Understanding the true impact of mental health issues on businesses

Mental health issues pose substantial risks to businesses, from decreased productivity, increased healthcare costs and turnover to even occupational safety risks.

In today’s fast-paced business world, companies are continually striving to enhance their competitive edge. Yet, amidst this drive for success, an often-overlooked factor can significantly impact a business’s bottom line. This is the mental health of its employees. 

Unlocking the full potential of your workforce starts with prioritising their mental well-being. In today’s dynamic workplace, employees’ mental health is not just an individual concern—it’s a business imperative. However, the concrete measures on how to support the mental health of employees are often unclear. In this article, we explore the variety of risks, and offer strategies for navigating this complex challenge effectively. 

Mental health issues from the Nordic perspective 

The role of mental health is crucial in societies that are based on innovations and knowledge, such as the Nordic countries. Currently, depression and anxiety disorders rank as the leading causes of occupational disability in the Nordic region. Depression in each country affects around 200,000 – 300,000 people in Finland, Norway and Denmark respectively, and up to 500,000 people in Sweden every year (World Population Review, 2023).  

Furthermore, common work-related stress is known to be one significant risk factor for depression, as people who experience constant work stress are around 20-30% more likely to develop depression. One of the most well-known consequences of prolonged work stress is burnout, which can take months or even years to fully recover from. According to If’s Nordic Health Report (2023), approximately 84% of people in the Nordic countries experience harmful stress in their daily lives.  

The costs of mental health issues 

The significant financial costs of mental health issues on both a company and at societal level, often come as a surprise. At the European level, mental health problems cost around EUR 600 billion per year in terms of reduced productivity, the healthcare burden, social security and unemployment costs. To offer a more concrete company-level perspective, it is estimated that a 30-year-old’s disability pension costs around 120 times more than that person’s equivalent monthly salary. Moreover, mental health-related sick leave lasts on average 62 days, surpassing those for musculoskeletal disorders. 

The prediction of a smooth return to work after mental health-related sick leave is discouraging; only about a quarter of individuals return fully able to work. Example:  

  • The average absenteeism rate in Finnish companies is around 4.5%, which corresponds to around ten days of absence per employee per year.  
  • For a company with 1,000 employees and an estimated average employee income of around EUR 3,000/month, the cost of one day of sick leave is around EUR 476.  
  • If absenteeism can be reduced by at least 10% per year in this example case, savings of just under half a million euros could be achieved, (Varma, 2023). 

We must also remember all the indirect costs of sick leave, from having to arrange replacements for absent employees, to many other factors. 

What factors affect our mental health? 

When talking about mental health issues in the context of working life, we must remember that mental health itself is influenced by a variety of personal and work-related factors. On a personal level, factors such as genetics and lifestyle choices (e.g., diet, exercise, substance use) play a role in determining the risk of developing issues. While employers can’t alter personal factors, they wield considerable influence over work-related stressors.

Work-related factors include job demands (e.g., stressful situations, difficult decisions, tight deadlines, constant pressure), high workload, job security, work-life balance (long hours), psychological safety, relationships with colleagues and supervisors, and the presence of support mechanisms within the job environment. The interplay between these personal and work-related factors can either enhance or detract from an employee’s mental health and overall working ability. 

How are mental health issues manifesting in the workplace? 

Tuomas Kaleva photo.
Meet our expert: Tuomas Kaleva, Development Specialist, Finland

Understanding the ways in which mental health issues exhibit themselves in the workplace is essential for any organisation striving for a productive workforce.  

Beyond absenteeism and healthcare costs, indirect costs like overtime and substitute arrangements strain employees. A phenomenon called presenteeism, where employees are physically present but unproductive due to health issues, is a major concern, costing around 1.5 times more than absenteeism.  

Key personnel absences pose significant business risks. Certain specialists, managers, CEOs, or other essential personnel in responsible roles may have a significant number of skills and knowledge that maintain important customer relationships or production processes.

The loss of these critical personnel to a long period of sick leave or to a competitor, could cause severe setbacks to the business. 

Have you identified the key personnel in your organisation? 

Would you be surprised to know that occupational safety risks are also linked to mental health issues? Mental health issues increase accident and error risks, as conditions like depression and anxiety diminish focus and increase risk-taking behaviour. Workplace stress impairs performance, decision-making, concentration and working memory, while sleep disturbances elevate errors and risks. 

Process for supporting employees’ mental health.  Early intervention and support, treatment and return to work, development of mental healt resources, prevention.
Process for supporting employees’ mental health.

How can your organisation support your employees’ well-being? 

To foster a thriving and productive workforce, organisations must take a holistic approach to support mental well-being.   

Prevention is the first line of defence and is about identifying and managing stress factors, promoting psychological safety, and strengthening resilience among your employees. Offer mental health training to equip your teams and leaders with the knowledge to recognise signs of distress and create a culture where mental well-being is paramount.  

Early intervention and support from managers is vital. Develop mechanisms for employees to report concerns, assess working ability, and provide accessible mental health resources before issues get worse. Customise job roles to match your employees’ capabilities, ensuring they can manage their well-being while contributing effectively. 

Treatment and the return to work are part of the journey. Make treatment options readily available and support the return-to-work process to facilitate a smooth transition and prevent further development of mental health issues.  

Development of mental health resources includes tracking relevant metrics and learning from past experiences, as you would in cases of occupational safety incidents. Continuously improve your approach to mental health support.  

Written by

Tuomas Kaleva, If