Loss of income
Compensation for loss of income arising from an occupational accident or occupational disease is paid in the following form:
- daily allowance
- Workers' compensation pension
- rehabilitation allowance
Daily allowance is paid on the basis of incapacity for work if the incapacity lasts for at least three consecutive days, excluding the claim date. Daily allowance is not payable for the claim date. Daily allowance is paid for up to one year from the date of the claim event for all calendar days.
For the first four weeks from the claim date, the amount of daily allowance corresponds to the amount of the employee’s sick pay. Daily allowance is paid to the employer that pays the employee’s sick pay. If the employee has not received sick pay, daily allowance is determined in accordance with the earnings preceding the claim event.
After the first four weeks, the amount of daily allowance is 1/360 of the employee’s annual earnings.
Daily allowance is a taxable benefit. Employee payments are deducted from daily allowance before tax is withheld at source.
Workers' compensation pension
If inability to work continues for more than one year from the claim event, the employee will be paid workers’ compensation pension, the amount of which is determined on the basis of annual earnings.
The full workers' compensation pension is 85 per cent of the annual earnings of persons aged under 65 and 70 per cent of the annual earnings of persons aged 65 and above.
Daily allowance can be paid as a partial compensation if the inability to work and reduction in earnings are partial. The reduction in the ability of work must be at least 10 per cent.
As a rule, the assessment of the ability to work is based on the injured person’s remaining ability to earn income. The reduction in the ability to work must be a consequence of a covered accidental injury or occupational disease.
The workers’ compensation pension is adjusted each calendar year using the earnings-related pension index referred to by the Employees Pensions Act.
From the beginning of the sixth year, the basic amount of workers' compensation pension will be increased on the basis of the claimant’s age, if the claimant is under 65 years of age. Workers' compensation pension is a taxable benefit.
Rehabilitation allowance covers loss of income during vocational rehabilitation.
As a rule, rehabilitation allowance paid during vocational rehabilitation corresponds to the amount of full daily allowance or workers' compensation pension.
Compensation for loss of income is based on the annual earnings in the following situations:
- Daily allowance four weeks after the claim event
- Workers' compensation pension
- Rehabilitation allowance four weeks after the claim event and during the period of receiving workers' compensation pension
- survivors' pension (for the surviving spouse and children).
Annual earnings are determined on the basis of the employee’s earnings at the time of the claim event: in other words, on the date of the loss. These are determined on the basis of the earnings received during the year preceding the claim event. All employment relationships valid on the claim date are taken into account.
The annual earnings of the claim date are compared to the average annual earnings of the three years preceding the claim event (= reference period earnings). If the earnings of the claim date differ by less than 20 per cent from the average, the annual earnings are deemed the earnings of the claim date.
If the earnings of the claim date differ by at least 20 per cent from the average reference period earnings, the annual earnings are deemed to be the average of the reference period earnings and the claim date earnings. However, if this difference of at least 20 per cent is caused by a change in earnings that has been assessed to be permanent, the annual earnings are deemed to be the earnings of the claim date.
The calculation of annual earnings also takes into account the effects of unemployment, illness and other absence on earnings. In addition to cash pay, annual earnings include other taxable remuneration received from work, such as benefits in kind.
If the annual earnings remain under the limit provided in legislation, the compensation will be based on the minimum annual earnings. The law gives special provisions on the annual earnings of students and retired persons.