Loss of earnings due to illness in SMEs:
protecting wages
and cash flow
Sick leave: an operational and human risk
Without a solution, the payroll burden can become unpredictable.
A prolonged sick leave puts an SME under double pressure: business continuity and payroll costs.
In Switzerland, employers have obligations to maintain salary in case of illness, the extent of which depends in particular on working conditions and the applicable framework.
Loss of earnings insurance for illness serves to stabilize this exposure, protect employees and limit internal tensions during long absences.
The issues also involve HR compliance: entry conditions, certificate management, notification deadlines, and coordination with the LPP if disability is being considered.
A well-structured solution reduces disputes, secures the budget and improves the quality of social dialogue.
What is covered by a loss of earnings due to illness, and the pitfalls to avoid
The right questions are about definitions, not just about price.
In Switzerland, loss of earnings insurance for illness is generally put in place to supplement and secure the obligation to maintain salary in the event of incapacity for work due to illness.
It is not mandatory federal social insurance in the strict sense, but a solution widely used by SMEs, often because it provides financial predictability and a more stable HR framework.
As a general rule, the contract provides for the payment of daily allowances for a defined period, after a chosen waiting period (deferral period).
The percentage of salary replaced and the duration of compensation vary according to the contract, as do the inclusion of certain elements of remuneration (bonuses, commissions, allowances) and the way in which part-time work or salary fluctuations are dealt with.
It is common for insurance to be structured to cover the “pre-disability” phase, and then for coordination with the AI and the LPP to become central if the disability is prolonged.
The points of vigilance begin with the medical and administrative definitions.
“Incapacity for work” can be assessed according to criteria and documents required by the insurer; the quality of the medical certificate, the job description, and the history of the absence often influence the treatment.
Exclusions or limitations exist: pre-existing diseases not declared in certain contexts, situations related to an intentional act, and, depending on the contracts, restrictions on certain specific situations.
It is also necessary to monitor the obligations of the insured (employer and employee): timely notification, transmission of documents, compliance with proposed rehabilitation or medical follow-up measures, and consistency of HR information.
From a financial perspective, the “franchise” often manifests itself in the waiting period, and sub-limits may apply to certain remuneration positions or categories of personnel.
For an SME, choosing the right level of coverage means making a trade-off between protection, simplicity and budget.
A useful decision-making framework involves asking yourself, in a structured way, the following questions: what is your absenteeism profile and your dependence on a few key functions; what portion of salary do you want to secure to maintain internal equity; what shortfall can your cash flow absorb without stress; how does your plan fit with the LPP, particularly regarding disability benefits; and what contractual or HR policy requirements do you want to comply with.
Next, we test the consistency with scenarios: a three-month break, a one-year break, several simultaneous breaks, a gradual return.
The best solution is often the one that avoids “blind spots”, for example a forgotten category of staff, an unsecured variable salary even though it represents an important part, or a gap that is too long in relation to your internal obligations.
Finally, success hinges on execution. Simple processes are essential: an identified internal manager, a document checklist, an announcement schedule, and factual communication with the employee.
Mage & Associates can assist you through risk analysis, policy review and clarification of contractual points, so that your loss of earnings sickness insurance actually works when you need it.
Trois raisons d’assurer la perte de gain maladie
From financial management to HR serenity, without complicating things.
Stabilize the
budget and
cash flow
A well-defined coverage replaces a portion of the salary for the duration stipulated in the contract.
This prevents several long absences from disrupting the cash flow.
The exact level, duration and waiting period vary depending on the insurer and the plan.
Preserve
the climate
social
When the rules are clear, employees better understand what is paid and when.
SMEs can maintain a fair framework, even with sensitive situations.
This limits misunderstandings and supports a return to organized work, when possible.
Reduce the
HR risks
and legal
Loss of earnings due to illness is not just a matter of salary.
It structures the management of absences: announcements, documents, exchanges with the insurer, coordination with the LPP and sometimes the AI.
A clear process protects the SME when making difficult decisions.
A long break and a gradual return: insurance put to the test
A realistic, fictional example, typical of an SME in French-speaking Switzerland.
Realistic fictional example.
A B2B service SME in Geneva, with approximately 30 employees, is experiencing rapid growth.
An administrative manager falls seriously ill and is unable to work for several months.
The company needs to reorganize invoicing, payroll and supplier tracking, while continuing to bear some of the replacement costs.
The claim is made quickly, but the insurer requests specific information: detailed medical certificate, description of tasks, occupancy rate, reference salary and proof of payment.
One point becomes crucial: the remuneration includes a significant variable component, and the insurance contract only partially incorporates it.
Without clarification, the employee expected a higher salary replacement. The SME then structured the file, documented the salary components, and implemented transparent communication.
After the prescribed waiting period, the insurance company pays benefits according to the insured amounts. The doctor then authorizes a gradual return to work, which involves regular adjustments to the disability rating and the amounts paid.
With rigorous monitoring and coordination with the LPP (Swiss pension fund) to anticipate potential disability, the situation stabilizes. The lesson for decision-makers is simple: loss of earnings due to illness truly provides protection when salary definitions, notification deadlines, and HR processes are in place before the first absence.
