Understanding the financial impact of mental health in the workplace
Mental health is a major challenge for both employees and employers. It can negatively impact the health and wellbeing of employees, as well as hinder the productivity and profitability of businesses. The financial toll of stress can be seen in three key areas: absenteeism, productivity, and turnover.
Unfortunately, the cost of stress is often overlooked by organizations and is not fully quantified. However, it is important to understand the financial impact of poor stress management in order to appreciate the importance of addressing the issue and making improvements. By calculating the cost, organisations can gain a clear understanding of the commercial benefits of promoting healthy management practices.
How is it calculated?
The numbers are based on extensive data gathered from economists and academic studies. The following sources have been used to estimate the costs of sickness absence, presenteeism, and staff turnover:
- "Costing Sickness Absence in the UK" - Institute for Employment Studies (IES) Report 382. S. Bevan & S. Hayday (2001)
- The cost of sickness absence was calculated based on gross employment costs, absence management, and alternative cover.
- The average cost per employee per year (based on a full-time equivalent over £25k annual salary) is £1,074.
- The current average sickness absence rate in the UK is 2.2% (the highest since 2010), according to the latest figures from the Office for National Statistics.
- The costs were calculated assuming that 50% of sickness absence is due to work-related stress, anxiety, and depression (HSE, 2021).
- Presenteeism is the act of showing up for work without being productive
- "Sickness presenteeism: measurement and management challenges" - Ergonomics 61:3, pp 341-354. Z. Whysall, J. Bowden & M. Hewitt (2018)
- "The cost of the brain drain: understanding the financial impact of staff turnover" - Oxford Economics. T. Rogers & M. Sadier (2014)
- 521 organizations were surveyed with data from employees earning over £25k pa in retail, IT & technology, legal, accounting, and media & advertising industries.
- The cost of staff turnover was estimated to be £31,364.
- The costs were calculated based on the assumption that 65% of voluntary staff turnover is due to poor mental health (Mental Health and Employers. The case for investment – pandemic and beyond.’ Deloitte UK, 2022).