The Cost of Psychological Wellbeing in the Workplace White Paper

Why Implement a Psychological Wellbeing Strategy in Your Organisation?

With the stresses and strains placed on everyone in today’s working world, workplaces can look at how they might help promote and maintain mental health and psychological wellbeing amongst their employees. With one person in five likely to be affected by mental illness and six million working days lost by Australian workplaces each year because of the effects of mental health, it makes sense for employers to implement policies, strategies, and programs that support and protect the psychological wellbeing of their employees.Ultimately these efforts sustain productivity and reduce overall business costs.

Current mental health statistics impacting on the Australian workforce:

  • In 2011 Mental Health issues had overtaken physical injury as the cause for the longest absences from work (ABS, Social Trends 2011).
  • Research shows that Australian businesses lose over $10.9 billion a year by failure to provide early intervention/treatment for employees with mental illness.
  • On average it is estimated that each employee with an untreated common mental health issue will cost organisations more than $9000 per year, whilst a senior executive or professional costs $25, 000 per year
  • On average, the cost of treatment per employee with a mental health issue is approximately $1600
  • Employees who receive treatment for depression perform more productively. Economic analysis suggests that improved productivity on average is worth $7, 878 compared to those who do not receive treatment.
  • It is estimated that a GP who sees 40 patients a day can expect that between eight and ten (20-25%) of these patients will require support or treatment for anxiety and depression.
  • The World Health Organisation estimates that depression will be the number one cause of disability in both the developed and developing worlds by 2030 (WHO 2008).

Despite one in five Australians experiencing mental health problems each year, nearly half of all senior managers believe none of their workers experience mental health problems (Hilton, Whiteford, Sheridan, Cleary, Chant Wang, Kessler 2008).

What is the current approximate cost to your organisation for not implementing a psychological wellbeing strategy?

Use the below formula to calculate the cost and productivity gain for your organisation. This example uses a sample of 1000 employee’s (substitute the staff numbers with your current staff numbers):

Lets assume 5% of the population at any given time has depression per year:
Your organisation has 1000 employees…
5% of 1000 staff = 50 x $9000 (annual cost per employee if untreated) = $450, 000 (total annual cost)

What productivity gain is there for implementing a psychological wellbeing strategy in your organisation?

Using the same staffing formula model as above :
If the 50 staff receive treatment = $1600 (average cost per employee who receives treatment) x 50 = $80 000 (total annual cost for receiving treatment)
50 x $7 878 (productivity gained per employee that receives treatment) = $393 900- $80 000
= $313, 900 Overall productivity gained.

This is a return on investment of approximately 5 times.

1) Without accounting for reduction in costs associated with financial losses due to WorkCover /
insurance claims, part-time or casual employees, staff attrition or critical incidents
12) This does not account for other psychological injuries such as Acute Stress Disorder, Post Traumatic Stress Disorder, Anxiety Disorder or other psychological complaints.

It is clear that the cost of ignoring the problem is far greater than the cost of developing and implementing strategies to creating a psychologically healthy workplace.

Reasons for creating a psychologically healthy workplace

  • Implementation of early diagnosis and intervention programs can result in a five-fold return on investment as a result of increased employment and productivity in employer outcomes.
  • It reduces costs associated with worker absence from work and high work turnover.
  • Helps achieve greater staff loyalty and a higher training investment.
  • Minimises stress levels and improves staff morale.
  • Mental health issues can affect anybody
  • Because it is the law

Developing the skills of key senior staff to work effectively with mental health and wellbeing issues, can significantly contribute to successful outcomes leading to a reduction of claims, reliance reduction on income support and industrial disputes saving adverse impacts on mental health.

Research shows that developing a combined ‘systems’ approach that incorporates both individual and organisational strategies is the most effective way to intervene in relation to job stress and to improve employee health and health behaviours.


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