When an employee falls ill, most business owners and managers primarily think about reorganizing workloads, arranging temporary cover, or dealing with reduced team capacity. However, many employers are unaware that an employee’s incapacity for work also creates direct financial costs for the company.
During the initial period of illness, the employer pays sick leave, and in certain cases, the employer must also contribute one-third of the sick pay paid to the employee.
Sick Leave vs. Sick Pay
These two concepts are often used interchangeably in everyday conversation, but from an employer’s perspective, there is a significant difference between them.
Sick Leave
In the case of an employee’s own illness, the first period of incapacity for work is generally not covered by sick pay but by sick leave.
Employees are entitled to 15 working days of sick leave per calendar year. It is important to note that this is not 15 days per illness, but 15 working days in total during the given calendar year. If the employment relationship begins during the year, the entitlement must be calculated proportionally.
The employer bears the full cost of sick leave. During this period, the employee is entitled to 70% of their absence pay, which remains subject to taxes and social security contributions.
Sick Pay
If the employee remains unable to work after exhausting their sick leave entitlement, they may become eligible for sick pay.
Sick Pay Is Not Fully Financed by the State
A common misconception is that once the sick leave period ends, the employer has no further financial obligations because sick pay is funded by the health insurance system.
In reality, if an insured employee receives sick pay due to illness or hospital treatment, the employer is generally required to pay one-third of the sick pay amount as an employer contribution.
This contribution is borne exclusively by the employer and cannot be passed on to the employee.
As a result, in the case of a prolonged illness, the employer’s costs do not end after paying for the initial 15 working days of sick leave.
A Simple Example
If an employee receives a total of HUF 300,000 in sick pay during a longer period of incapacity for work, then, as a general rule:
- HUF 200,000 is financed by the health insurance system;
- HUF 100,000 is borne by the employer as a sick pay contribution.
Therefore, the employer’s liability is not one-third of the employee’s salary, but rather one-third of the actual sick pay paid.
How Is the Contribution Paid?
The administrative process depends on whether the employer operates a social security payment office, which is typically the case for employers with more than 100 employees.
If the Employer Operates a Social Security Payment Office
The employer’s payment office determines the amount of the sick pay contribution payable.
If the Employer Does Not Operate a Social Security Payment Office
The competent health insurance authority determines the amount of the contribution.
The employer receives an official decision and must pay the contribution within 15 days after the decision becomes final, transferring the amount to the designated tax authority account.
In a well-managed payroll process, handling these obligations is usually not part of a managing director’s daily responsibilities. Nevertheless, it is important for company leaders to understand that such payment obligations are neither errors nor exceptional cases, but legally mandated employment-related costs.
Not All Cases of Incapacity for Work Follow the Same Rules
The reason for the employee’s incapacity for work can significantly affect both sick leave entitlement and the employer’s contribution obligations.
Employee’s Own Illness
In cases of ordinary illness, the employee must first use their available sick leave entitlement. Once this period ends, they may become eligible for sick pay, after which the employer is generally required to pay the one-third contribution.
Pregnancy
In certain pregnancy-related cases, sick leave may not apply, and the employee may become entitled to sick pay from the very first day of incapacity for work.
The employer must still pay one-third of the sick pay provided.
This is particularly important for annual budgeting purposes, as a prolonged period of incapacity due to a high-risk pregnancy may generate employer contribution costs for several months.
Occupational Accidents and Occupational Diseases
In the event of a workplace accident or occupational disease, there is generally no sick leave entitlement, and employers are typically not required to pay the one-third contribution relating to accident-related sick pay.
However, if the accident or illness occurred because the employer failed to comply with mandatory occupational safety regulations, considerably more substantial compensation obligations may arise.
Caring for a Sick Child
Childcare sick pay should not be confused with sick pay paid due to the employee’s own illness.
In the case of caring for a sick child:
- no sick leave entitlement applies;
- the employer is not required to pay the one-third sick pay contribution.
Employers Should Plan Ahead for the Costs of Employee Absence
Employers should be aware that a prolonged employee illness affects more than just staffing and operational continuity. It may also result in direct financial costs that should be considered when planning company budgets and workforce management strategies.
