Excessive Sick Leave Hurts
What they are unaware of, is that we are on to them. They also need to understand, that they actually can hurt themselves in the end. Some may say that they are “like kittens trying to fool a cat”.
Although our Social Security Board does not penalize persons who take sick-leave during their working years, EXCESSIVE periods of sickness can hurt your pension amount when you retire.
Social Security by design, assists persons during periods of medical illness, not only by paying a generous replacement rate of 65% of average insurable earnings, but if the period of sickness spans one week or more, we provide them with a credit week for each full week of sick-leave taken.
Conversely, the more sick-leave you use, the more likely it is that you would earn credit weeks. These credit weeks may be used to calculate your average weekly earnings and hence your pension. Since each credit week will represent a weekly wage that is 65% of your average wage, a person can reduce the average earnings used for calculating their pension by up to 35%!That is, by frequently claiming sickness benefit (especially for periods that are longer than one week); one can reduce their pension by as much as 35%!
Sick-leave can hurt you in the long term. To see how, let’s examine the following scenarios.
- Mr. David worked for twenty years earning $1,000 per week. He never had frequent periods of sickness claims throughout his working career. Then his average weekly earnings used to calculate his pension, would be $1,000.Thus, taking into consideration his pension points and associated replacement rate, Mr. David would receive $1,950 per month as his pension for the rest of his life.
- Mr. John also worked for twenty years earning $1,000 per week, but he frequently claimed sickness benefits throughout his working career, and to an extreme in the years used to calculate his pension. Then Mr. John’s average weekly earnings, used for calculating his pension would be $650.
Thus, taking into consideration his pension points and associated replacement rate, Mr. John would receive $1,267.50 per month as his pension for the rest of his life.
Here we see how a difference of $350 in the average wages used to calculate pensions, resulted in a 35% smaller pension, FOR LIFE!
Since Social Security uses your three best contribution years from the most recent fifteen years to calculate your average weekly earnings, one can see how a lower average wage may adversely affect your pension allotment. Mr. David would have a pension calculated with $1,000 for the remainder of his life, while Mr. John would have a pension calculated with $650 for the rest of his life.
I am sure that we would all prefer to “lock in” the highest pension entitlement that we possibly can. So if you can help it, avoid claiming unnecessary sick-leave, before you pass the infirmity to your pensions.
By Donovan A.G. Herbert
Manager Research & Statistics
St. Christopher & Nevis Social Security Board