The financial cost of ignoring mental health in the workplace

Jan 23, 2015

Mental health conditions come at a huge cost, not only to individuals and those closest to them, but also to businesses that fail to address the existence of mental health problems in the workplace.

A recent report on mental health in the workplace by PricewaterhouseCoopers (PwC) looked at the financial cost incurred when employers do not take action to manage mental health conditions in their business. It estimates the cost to Australian business is approximately $10.9 billion per year.


Cost 1: absenteeism $4.7 billion

PwC estimates that absenteeism resulting from employee mental health conditions costs Australian businesses $4.7 billion per annum, equivalent to 1.1 million days’ sick leave. The cost is incurred because employers pay for not having a person present to undertake the work. The figure was calculated by multiplying the average Australian wage by the amount of time taken off due to sick leave for mental health reasons.


Cost 2: presenteeism $6.1 billion

Presenteeism, where people are less productive in their role due to a mental health condition, is estimated to cost Australian business $6.1 billion a year. This cost is based on the assumption that workers are 50% less productive. This figure is then multiplied by the amount of time the person is assumed to be working but is less productive than normal.

The more acute a person’s mental health condition, the less productive they are likely to be. For an employee with a severe mental health condition, PwC estimates that it results in 378 hours of presenteeism per year. Moderate mental health conditions are considered to cause 150 hours of presenteeism per employee a year, and mild mental health conditions result in approximately 30 hours of presenteeism per employee a year.


Cost 3: compensation claims $146 million

Compensation claims resulting from mental health conditions are estimated to cost Australian businesses $146 million a year. Some industries received more claims than others – the retail trade, for example, received 505 claims with a typical compensation payment of $13,800, while mining received 50 claims with a typical payment of $22,400.


Take action on mental health and curb the costs

These financial costs – and the wellbeing of all employees – can be addressed through effective mental health initiatives in the workplace. Heads Up is a joint initiative of beyondblue and the Mentally Healthy Workplace Alliance (MHWA). Heads Up aims to guide business leaders towards implementing an action plan for promoting good mental health in the workforce. To access the Heads Up action plan and business leader tools for better workplace mental health, simply register your details.


Heads Up on LinkedIn 

If you would like more information and resources about how to create a more mentally healthy workplace, please visit our LinkedIn company page, which is regularly updated with stories and links related to the issue.

If you would like to join the discussion about a mentally healthy workplace, please visit our LinkedIn group page and become part of the conversation.

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