Sick leave has become an increasingly burdensome issue for businesses across Europe, with growing absenteeism costing companies billions of euros annually. In countries like Norway, the problem has reached a tipping point, with workers taking more sick days than anywhere else in Europe. Absenteeism has surged to its highest levels in 15 years, prompting concerns among policymakers and businesses alike about the impact on productivity and economic growth.
In Norway, the situation is compounded by an extensive welfare system that provides workers with generous health-related benefits. Employees receive their full salary for up to a year, followed by two-thirds of their previous earnings. While this system is designed to protect those who cannot work due to illness, critics argue that it has led to a reliance on benefits, contributing to the nation’s growing sick leave problem. The International Monetary Fund (IMF) has warned that the system is “costly and distortionary” and called for urgent reform.
“Companies tell us that more time is spent on recruitment, getting hold of people with the right skills, while there is more wear and tear on the employees who remain,” said Odd Arild Grefstad, CEO of Norwegian pensions and insurance firm Storebrand ASA. “All of that means that productivity drops.”
However, the Norwegian system is not the only one under scrutiny. Rising sick days are a growing concern across the continent, exacerbated by factors such as ageing workforces, increasing awareness of mental health issues, and the lingering effects of the COVID-19 pandemic.
As the numbers of sick days increase, so too do the financial consequences. For governments already grappling with sluggish growth and rising debt, these absences put further strain on already fragile economies. Business leaders argue that illness-related absenteeism is exacerbating labour shortages, diminishing output, and impeding overall business performance. Meanwhile, for workers, extended sick leave often leads to reduced earnings and can have negative consequences on mental health, self-esteem, and overall well-being.
In the UK, the number of economically inactive working-age people has risen by nearly 800,000 since early 2020, with long-term sickness alone costing the economy £33 billion ($42 billion) in lost productivity. This figure is expected to double by the end of the decade, according to a report by Zurich Insurance. In response, Prime Minister Keir Starmer recently unveiled a plan to reverse this trend by getting more people back into work, aiming to boost economic growth and reduce the burden of benefits.
Elsewhere in Europe, the situation is similarly dire. In Germany, businesses spent a record €77 billion ($81 billion) on employee sick leave last year, more than double the amount spent in 2010, according to the IW economic research institute. The German government estimates that sick leave costs the economy around €200 billion annually. Meanwhile, France is also feeling the pinch, with the head of the national health insurance agency warning of growing costs that are straining the country’s health budget.
While support for those unable to work due to illness is vital, governments are becoming increasingly focused on reducing absenteeism and helping people return to work. This is not just about saving money but also about preventing workers from drifting away from the labour market entirely.
“One of the most frightening statistics in this field is that if someone has been on sick leave for at least six months, the likelihood that they will leave the labour force altogether is higher than the likelihood of returning,” said Christopher Prinz, senior labour market analyst at the OECD in Paris.
The issue of sick leave is further complicated by the rise of “presenteeism,” where employees show up to work despite being ill. Research by the OECD shows that presenteeism is even more harmful to productivity than absenteeism, with losses from employees working while sick being two to three times greater.
In Norway, architect Andreas Tingulstad, who relies on benefits after suffering a stroke and brain injury, stresses that while the welfare model is not perfect, it is crucial for those genuinely in need. “Usually a disability or sickness is no one’s fault. It just happens,” he said. “I’m sure there are lots of people that do take advantage, but you can work to improve it.”
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Governments in countries like France and the UK are considering ways to tackle absenteeism without undermining welfare systems. France’s national health insurance agency plans to contact those on sick leave for more than 18 months to explore options for reintegration into the workforce. Additionally, the French national auditor has proposed cutting compensation for absences of less than eight days, which could save €470 million annually.
In the UK, Starmer’s plan includes improving sick pay access for workers, which could cost businesses up to £4.5 billion a year. However, the government argues that the costs will be offset by increased worker well-being, which in turn will boost productivity.
Despite these efforts, a consensus on how to best address the issue remains elusive. In Norway, talks between employers’ groups and labour unions over the “inclusive working life” agreement have stalled over disagreements about benefits.
“We have a shared responsibility to reverse this trend,” said Anne Louise Aartun Bye, head of the labour market department at NHO, the employers’ organization in Norway. “Society cannot afford sickness absence to continue as it is now.”
As European governments and businesses continue to grapple with rising sick days, finding a balanced solution that addresses both the needs of workers and the economic pressures on businesses will be key to sustaining economic growth and improving public health outcomes.
