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Poor Mental Health Costs Employers More Than They Think

Learn about the true costs of poor mental health in the workplace, from company culture to the bottom line.

Global workplaces are changing and placing more demand than ever on employees. Employees must be more creative, adaptive, and resilient to meet these requirements. Yet, personal and workplace stress place an unnecessary burden on employees, making it difficult for them to accomplish their goals in the workplace. 

Although 301 million people are living with an anxiety condition and 280 million are living with depression, over two-thirds of employees do not receive the mental health care they need. Equitable mental health access remains a complex issue that requires multi-sectoral services and innovative interventions. The future of mental health care depends on an organization's ability to apply a multifaceted approach to its mental health benefits programs to fully support its workforce's mental well-being.

While employers are justifiably focused on business outcomes amid a challenging economic market, they often fail to consider the cost of poor mental health in the workplace. The true costs of poor mental health in the workplace come from various symptoms and sources that can significantly affect company culture and the bottom line. 

The Cost of Untreated Mental Health Conditions

Untreated mental health conditions profoundly impact every facet of an individual's life. This includes behavior and performance in the workplace. 

Yet, without a clear understanding of how mental health impacts an individual, it can be difficult to understand how the costs add up to thousands for employers. These are the most common ways untreated mental health conditions cost your organization.

Untreated Mental Health Concerns Result in Substantial Costs for Businesses

Lack of treatment to prioritize mental well-being exacerbates mental conditions and negatively impacts relationships and productivity. According to the Center for Prevention and Health Services, untreated mental health concerns result in substantial costs for businesses—$60,000 annually for one organization and $105 billion nationwide

Employees not dealing with mental health conditions can also significantly impact business costs. According to Gallup, low morale costs American businesses up to $550 billion a year due to lost productivity, including absenteeism, illness, and other problems resulting from employees being unhappy at work. 

Decreased Output and Productivity

All too often, employee struggles with mental health conditions go unnoticed in the workplace. However, low productivity can be a red flag. Employees with unresolved depression experience a 35% reduction in productivity, contributing to a loss in the U.S. economy of $210.5 billion annually in absenteeism, reduced productivity, requests for extended leaves of absence, and medical costs. The cost of mental health treatment is a fraction of this amount, and yet many people do not seek treatment because they cannot afford it or are afraid of the stigma attached to mental illness. 

Increased Employee Absenteeism

The American Psychological Association defines absenteeism as an unjustified absence from work or school, especially when regular or persistent. Since depression causes difficulty concentrating and a loss of interest in most activities, it's not surprising that it causes an average of 31.4 missed days per year for an individual. 

It has also shown that mentally distressed workers have a 3.5 times higher likelihood of suffering from substance use disorders which could result in more missed work. The cost of a missed workday is estimated to be $340 per day for full-time employees and $170 per day for part-time employees, which could have a major impact on any business. 

Increased Presenteeism

While absences are costly, they are not the only way businesses incur costs related to untreated mental health conditions. Presenteeism is coming to work when one is ill, injured, or otherwise unable to function at full capacity on the job. 

The resulting reduction in productivity is a growing financial and safety concern for employers. While absenteeism is a significant concern, it fails to consider the loss of productivity when employees show up to work despite concerns. This adds up to another 27.9 days lost annually due to unproductivity.

Increased Turnover

A previously mentioned study revealed that employees say their job is more likely to hurt their mental health than to help it. Furthermore, over half of employees do not have easily accessible support services. When you consider that untreated mental health conditions can lead to absenteeism and presenteeism that affect work performance, and poor workplace conditions can harm mental health, it's easy to see that turnover is likely to increase.

Turnover, whether voluntary or involuntary, leads to direct and indirect costs. Hiring new employees costs more than retaining them, costing U.S. businesses $1 trillion yearly due to employee turnover.

Costs may include:

  • The effects of turnover on remaining employees: Whether an employee leaves a position voluntarily or involuntarily, their workload has to go somewhere. Colleagues are often forced to take the slack by doing extra work. As a result, overall production is decreased as employees attempt to take on too much at once. Team members taking on extra duties are more subject to burnout and low morale resulting in further diminished production and increased absences from exhaustion.
  • Recruitment costs: According to new benchmarking data from the Society for Human Resource Management (SHRM), the average cost per hire was nearly $4,700. Many businesses depend on professional recruiters to avoid placing extra strain on HR. This route can still be costly, as the average fee from a professional recruiter is between 15% and 20% of the first-year salary of the new employee. 
  • Training a new employee: Even if a new employee has experience in a specific role, it takes time to become accustomed to new policies in a different workplace.  Companies spend an average of 46.7 hours on training employees, costing an additional $986 in training expenses
  • Loss of institutional knowledge: An employee who works for a significant amount of time holds knowledge about organizational products and processes. Important information is lost when this knowledge isn't passed on to a new hire. It's estimated that the average new hire will spend almost 200 hours working inefficiently to duplicate the work of the previous employee. This loss of knowledge costs U.S. businesses $47 million in lost productivity each year.

Rapid turnover represents one of the most significant preventable profit losses for businesses. Along with increased morale and engagement, there is a distinct connection between employee retention and mental health benefits. Previously mentioned studies show that 79% of employees are likely to stay at a company that provides high-quality mental health support. 

Improve the Well-Being of Your Employees

Employee well-being is a term used to encompass various aspects of an employee's life. It includes physical, emotional, social, and spiritual health and work/life balance. Work and life aren't mutually exclusive. Employees bring their whole selves to work, including their physical and mental well-being. 

While employers are often willing to invest in well-being programs, physical health often takes priority, while mental health is left out of the equation. Gallup defines the elements of well-being as career, social, financial, physical, and community well-being. This description ranks physical well-being as one of five critical elements, while the other four hinges on mental well-being. 

Employee engagement and well-being are connected in that each one affects the other. While employee engagement alone makes a considerable improvement in business outcomes, well-being yields significantly more potent rewards. Employees who strongly agree that their employer cares about their overall well-being are:

  • 69% less likely to actively search for a new job
  • 3x more likely to be engaged at work
  • 71% less likely to report experiencing burnout
  • 36% more likely to be thriving in their overall lives
  • 5x more likely to strongly advocate for their company as a place to work 

At Modern Health, we take a unique approach to mental health care that addresses the whole person and all factors contributing to mental well-being. This approach also alleviates many barriers to care that employees commonly experience with traditional benefits packages like EAPS. 

We achieve our goals of providing equitable, accessible mental health care for employees with a stepped-care model that provides each employee with the right level of care for their needs, along with multiple modalities and culturally centered care. We encourage employers to carefully measure the ROI of mental health benefits with a comprehensive, realistic, and scientifically rigorous approach to measuring financial impact. 

Learn more about the costs of poor mental health in the workplace and how you can provide mental health benefits to help your employees thrive with our HR guide, The ROI of Healthy & Engaged Employees

Modern Health

Modern Health is the comprehensive mental wellness platform that combines the WHO well-being assessment, self-service wellness kits, an international network of certified coaches, and licensed therapists available in 35 languages all in a single app. Modern Health empowers employers to lead the charge in acknowledging that mental health is just as important as physical health, de-stigmatizing the conversation, and increasing accessibility of mental health services for all.