How can an employer pay the salary to an employee who is on a sick leave and receives sickness allowance ?
Once an employee is granted a sickness allowance, the Employer cannot pay the relevant insurance contributions, because in that case the system of IKA, electronically informed, will receive two totally different indications, that may lead the Authorities to believe that there is a mistake or even fraud involved.
Unfortunately, the employee cannot resign from his/her right to receive the IKA sickness allowance, so that the insurance contributions are paid together with the salary.
The sickness allowance cannot be granted for an indefinite period, but it has a limitation of appr. two (2) years (720 days). After this period expires, the competent Committee of IKA (currently KEPA) will decide whether the employee is still incompetent for work, in which case he will receive a disability pension, or whether he can return to his work.
If the employers business has an internal regulation, which provides that in case of long term sickness of the employees, it will continue paying their salaries and the relevant social contributions for a certain period, here is an option, under conditions, to continue paying (salary and) social contributions for a reasonable period of time.
So, if an employer decides to pay to a sick employee his salary although he receives the sickness allowance from IKA he may do so, but must not deduct employees IKA contributions and/or pay the employers contribution to IKA for this salary.
According to article 31 par. 1 aa) of the Income Tax Code, for the tax deductibility of payroll expenses and payments to personnel, the relevant social security contributions to IKA or of any other social security institution must have been paid or legally exempted from payment. Also, according to paragraph 16 of the same article, no other payments that are made voluntarily by the employer to employees and which do not represent compensation for work done by the employee are tax deductable. So, this expense may not be deductable for income tax purposes.