The Hidden Cost of Mental Health on Australian Business

Having retired from accounting in 2013, I have continued to take a keen in interest in business and productivity. Fast forward to 2025 and I find myself as the founder and Director of OM Psychology, sitting across from clients who have engaged me privately, been referred by their GP’s or EAP services, and I hear about the psychological impacts of their work environments. This impact is not just on their wellbeing as an individual or their functioning within their work role but also the performance of the organisation they work for in overall. This led me to further investigate the impacts of mental health and psychological safety both on individuals and wider impacts on business. The conclusion is that figures suggest the psychological safety of the Australian workforce is inseparable from the health of the Australian economy.

If we start with broad economic data, by the end of 2024, poor mental health was costing the Australian economy up to $936 million every day. With latest data suggesting 43% of Australian’s will experience a mental disorder in their lifetime, and 21.5% having experienced one in the past 12 months alone. Further to this, when you look close at those aged between 16-24, the prevalence increases to 39% in the last 12 months. These are numbers which have increased over recent years and continue to trend upward. Before looking at business specific data, these pieces of information should inform business owners/leaders that mental health is not a personal matter but one that should be a business and economic priority.

Exploring this further, available data from Safe Work Australia showed that a mental health related claim would result in 30.7 working weeks lost on average, which is almost five times longer than the 6.2 weeks you would typically see associated to a physical injury. If we also adjust for inflation figures, the $9.6 billon that absenteeism cost Australian employers in 2018-2029, would be $11.5 billon last year. And for those who attend work but function below their capacity (Presenteeism), this costs an additional $8.5 billion for the same period. These figures are not simply statistics but represent prolonged strain on teams, disrupted service delivery and diminished organisational performance.

In recent years there has been a shift in the evolution of workplace safety to move into psychosocial safety. Psychosocial safety includes role clarity, appropriate employment demands and workplace conflict resolution. Research on Psychosocial Safety shows that improving organisational commitment to psychological health can reduce job strain by 14%, depression by 13%, sickness absence by 43% and presenteeism by 72%. In real world context, a medium sized organisation of 100 employees could save over $180,000 annually by improving psychological safety elements, while a larger organisation 1000+ employees, could save in excess of $1.8 million annually.

Is it worth the expense?

A 2014 analysis from beyondblue found a return on investment of $2.30 for every dollar spent on workplace mental health programs. In current economic conditions, this is more likely closer to $3. From a clinical and organisational perspective, this return on investment looks like reduced absenteeism, greater employee engagement and lower staff turnover. Investment in mental health is not an expense but is a strategic driver of organisational resilience and sustainability.

One key element that every health professional will know is prevention is more effective than intervention. What does this look like in business practice?

1. Organisational commitment at the leadership level

• Make mental health and psychological safety core leadership priorities.
• Integrate wellbeing metrics into executive reporting alongside traditional KPI’s.
• Provide leadership with evidence-based training to identify early signs of psychological strain as prevention is more effective than intervention.

2. Systematic management of psychosocial risks

• Conduct regular psychosocial risk assessments in line with Safe Work Australia’s Model Code of Practice: Managing Psychosocial Hazards at Work.
• Address hazards such as excessive workloads, role confusion and a lack of autonomy as seriously as a workplace would address physical hazards.

3. Work design for Psychological Health

• Ensure role clarity and achievable workload expectations.
• Offer flexibility in work arrangements to support work-life integration.
• Promote task variety to maintain engagement and reduce burn out.

4. Mental health literacy and skill development

• Implement organisation wide mental health education to reduce stigma and promote help seeking behaviours.
• Train management in supportive communication, performance management techniques and conflict management.

5. Accessible and confidential support

• Provide a high-quality EAP and actively promote the program and its confidentiality.
• Ensure pathways designed for support to be easy to navigate.

6. Ongoing measurement and continuous improvement

• Regularly provide confidential surveys to staff on wellbeing and psychosocial safety.
• Regularly evaluate absence, turn over and EAP data.
• Publicly report on progress to build trust and accountability.

Psychological safety is no longer a peripheral issue – it is a central determinant of workforce performance, organisational stability, and economic health. The most successful organisations of the future will be those that recognise mental health not as a side project or with token gestures, but as a core component of strategic and operational excellence.

This Article can be found referenced by Better Learning here