5 %
TOTAL direct costs 5.2 %
TOTAL direct and indirect* costs 10.6 %
29.5.2015 6
An example of the costs in one big
Finnish city, % of the payroll
Distribution of work disability
costs in the municipal sector in
Finland
* approximation

7. Direct costs of work disability in different
organisations as a %-share of the payroll
7
29.5.2015
• Bars describe costs in different
organisations.
• Costs vary substantially between
organisations.
• Differences are bigger when it comes
to more severe work disability
problems (disability pensions) than
sick leaves.

8. Distribution of the sick leaves according to
duration and costs
67
26
7
1-14 days 15-60 days over 60 days
29.5.2015
Distribution of sick leaves
according to duration
24
47
29
1-14 days 15-60 days over 60 days
Distribution of sick leave costs
according to duration
8
Length of absence Length of absence

9. Does cost awereness matter?
• Cost awereness of work disability costs has risen among public
sector employers in Finland.
• Calculating the costs and analysing reasons behind them
raises work disability on the employers’ agenda.
• When employers have seen the costs of work disability more
clearly, they have:
– Set more goals, i.e. level of sick leaves.
– Hired ”case managers” for managing work disability issues in the
organisation.
– Improved their HR-systems to achieve better management of
work disability.
– Paid attention to role of supervisors, especially improving their
skills in early prevention.
29.5.2015 9

10. Conclusions
• Calculating the costs is a good strategy when trying to get
more attention on work disability.
• It is not easy to calculate costs of work disability.
– It is challenging to get the relevant data from HR systems.
– Employers lack expertise in collecting and analysing the data.
– Measures are not well-established, e.g. how to measure sick
leaves.
• It is important to remember that costs are determined by
work disability.
– The focus should be on work disability and diminishing it.
• In the future, organisations should integrate economic
perspective of work disability costs to normal management
system of the organisations.
29.5.2015
10

11. Appendix
1.1.2011 Etunimi Sukunimi 11

12. Keva in brief
• Keva handles the pension matters of employees of local
governments, state, church and the Social Insurance Institution
Kela in Finland. We provide earnings-related pension services for
some 1.3 million public sector employees and pension recipients.
• At the beginning of 2013, Keva had 934 member organisations as
employer customers. Our member organisations include all Finnish
cities, municipalities and joint municipal authorities as well as a
number of municipal associations and limited liability companies.
• Keva is responsible for the funding of local government employees’
pensions and for investing pension assets. These pensions are
funded through contributions from local government employers
and employees. In 2012 Keva’s contribution income amounted to
approximately EUR 4.8 billion. The value of our investments is
around EUR 35.8 billion (31 March 2013).
29.5.2015 12