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Compensation for the loss of earnings

Daily allowance

Initially, daily allowance will be paid on the basis of inability to work if it 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. In such a case, daily allowance is paid to the employer. If the employee has not received sick pay for the above-mentioned period, daily allowance is determined in accordance with the earnings for the four weeks preceding the claim event.

After the first four weeks, the amount of daily allowance will be 1/360 of the injured person’s annual earnings.

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.

The Workers’ Compensation Act provides for daily allowances for students, schoolchildren and self-employed persons. Likewise, it contains provisions on daily allowance in situations where a person receiving old-age or disability pension manifests an occupational disease.

Daily allowance is a taxable benefit.

Employee payments are deducted from daily allowance before tax is withheld at source. (See the annual amount of deduction)

Workers' compensation pension

If inability to work continues for more than one year from the claim event, the injured person 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 reduced ability to work must be caused by the compensable injury sustained in the occupational accident or the occupational disease, and not any other injury or illness which is independent of the occupational accident or disease.

The Workers’ Compensation Act provides for workers’ compensation pension for students, schoolchildren and self-employed persons. Likewise, it contains provisions on workers' compensation pension in situations where the claim event occurred during work performed by a person receiving old-age pension.

The workers’ compensation pension is adjusted each calendar year using the earnings-related pension index referred to the Employees Pensions Act.

From the beginning of the sixth year, the basic amount of the 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

Instead of daily allowance and workers' compensation pension, the injured person is paid rehabilitation allowance in compensation for the loss of earnings during vocational rehabilitation.

As a rule, rehabilitation allowance paid during vocational rehabilitation corresponds to the amount of full daily allowance or workers' compensation pension. However, if rehabilitation does not prevent the injured person from engaging in gainful employment, the rehabilitation allowance is determined on the basis of the loss of earnings.

During holidays which are part of the syllabus of the training compensable as vocational rehabilitation, rehabilitation allowance is paid in the same amount as during the actual training. Therefore, earnings from summer jobs and similar work will not affect the amount of rehabilitation allowance.

Annual earnings

Compensation for loss of earnings 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.

Annual earnings are determined on the basis of the injured person’s earnings at the time of the claim event (earnings on the claim date). 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 will be 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 above paragraph explains the main rules of how annual earnings are determined. The calculation also taken 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 Workers’ Compensation Act contains special provisions on the annual earnings of students and retired persons.

Main rules of how annual earnings are determined

A waiter has had an accident on 1 January 2016. The permanent employment relationship had begun on 1 December 2014.

  • Earnings of the claim date, i.e. earnings for the period of 1 January 2015 – 31 December 2015 are EUR 26,363.45.
  • Earnings for the reference period, i.e. earnings for the years of 2013 – 2015 are EUR 26,363.45, EUR 15,763.00 and EUR 23,477.00 and increased to the 2016 level EUR 26,556.873, EUR 16,031.55, EUR 24,290.82, the average being EUR 22,293.08.
  • When the earnings of the claim date are compared to the average of the reference period earnings, the difference is 18.25843 per cent.
  • Because the claim date earnings do not differ by 20 per cent from the average reference period earnings, the annual earnings are deemed to correspond to the earnings on the claim date, i.e. EUR 26,363.45.

12.6.2017

Worker's compensation and insurance
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Finnish Workers' Compensation Center
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