Abstract Background Many OECD countries implemented reforms to promote sustained employment of employees on long-term sick leave. Still, sustained employment remains low, which is worrying as it may affect the health and well-being of this vulnerable group of workers. This study aimed to examine the extent to which a firm's disability policies and practices increase the likelihood of sustained employment of long-term sick-listed employees with remaining work capacity. Methods Survey data on firms’ disability policies and practices was obtained from the Dutch Employee Insurance Agency (UWV) and linked to register data covering the employment outcomes of all employees that applied for disability benefits between 2006 and 2010 (N = 6103 employees from N = 366 employers). The dependent variable was sustained employment one year after the disability assessment. Implemented disability policies and practices were measured across seven domains: sick leave prevention, absenteeism management, reintegration management, occupational health and safety services (OHS), reintegration activities with the current/another employer, and positive workplace culture. Multilevel multiple logistic regression analyses were performed. Results Sick leave prevention policies (OR = 2.3, 95% CI 1.3-4.0), absenteeism management policies (OR = 1.8, 95% CI 1.0-3.3) and OHS (OR = 1.8, 95 CI 1.1-3.2) were positively associated with sustained employed one year after the disability assessment. No significant results were found for the other domains. Conclusions Employees with remaining work capacity in firms with the most comprehensive absence management policies, prevention policies, and OHS are about twice as likely to continue working one year after the disability assessment than firms with the least comprehensive policies. Legislation that encourages firms to invest more in absence management and prevention policies may result in better employment opportunities for this vulnerable group of employees. Key messages • Firm's prevention and absence management policies could be highly effective in fostering sustained employment of employees on long-term sick leave. • Legislation that encourages firms to invest more in disability policies and practices may result in better employment opportunities, health, and well-being of people with partial work disabilities.