In this paper we analyse how the absence behaviour of Italian public sector employees has been affected by a law, passed in June 2008, reducing sick leave compensation and increasing monitoring intensity. We use micro-data on a sample of about 860 workers, employed at an Italian public administration, for years going from 2005 to 2009. We estimate the effect of the reform using linear and non-linear estimators. As predicted by agency theory, individuals react to economic incentives: the employees in our sample have considerably reduced their absences under the new regime. Since the reform has affected employees in a non uniform way, we show that the reduction of absenteeism is significantly stronger for employees suffering higher earning losses. Results also show that while the reform has reduced the duration of short absence spells, the duration of long spells has increased. We argue that this is due to the non-linearity of earning losses introduced by the new law.