Workplace Mental Health: The True Cost to Employers

Employee mental health has only recently become recognized as a crucial aspect of organizational health and performance. In the last two years, employers have become increasingly concerned with the risks and costs of poor employee mental health.  Unaddressed mental health issues, especially among employees at work, can come at a high cost to employers.

Often, mental health costs are not quantified, so employers remain unaware of the risks associated with not addressing these issues. Here, we’ll uncover the effect poor mental health has on workplace outcomes and some of the costs associated with not making it a top priority. 

Shedding Light on Mental Health

People face a wide range of mental health issues, some more common than others.  The National Alliance on Mental Illness reports that roughly 20 percent of adults experience mental health challenges each year.

The two most commonly diagnosed conditions are anxiety disorder, at just under 20 percent, and depression, at approximately 10 percent. These symptoms may be relatively minor for some people, and for others, they can disrupt their work and home lives. 

It is also worth noting that these conditions are chronically under-treated, which can compound consequences for the affected individual, their employers, and the healthcare system. Widespread inequities in our healthcare system, such as shortages of mental health professionals in rural or isolated regions, are a driving factor in undertreatment. 

Many employers have not recognized the importance of offering proactive mental health benefits to their employees, despite statistics showing that more than 90 percent of employees report workplace stress. Unfortunately, the COVID-19 pandemic has only exacerbated this issue. In addition to the mental health challenges above, there has also been a significant uptick in people reporting burnout. 

The Costs of Mental Health For Employers

Employers are uniquely positioned to help employees with their mental health problems while simultaneously improving their bottom line. Investing in their employees by educating and bringing awareness to these issues can reduce the social and economic costs brought on by mental health problems. 

However, if those employees do not receive treatment, the burden of health care costs may fall on the employer. Here is what happens when mental health issues and substance abuse disorders go untreated in the workplace: 

#1 Reduced Work Output and Productivity

An employee dealing with mental health or substance abuse challenges is likely less efficient and productive than when they are healthy. This change in performance is often unintentional. They simply may lack the bandwidth to devote energy to work.

The CDC found that employees’ cognitive performance declines in more than a third of situations. Often, mental health challenges also impact employees’ physical performance and health. Together, these productivity losses can be staggering. Depression alone can cost up to $50 billion per annum in lost productivity for employers. 

#2 Unsafe Work Conditions 

Employees dealing with behavioral health or substance misuse may be more distracted at work. The CDC found that acute alcohol use impairs vision, motor skills, reaction time, and judgment. These impairments are linked to falling injuries, motor vehicle accidents, and occupational and machine injuries. The CDC estimates that alcohol use accounts for 18% of workplace injuries, and prescription pain medications are associated with workplace injuries. 

Workplace-related injuries and issues cost approximately $250 billion annually in medical expenses, lost earnings and benefits, and reduced productivity. This expense is higher than the costs of both cancer and diabetes and is potentially avoidable with employers’ proper interventions and tools. 

#3 Poor Workplace Morale = More Turnover

It can be challenging to work in a space where employees are unhappy or stressed. Even if you are not suffering from depression or anxiety, it can bring you down. Not surprisingly, such workplaces often have higher levels of turnover.

Turnover is costly to employers, as they must go through the recruitment and training process again. Some estimates suggest that the cost of turnover can be up to 50% of an employee's yearly salary. Therefore, reducing turnover reduces costs for employers. 

#4 Increased Absenteeism

When workers struggle with their mental health, they are more likely to be absent from the workplace. These absences are due to fatigue and brain fog caused by mental health conditions and heightened physical illnesses—stress, anxiety, and depression compromise the immune system. However, even without diagnosed mental health challenges, many workers report being out of the office simply because their workplace is too stressful. 

Absenteeism, however, places a high cost on the employer and those who remain in the office. For example, employers may need additional headcount to compensate for the work not getting done. Or, in some cases, other employees are required to pick up the slack by working overtime.

Often, overtime costs employers from 1.5 to 2 times the standard wage. Working overtime can also increase stress among workers who spend more time in the office. 

#5 Presenteeism Is a Big Problem, Too

Absenteeism is not the only problem—presenteeism is also common among employees struggling with substance use or mental health issues. Presenteeism happens when a worker is in the office but cannot function to the best of their ability due to physical or mental health challenges. 

Perhaps not surprisingly, more workers and workplaces are impacted by presenteeism than absenteeism. The cost of presenteeism is difficult to estimate since it is not always clear if the worker sitting at their desk is less productive than usual. Still, most estimates suggest that presenteeism can cut productivity by almost a third. 

Employers Should Invest In Employee Health and Wellness

Faced with the challenges highlighted above and the high costs associated, employers need to establish workplace benefits and programs for their employees. In addition, business leaders should look for customized mental health programs, like Pathways at Work, to meet the various needs of their workforce. 

Sometimes, these services may take a less formal approach, such as introducing discussion groups or webinars that reduce on-and-off-job stress. However, these less formal programs can help people talk about mental health and reduce the associated stigma. 

Learn The Cost of Ignoring Mental Health In The Workplace 

For some employers, anecdotal evidence highlighting their employees’ struggles with mental health may be enough to convince them of the importance of providing comprehensive behavioral health benefits. But, other employers may want more information, and for them, quantifying the costs of mental health challenges can be beneficial. 

To get a better idea of costs associated with mental health in your workplace, check out our Workplace Mental Health Calculator. By calculating the cost of employee mental health, you can take steps to reduce its impact on your organization and your bottom line.