Term
Disability pension
A benefit for someone whose long-term illness has reduced their ability to work by more than 40 %, paid in full above 70 %. Recipients may work or run a business alongside it, and for the employer such an employee counts as a person with a disability.
Updated
What it means
A disability pension is a benefit from disability insurance that the Social Insurance Agency pays to someone whose ability to earn a living is reduced by more than 40 % compared with a healthy person because of a long-term adverse health condition. Long-term means the condition is expected to last more than a year.
The amount depends on the degree of reduced capacity, the length of insurance and previous earnings. Above a 70 % reduction it is paid in full, for 41 to 70 % proportionately. The person must also have the required number of insurance years, which depends on age.
A disability pension is not a benefit for not working. Recipients may be employed or self-employed alongside it without the pension being reduced. On reaching pension age, the disability pension is converted into an old-age pension.
How it works in practice
For the employer, an employee drawing a disability pension is a person with a disability and counts towards the disability employment quota. An employer with at least 20 employees can thereby reduce or eliminate the levy for not meeting the quota.
A recipient with a reduction above 70 % is not compulsorily covered by disability insurance, unlike other employees, and special contribution rules apply. The employee should give the employer the Social Insurance Agency’s decision on the pension so that payroll is calculated correctly.
If the disability arose from a workplace accident or occupational disease, the person may also be entitled to an injury annuity from accident insurance. For companies employing more such people, sheltered workshop status may make sense.
What to watch out for
A common mistake is the employer not having a current decision on an employee’s disability pension. When the degree of reduction changes or the pension is withdrawn, the contribution regime and the quota count change too. Decisions should be kept in the personnel file and checked regularly.
Mind discrimination as well. An employee with a disability pension is entitled to reasonable adjustments at work and must not be disadvantaged in pay or promotion. Adapting the work to their health is the employer’s duty, not a voluntary perk.
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