BRIEFING ON THE POLICY ON INCAPACITY LEAVE AND ILL-HEALTH RETIREMENT (PILIR)

1. BRIEFING ON THE POLICY ON INCAPACITY LEAVE AND ILL-HEALTH RETIREMENT (PILIR) Presentation to the Portfolio Committee 11 March 2015 Venue: Committee Room 1 120 Plein Street Cape Town

2. Overview • What is PILIR? • Why PILIR? • Philosophy & principles of leave • Legal Obligations • Pilot Study • Implementation of PILIR • Centralised - April 2006-March 2009 • Decentralised - April 2009 to date • Benefits of PILIR • Review of PILIR modality

3. What is PILIR? • Important Concepts • “Health Risk Manager” • means an independent natural or juristic person appointed by the Employer to advise on the granting of incapacity leave and ill-health retirement of employees • is an external company with medical and occupational health experts • “Employer” means the Head of Department or his/her designated office, which will be responsible for the handling and investigation of incapacity leave applications and ill-health retirement applications. • Objectives • The objectives of this policy is to set up structures and processes which will ensure- • intervention and management of incapacity leave in the workplace to accommodate temporary or permanently incapacitated employees; and • that rehabilitation, re-skilling, re-alignment and retirement, where applicable, of temporarily or permanently incapacitated employees are facilitated, where appropriate.

4. What is PILIR? • Mission of PILIR is to- • adopt a holistic approach to health risk management; • prevent abuse of sick leave by managing incapacity or ill-health as far as possible; • adopt a scientific approach to health risk management; • involve the various stakeholders; • implement health risk management that is consistent, fair and objective; and • support health risk management that is cost-effective and financially sound.

5. What is PILIR? • Temporary Incapacity Leave • Employee applies after 36 working days’ normal sick leave is exhausted for each occasion s/he needs additional sick leave. • For periods of 1-29 working days per occasion, the employee must fill out the application form for short temporary incapacity leave. • For periods of 30≥ working days per occasion, the employee must fill out the application form for long temporary incapacity leave. • Employee must submit with the application • A medical certificate • Additional medical evidence & written motivation • The employee must complete the consent form which is part of the application form. The purpose of this form is to obtain the employee’s consent to access medical information/further medical examination

6. What is PILIR? • Short Period Temporary Incapacity Leave • Assessment by the Health Risk Manager is to determine the- • Validity • Need for ongoing temporary incapacity leave • Appropriate duration of leave • Preliminary advice on medical condition (if applicable) • Long Period of Incapacity Leave • The assessment process is a two pronged approach • Primary assessment which deals with the employee’s application for either the full period or the 1st 30 working days • Secondary assessment deals with the further medical examinations in the event where the HRM identified such a need to further investigate.

7. What is PILIR? • The purpose of the primary assessment is to determine the- • Validity and reason for the absence • Need for ongoing temporary incapacity leave • Appropriate duration of leave • Whether or not there is a need to refer the employee for (a) further medical examination(s), if applicable • Secondary assessment – deals with the further medical examinations, if a need has been determined to investigate: • The granting or not of additional incapacity leave, • The management of the medical condition; • Whether the condition is permanent in nature and alternative employment, or adaptation of duties/work environment/ill-health discharge should be considered.

8. What is PILIR? • Il-health retirement • Process can be initiated by either the employer or employee • Full assessment is required to determine- • Validity of application • Management of medical condition • Alternate employment, adaptation of duties, ill-health discharge • HRM must advise the Employer on the: • Validity of the application • Extent of incapacity (partial/full) • Appropriate duration of incapacity (temporary or permanent) • Potential alternative work/work modifications, rehabilitation, etc. • Future strategies & requirements

9. What is PILIR? • PILIR provides that if employees are unhappy with decisions of the Employer that grievances can be lodged through the prescribed grievance procedure. • These grievances must be dealt with as close as possible to the point of origin in terms of the prescripts. • The Head of Department may take a different decision from the advice from the Health Risk Managers. These deviations must be reported to the DPSA and the Health Risk Manager.

10. Philosophy/Principles The philosophy and principles of leave are as follows: • Compliance with legislation • Health & safety of employees • Recuperation from illness/injuries • Create training & development opportunities • Support recruitment & retention of staff • Support service delivery

11. Philosophy/Principles • In terms of the employment contract the specific rights and responsibilities conferred upon the employer and employees, include- • The employer has the right that the employee be present and able to conduct its business. • The employer is responsible to, among others, pay the employee for services rendered. • The employee is responsible to present at work and render the employer’s services. • The employee has a right to pay for services rendered. • There is, in terms of the employment contract relationship, no obligation on the employer to pay the employee if s/he is not present at work. • Labour legislation introduces fairness in this relationship providing for and regulating types of leave.

12. Philosophy/Principles • Leave – • Has a monetary and time element attached to it. • The monetary element is rooted in the budget. • The time element is rooted in the department’s service delivery obligation • Leave that is properly managed results in- • An investment in human capital. • An investment in the health and wellness of staff • Staff is well rested and healthy which in turn improves performance and enhances sustainable service delivery. • On the contrary, if leave is abused/misused and/or not well managed, it results in- • Increased expenditure • Lacking service delivery • Ill and injury-prone work force.

13. Why PILIR? • Obligation on Employer in terms of PSCBC Resolution 7 of 2000 and Employment Legislation, read with Schedule 8 of the LRA to investigate: • applications for incapacity leave • cases of ill-health retirement • Important Studies leading to the development of PILIR: • Study into GEPF disability experience & management of sick & incapacity leave - 2001 • PSC: Report on Sick leave Trends in the Public Service - 2002 • Report of the Auditor-General On A Performance Audit of The Management Of Sick Leave Benefits At Certain National And Provincial Departments - 2005 • It was clear from these studies that– • The Public Service, as any other employer in the country, experiences absenteeism from the workplace as a major problem. • The abuse and poor management of sick leave have serious financial implications and a detrimental effect on service delivery.

14. Why PILIR? • The reasons for the poor management of sick leave and ill-health retirements could be attributed to a number of reasons, which include, among others that- • incapacity leave and ill-health retirements were not managed consistently, since a uniform and clear policy on the management of incapacity leave and ill-health retirements was lacking; and • incapacity was rarely investigated and properly managed, because of a departments’ lack of medical expertise and skills to investigate incapacity and ill-health retirement; and

15. Why PILIR? • The usage of ill-health benefits and sick and incapacity leave were exceptionally high. Particular trends were also detected in the usage of sick leave, i.e. a high percentage of absenteeism. For example, an analysis of 1557 ill-health retirement exits for the period Nov. 2000 - Feb. 2001 showed that: • 48% of all applications: probably or definitely would not have been granted ill-health benefits; and • 68% of all applicants could have benefited from return to work strategies • The Public Service as employer could, with the correct and scientific approach, add value to employees’ lives, where an employee is temporarily incapacitated and could return to work after s/he was afforded the appropriate period of temporary incapacity leave to recuperate.

16. Legal Obligations • Sick Leave benefits in the Public Service • An employee is eligible to 36 working days normal sick leave over a three year sick leave cycle (36 months) • If an employee has depleted his/her normal sick leave s/he may apply for incapacity leave. Incapacity leave is additional sick leave. There is no cap. • Legal obligations in relation to sick leave/incapacity leave • Employee • Normal sick leave: the employee must submit a medical certificate for periods of 3 days and longer, when s/he is absent on more than two occasions in an eight week period or when the employer has identified a pattern/trend. • Incapacity leave: medical certificate and additional voluntary motivation. • Must prove to the employer that s/he is too ill to be at work. • Employer • Normal sick leave: Investigate trends and institute disciplinary action, if necessary, or consider alternatives short of dismissal. • The granting of incapacity leave is at the discretion of the employer following the assessment of the application within 30 working days.

17. Legal Obligations • Ill-health Retirement • Either the employer or employee can in terms of employment legislation initiate an ill-health retirement application/process. • Legal obligations in relation to ill-health retirements • Employee to provide medical reports & additional voluntary motivation to support the application • Employer must investigate the ill-health retirement application short of dismissal and consider alternatives

18. Pilot Study • The MPSA adopted PILIR for purposes of a pilot project • Objectives of the pilot study were to – • determine the effectiveness of PILIR as a management tool; • determine the feasibility of the utilization of the Health Risk Manager in the Public Service environment; • redefine PILIR in line with the Public Service needs; and • determine the practicability of the turn around times. • The Pilot study commenced middle 2003 & ended March 2006 • The pilot sites included • SAPS, Department of Correctional Services and Free State Provincial Government • The appointment of Health Risk Managers entailed a joint tender process between the DPSA and the GEPF which had sponsored the pilot project. The pilot sites participated in the evaluation of tender process.

19. Pilot Study • Incapacity leave experience in the pilot departments

20. Pilot Study The Ill-health Retirement (Exits) Experience Note: Prior to the pilot study on PILIR substantial numbers of ill-health retirement exits were experienced. Once the pilot study on PILIR commenced a significant decline in actual exits were noted. This can be attributed to the better management of ill-health retirements, managers taking responsibility, etc.

21. Pilot Study • Within the work environment • The pilot sites became acutely aware of the drivers of incapacity leave and ill-health retirements. • Post Traumatic Stress Disorder in both SAPS and DCS was identified as the driver for incapacity leave and ill-health retirements • Training proved to be key in the effective implementation & application of PILIR • Consequently, the MPSA on recommendation of Cabinet approved the implementation of PILIR on 1 April 2006

22. Implementation of PILIR • Centralised Approach April 2006 – March 2009 • Modality • PILIR was rolled out to the entire Public Service on 1 April 2006 in a centralised manner • The DPSA played a pivotal role in the appointment and contracting, as well as the payment of the Health Risk Managers. • The rationale for the DPSA being centrally responsible for the payment of the Health Risk Manager was in the main to manage identified financial risks and to incubate the implementation of PILIR in departments. • Public Service was divided into 11 implementation areas, i.e. One in each of the nine Provinces with National Departments grouped into two clusters.

23. Implementation of PILIR • Price Structure • A multiple price structure was applied which comprised of- • A monthly baseline fee which consisted ofa fixed monthly amount and a variable amount (capitation fee) per employee based on the number of employees • A fee-per-case depending on the application type. This fee included the handling of medical accounts and all administration, reports, assessments and other tasks associated with the handling of the case, including the use of a courier service for the delivery of supporting documentation required by health professionals. • Actual medical expenses related to secondary assessments but limited to a pre-defined cap.

24. Implementation of PILIR • Decentralisation April 2009 to Date • Framework on Decentralisation • The rationale for decentralisation is to devolve the responsibilities from the DPSA to departments, i.e. the departmental contracting of HRM’s to render services required in terms of PILIR, the budgeting for the services and payment for the expenditure. • The decentralised PILIR model is underpinned by the- • Legal roles & responsibilities of the Minister for Public Service and Administration to determine norms and standards regulating the conditions of service of employees in the Public Service; • Mandate of the DPSA as the organ of state which is central in executing these legal responsibilities as entailed in various policies. • Roles & responsibilities of the respective Heads of Department supported by their Departments to implement, apply & execute policies and procedures emanating from the Public Service Act and the Public Finance Management Act. • The decentralised model entails- • The appointment of a Panel of Accredited Health Risk Managers (Panel) by the DPSA through a single bid process. • Successful service providers are appointed to the Panel by entering into a Panel contract with the DPSA.

25. Implementation of PILIR • Modality in the decentralised approach • The DPSA through its procurement process procures and appoints a Panel of Accredited Health Risk Managers. The current Panel comprises five service providers. • Each of the implementation areas selects a Health Risk Manager from the Panel and each of the Departments in the cluster enters into a departmental contract with the service provider through an independent interview/selection process. • The purpose of this contract is, among others, to enable departments to pay for services and manage the service providers’ performance. • In this regard the provisions of Treasury Regulation 16A6.6 are applicable. • The implementation areas were increased from 11 to 13 for the current contracting period. This is an attempt to distribute work more equitably.

26. Implementation of PILIR • Price Structure • Following consultation with the implementation areas, a monthly capitation fee was adopted. The benefit of a capitation fee modality is that it enhances the budgeting process, and validating of invoices is not labour intensive. • The capitation fee is payable monthly in advance based on the number of employees within the department where employee numbers used are updated quarterly. • The current monthly capitation fee is R 8.98 per employee. • In addition, if actual medical referrals of all long temporary incapacity leave and ill-health retirement applications in a cluster or a Province exceeds 30% of the total number of long temporary incapacity leave and ill-health retirement applications received in the 12 month period, all cases referred in excess of 30% may be invoiced at actual cost but limited to R3 133.72 per assessment.

27. Implementation of PILIR • Contract Management and Support to Departments • The service providers’ performance is monitored and managed by Departments through their departmental contracts. • The Health Risk Managers are required to provide quarterly reports to the DPSA. These reports are perused for challenges that may have arisen. • The departmental contracts provide for a Steering Committee comprising of the service provider and the PILIR champions from the departments. The purpose of the Steering Committee is, among others, to deal with contract management issues in the implementation area. The Steering Committees meet quarterly. The DPSA generally attends these meetings in an observer capacity and provides technical support and advice, where required. The DPSA also uses this platform to raise challenges/concerns that have been identified in the quarterly reports.

28. Implementation of PILIR • ... Contract Management and Support to Departments • The price is reviewable annually • The Panel contract provides for an annual meeting of the Health Risk Managers (HRM’s) Forum and comprises the DPSA and the Health Risk Managers. • If (and when) required, the DPSA engages with HRM’s and departments in ad hoc meetings to discuss issues confronting them. Departments and HRM’s are also supported through formal correspondence, if issues are raised pertaining to the implementation and application of PILIR.

29. Implementation of PILIR • Legal Challenge • The contracts with the Panel of Accredited Health Risk Managers expired on 31 December 2012. • The procurement process for the appointment of the new Panel of Accredited Health Risk Managers with effect from 1 January 2013 was concluded early in November 2012. • On 19 November 2012 the North Gauteng High Court interdicted the roll-out of the new Panel of Accredited Health Risk Managers following an application to that effect by an unsuccessful service provider. Attempts to have this interdict set aside were unsuccessful.

30. Implementation of PILIR • ...Legal Challenge • As the PILIR could not be implemented as a result of the court action, the DPSA advised Departments to duly record applications received during the period that the interdict was in effect and to assign them to safe keeping according to the provisions of the Minimum Information Security Standards (MISS). Departments were expected to advise employees that the applications are pended until such time that a service provider has been appointed. • The PSCBC was also informed of the interdict and the fact that the Employer would not be able to adhere to the provisions of clause 7.5 of PSCBC Resolution 7 of 2000 on the granting of incapacity leave by the employer.

31. Implementation of PILIR • The North Gauteng High Court heard the matter on 26 March 2013 and judgment was handed down on 24 June 2013. • The judgment set aside the DPSA’s decision to disqualify the service provider from competing in the tender and referred the application back to the DPSA for reconsideration. • The DPSA decided to implement the judgment. The service provider’s bid proposal was subjected to a de novo bid evaluation and adjudication processes and the appointment of the service provider to the Panel of Accredited Health Risk Managers finalised. • The selection interviews and appointments of HRM’s by implementation areas from the appointed Panel of Accredited Health Risk Managers commenced on 9 September 2013 and was finalised by the end of October 2013. • All Heads of Department were formally notified of the resumption of PILIR with effect from 1 November 2013.

32. Implementation of PILIR • Challenges • Gauteng Health does not comply with the provisions contained in PILIR as it introduced a different modality than what is determined in PILIR. It subsequently did not enter into the departmental contract with the appointed service provider for the Province. • The different modality that Gauteng Health follows has not been explained. • Employees and Departments often fail to adhere to time frames determined in PILIR. Departments are thus inundated with grievances/disputes related to their failure to comply with the time frames. • A number of Departments either pay the Health Risk Managers late or often not at all. This compromises the rendering of the service and compliance with PILIR.

33. Implementation of PILIR • Stockpiles • According to special register created on Persal, 21 766 temporary incapacity leave applications and 73 ill-health retirement applications were recorded during the period. • The aggregate cost of the stockpiled PILIR applications to the State for incapacity leave is estimated at R27bn (calculated on the aggregate of the salaries) and for ill-health retirement at R221m. • The Minister for the Public Service and Administration instructed that stockpiled PILIR applications be dealt with as an operational matter. • Dealing with the stockpiled PILIR applications as an operational matter means that all these applications had to be submitted to the Health Risk Managers for assessment in accordance with the provisions of the PILIR. • An option to dispense of the stockpiles in a cost neutral manner was explored by offering a contract extension to December 2016, but was unsuccessful since not all the Health Risk Managers accepted the offer. • An alternative was introduced in terms of which Departments should obtain quotations from the HRMs on the Panel to dispose of the stockpiles on a fee-per-case basis.

34. Implementation of PILIR • …Stockpiles • On 22 August 2014 the DPSA faced yet another legal challenge which threatened to interdict the dispensing of the stockpiles. After negotiations with HRM’s appointed to the Panel, a settlement agreement was reached in terms of which- • The Panel Contracts are extended to 31 December 2018; and • Metropolitan Health Risk Management, the current dormant HRM on the Panel, is appointed to dispense of all the PILIR stockpiled applications on a fee-per-case basis. This process must be finalised by March 2016. • Heads of Department were informed of the developments and provided with the necessary documents and template contracts to be used for contracting with Metropolitan. • Challenges: • Departments are slack in signing the contracts. • Free State Education failed to comply with directives from Minister – They advised that they had followed a different process. • According to recent information received from Metropolitan, KZN Health and Education indicated that they will not contract as they have not budgeted for the assessment of the stockpiles. • Departments are not adhering to agreed upon time-frames.

35. Benefits of PILIR • Sick leave trends: Public Service Commission Report • The Public Service Commission undertook and issued the Report on the Evaluation on the Impact of PILIR on Sick Leave Trends in the Public Service. • It was, among others, reported that- • Sixty percent (60%) of the respondents said that they understand PILIR as well as the functions of key role players. • In national departments there has been an average of 3.8% reduction in the number of sick leave days taken after the implementation of PILIR. • In both the national and provincial departments it was found that employees are absent on sick leave on Mondays and this practice has not changed even post introduction of PILIR.

36. Benefits of PILIR • ... Sick leave trends: Public Service Commission Report • There is non-adherence to timeframes for processing the applications by all parties involved in the implementation of PILIR. • Many managers are not managing the absenteeism of employees whose Temporary Incapacity Leave applications have been declined. • The redeployment of employees as per Health Risk Managers’ recommendations pose a challenge as no suitable jobs are available in the Public Service to accommodate such employees.

37. Benefits of PILIR • PILIR trends for the period ending December 2012 • A comparison between the 2007-2009 and 2010-2012 sick leave cycles shows: • A reduction of 19.51% in short incapacity leave applications • A reduction of 25.45% in long incapacity leave applications • A reduction of 34.21% in ill-health retirement applications • Cost Savings: Provided that Departments implemented the advice from the Health Risk Managers, the potential cost savings increased with 977.34% from R 8, 6bn in the 2007-2009 cycle to R 93, 2bn in the 2010-2012 cycle.

38. Benefits of PILIR • ... PILIR trends for the period ending December 2012 • The top five drivers for incapcity leave and ill-health retirement vary per application type and implementation area. However, the following conditions generally feature accross all application types: • Pshychiatirc conditions • Neurological conditions • Respiratory conditions • Orthopedic conditions • Diseases of the Musculoskeletal System and Connective Tissue

39. Benefits of PILIR • GEPF Experience (Study by the Fund Actuaries published in 2006) • Actual ill-health retirements decreased with over 60% • The Fund has achieved a saving of R 1 761 million relative to actuarial reserves over the five-year period from 1 April 2001 to 31 March 2006 as a result of its ill-health experience.

40. Review of the PILIR Modality • The PILIR model has evolved over several years. The need was identified to: • Conduct a comprehensive review and analysis of the PILIR model to validate if it is effective; efficient; economical; reliable; beneficial; administratively wieldy; fit-for-purpose; and geared towards the achieving the objectives and mission of the PILIR. • Identify and/or review the key constraints or challenges facing the implementation of PILIR. • Consult key role players to ascertain their views on the existing PILIR model: 13 implementation areas, 5 HRMs & a representative sample of employees. • The tender was advertised twice but turned out to be non-responsive. • Efforts are underway to obtain approval to embark on a closed bid process.

41. End