EXECUTIVE SUMMARY

 What is mental ill-health in the workplace?

The Productivity Commission estimates 3.5 million Australians have mild to moderate mental health issues. The project focuses on this cohort of employees as it is a group where workplaces are most likely to have an impact as well its sheer size resulting in the largest cost impacts on the economy. Mental health issues or mental ill-health for the purposes of this report is broadly defined as employees having symptoms or conditions that show some level of psychological distress. This may be broader than employees that have a clinical diagnosis of a mental disorder or illness. 

With a focus on prevention and early intervention, we are looking at promoting high levels of mental wellbeing before, or to prevent, employees developing a mental illness or disorder. This means providing some level of support to all employees, whether or not they have a diagnosed condition. In terms of the regulatory environment this is often described as reducing psychosocial hazards in the workplace.  

Many risk-based or safety approaches to mental health only consider mental health issues that are caused by work or the working environment. This can be difficult to define and disentangle from mental health issues more broadly. Viewed through a lens of improving productivity, any mental health issues that are experienced at work or affect workers are worth employers paying attention to, whether or not work is a direct cause of the issue. Many factors that influence mental health outcomes will be unique to an individual – some of which can be influenced by the work environment and some of which cannot. An individual’s mental health will be impacted by events and influences from all aspects of their lives, and may impact their work. A supportive work environment can limit the impacts of other stressful events on work performance and productivity. 

The argument for workplaces to intervene to improve mental health outcomes for their staff does not remove the need for individual responsibility. But it acknowledges that work is a substantial component of most people’s lives and that mentally healthy workplaces benefit not just individuals but also businesses themselves. 

Mental health and workers compensation

The impacts of mental health in the workforce are broader than those that end up in workers compensation claims, which are serious in nature and directly attributable to work related events. However, it is useful to look at the trends in workers compensation claims as a proxy for broader workplace impacts on mental health and costs to employers. Workers compensation payouts are very costly for employers, and can provide incentive for employers to invest in preventative actions.

Overall, serious workers compensation claims in Australia have fallen over the last two decades, with a 13 per cent overall reduction of serious claims since 2000. The largest falls have been in physical injuries. This reflects an increased focus on employer obligations for physical safety and reducing risks in the workplace. 

In stark contrast, claims for mental health conditions have increased by nearly 60 per cent over the same time period. This may not necessarily reflect increased prevalence of work-related mental health conditions, but potentially awareness from both employees and employers around mental health and increased the likelihood of employees applying for workers compensation (although the rate of rejection remains very high). Mental health conditions have the highest levels of compensation, with median compensation paid of $45,900 in 2018-19, compared to $14,500 for overall claims. Similarly mental stress claims have a median time off work of nearly 27 weeks, compared to just seven weeks for all serious claims. 

Projecting future growth

Mental health related workers compensation claims have grown particularly strongly over the last five years, with an average annual growth rate of 10 per cent, although there has been considerable variability in the rate of growth. Comparing this to the rate of growth in other mental health related statistics allow us to create scenarios for projected future growth. Mental health related Medicare services have also grown strongly, at an average rate of around 6.5 per cent over the last decade, and five per cent over the past five years. 

Using the moderate growth scenario, mental health related claims could double by 2030, and under the high growth scenario they could nearly triple. However, the trend rates do not include data that covers the whole COVID-19 period. Given the likely impacts of COVID-related disruptions, job instability and working-from-home it is possible growth rates may increase further. 

The trends are even more concerning when looking at the costs of claims. Median compensation costs per claim for mental health conditions grew from $14,300 in 2000-01 to $45,900 in 2018-19. If recent trends continued, median costs per claim could triple in real terms by 2030. There is clearly an incentive for employers to invest in the mental health of their staff, and reduce the rate of claims related to mental health. 

Why should employers invest in mental health?

Employers have legal and regulatory obligations towards their employee’s mental health. Under the Work Health and Safety Act 2011 businesses must manage the risk of psychosocial hazards in the workplace.But compliance alone cannot be the driving force behind investment in mentally healthy workplaces. 

Investing in the mental health of employees is a sound business decision, that can increase productivity and improve business outcomes. It has been well documented that unemployment is linked with poor mental health – not just through lower financial capacity but also through the social contact, sense of identity and shared purpose that employment can bring. But not all employment is equal. Workers with poor working conditions, low levels of autonomy and/or high levels of job insecurity are much more likely to have mental health issues. How the employee’s workplace and job is organised also has substantial impacts. 

The Productivity Commission estimated that the cost of absenteeism from work due to mental ill health was up to $10 billion per year, due to people taking an average of 10-12 days off. People with mental ill health are also estimated to experience reduced productivity on 14-18 days per year – an estimated cost of $7 billion per year. 

The available evidence suggests the returns on investment in mental health investment are high – driven mainly by increased productivity resulting from reductions in presenteeism. The Productivity Commission’s Inquiry showed returns on investment of between $1.30 to $4 for each dollar invested for Australian workplace mental health interventions. 

What is also clear from the research is the benefit of early intervention and preventative approaches. In a global study, Deloitte found stronger returns from proactive mental health support and organisational culture changes than from reactive approaches. The most effective programs are embedded in the organisation’s culture, long-term and offer a range of interventions. 

There are also more general benefits to an employer from fostering a mentally healthy workplace. With changing attitudes towards the importance of mental health in the community and reduced stigma around disclosing mental health issues, employers should be looking for all options to promote their workplace – mental wellbeing being one of them. 

There is a need for more evidence on what specific interventions can and will provide the best returns – this will assist government, industry and employers with how to target resources and promote investment in mental health.

Why do employers need to invest more in the mental health of their staff?

Previous research shows that Australian employers know that they have a responsibility to address the mental health concerns of their employees. While there is an increasing number of businesses interested in mental health, the overall numbers taking sustained action remain low. A NSW Government survey from 2017 shows only nine per cent of businesses had a sustained and integrated approach to mental health in the workplace.

The Productivity Commission noted in its inquiry that most businesses want to have a mentally health workplace, but don’t know what measures to take to achieve one. Some employers also remain unclear about what an employer’s duty of care is and how to meet this standard in practice. 

Several studies have shown that businesses most commonly cite a lack of resources and commitment from management as reasons for not doing more.   This is reinforced by SuperFriend’s 2019 survey that identified a lack of skills amongst managers and commitment from leadership to improve overall staff mental health as the primary factors holding back better mental health outcomes in the workplace.

Many employers have good intentions in this regard but need guidance on what to do. There is limited evidence or evaluation of programs and practices within workplaces, despite significant and growing spending by employers. While there is limited data on overall spending on mental health programs, companies providing corporate wellness have seen estimated revenue growth of 5.9 per cent per year over the past five years, driven by increased demand for mental health programs. Total revenue for corporate wellness providers was estimated at $288 million in 2022, which excludes spending on in-house programs. 

Where should employers focus their efforts?

While there is a need for more evidence on specific interventions on workplace mental health initiatives, the available evidence does show what the key elements of a mentally healthy workplace are. Many of these do not require significant new investments as they are strongly linked to organisational and managerial effectiveness. 

Workplaces need to have a range of different responses across the spectrum of mental health. Evidence suggests that the best returns come from businesses focusing on the prevention and early interventions space. We suggest a framework that builds strong foundations – through job design, management capability and organisational culture. This will assist in preventing mental ill health before it becomes a problem. But businesses also need to be prepared with how to respond to employees with more acute or complex mental health issues or illness. This means there is appropriate support for all in the organisation to thrive, and individualised support for those that need it.

Monitoring and assessment

Before implementing any interventions, organisations would benefit from first undertaking an assessment of where their organisation is sitting with addressing mental health and wellbeing. This provides a baseline for organisations, allowing them to see what areas need the most improvement, and to measure the impact of any changes implemented. 

Well established evidence backed tools such as the Thrive at Work assessment tool, the Safe Work NSW workplace pulse check or the People at Work tool, are good starting points and are easily available to assist businesses in assessing where they are at with mental health. 

Organisations can take an approach of progressive initiatives and continuous improvement measuring mentally healthy workplaces, planning for improvement, evaluating success and collecting data. 

Collecting, analysing and using data on the mental health of the workplace is a key component of monitoring and evaluation and the National Workplace Initiative suggests using a range of existing data, including:

Workers compensation claims, absences from work, turnover rates; 

• Existing financial data, such as overtime or consulting costs;
• Staff engagement surveys (one-off or regular);
• Focus groups; and
• Interviews, including exit interviews.

To get the most out of any survey or qualitative data, the workplace needs to engage with staff in a genuine manner, so that staff understand why they are being asked for input and are clear on the expected outcomes from the process. It is important that any data is interpreted within an understanding of the environment the company is operating in.

Much of the research and evidence around mental health interventions in the workplace is relatively new, and there is a role for continued testing and trialling of interventions to further build the evidence base. Employers should not be discouraged from trying an intervention, provided they are collecting appropriate data on implementation and impacts to expand the available evidence.

Assessments cannot be a one-off. Monitoring needs to be ongoing and part of a business-as-usual approach. This will allow organisations to be responsive to its changing needs, changes in the external environment and prioritise investments and resources as required. As many of the programs and interventions in the mental health space are relatively new, it is important that organisations evaluate their impact and continue to make strategic decisions about what to invest in over time. 

Job demands include the physical, emotional and cognitive demands of a job. Jobs with high demand tend to have higher levels of mental health risks, and increased levels of sick leave taken. This is particularly the case when combined with low control – how much decision-making authority the employee has. Jobs that are high demand and low control are generally classified as high-strain – and have the greatest risk of mental ill health. Flexible working is one aspect of job control, although certainly not the only one. The OECD notes that poor organisation of work and job design can play a role in the development of mental health problems. Research suggests that job demands and the degree of authority and autonomy a worker has over their work are key factors influencing worker stress levels, as well as the effort-reward imbalance – whether employees are rewarded (whether financially or otherwise) for their work. High level of work demands combined with low levels of autonomy causes negative mental health outcomes in the workplace. 

The OECD has found that job strain across occupations has increased over time. This is particularly the case in lower skilled occupations – likely to be those with low levels of control over their jobs. It also finds that job strain significantly increases the likelihood of having a mental illness. 

However, high levels of job control including access to support, feedback and learning opportunities, can reduce the impacts of high strain jobs. This allows employees to manage demand more effectively. A variety of tasks, and the opportunity to use skills is also important. 

Jobs that are designed with a high degree of positive characteristics have high levels of autonomy, social support, feedback and lower levels of job demands. There is considerable literature showing links between good job design and higher levels of performance.

Employment characteristics have also been shown to have significant impacts on mental health including working hours, modes of employment and relationships with colleagues. Insecure employment and temporary contracts are associated with worse mental health outcomes for employees (see box 1). 

Specific challenging or traumatic events may also confront employees of particular industries such as police officers, emergency responders, medical staff and the military. It is estimated that nine per cent of ambulance employees and 11 per cent of police employees have PTSD, compared to four per cent of the general population.  Specific actions to address industry-based risks must be taken into account in these circumstances.

A survey of Australian businesses by AiG and Griffith University on what mental health interventions organisations were implementing, found that not one organisation identified job design as a tool to manage mental health in the workplace. The researchers note this is surprising given the strong evidence on the link between job design and employee mental health and wellbeing. This suggests a need for more awareness of the role of job design in workplace mental health. 

The design on jobs is not fixed, and employers can re-design and re-configure roles to improve mental health outcomes. There is evidence that job redesign can benefit mental wellbeing, particularly when employees are engaged in the process of job redesign. Knight and Parker (2021) identify a number of factors crucial to the success of job redesign, including:

• Assessing and targeting areas needed for intervention
• Considering the context of the intervention
• Including employee participation in the design
• Assessing how the interventions are implemented
• Measuring the interventions against appropriate comparison groups. 

ORGANISATIONAL AND LEADERSHIP CULTURE

Important to the success of any interventions to improve mental health and wellbeing is the commitment and culture at the senior levels of leadership within an organisation. This includes a commitment to good working conditions and job design, policies and procedures for health and safety and a culture that supports and endorses mental health initiatives.  Senior leader support has been shown to be the important link to implementing and facilitating interventions for workplace mental health. Workplaces are unlikely to see significant returns from any mental health initiatives without supportive leadership. 

It is important to build a good ‘psychosocial safety climate within an organisation’, which evidence suggests improves mental health outcomes for employees. This includes balancing mental health and productivity outcomes. The Productivity Commission notes that making psychological health and safety as important as physical health and safety will generate net savings after implementation costs.

Leaders also have a role in modelling positive behaviours, including encouraging and participating in open discussions about mental health in the workplace. This is important to reduce stigma and build a supportive culture where people are comfortable speaking up and asking for support where required. Leaders who are actively involved in mental health promotion, model their commitment to stress management and prioritise positive mental health in the workplace can build a strong organisational culture that contributes to lower rates of mental ill health. This could start with leaders undertaking a self-assessment of their leadership style and impacts on mental health.

Few organisations have formal mental health and wellbeing strategies. An organisation wide mental health strategy, supported and championed by the board and senior leadership can be a way to show the organisation’s commitment to the mental health of employees and should be created in consultation with employees. There should also be clear roles and responsibilities at a senior leadership level around mental wellbeing. Business could consider where responsibility of mental health sits in the organisation. It often sits with a risk or health and safety role. There is an argument that it is more of a core human resources role – with a focus on thriving, not just managing risks. 

Leadership style is also important, with evidence that ‘transformational leadership’ – creating a vision of the future with a focus on inspiring and motivating, can improve employees’ mental wellbeing. Positive leadership styles can improve trust and build a supportive environment for employees. 

Early intervention

Early intervention, with a focus on awareness and wellbeing is important to ensuring positive mental health outcomes and shorter recoveries from periods of mental ill health. While there have been improvements in recent years, stigma around mental illness continues, which can make employees less likely to speak up or request assistance delaying appropriate support or treatment – lengthening recovery times.  

Awareness and improving knowledge is part of reducing stigma around mental health. Training in mental health literacy (often as part of ‘mental health first aid’ training) has reasonable evidence in improving mental health knowledge, reducing stigma and improving confidence in helping others, or themselves. This training is not for employees to diagnose or treat mental health issues, but to encourage early support and intervention. For employees to feel confident in putting their training into practice, a supportive organisational culture and appropriate resources are important.

Some organisations have attempted to promote early intervention through proactive wellbeing checks, such as screening for depression or psychological vulnerability. The available evidence suggests these are ineffective in most circumstances.  These programs can also come with considerable risk, such as increasing stigma for employees, issues around confidentiality and misinterpretation of results. These programs are not recommended, except in very specific circumstances, such as where workers are exposed to very high risk of trauma. 

Employee participation, including providing team-based training in new knowledge and skills has been shown to decrease symptoms of mental ill health while increasing productivity.  

Formal peer support programs have had some success, particularly in organisations with repeated exposure to traumatic events. Peer support leaders are provided with some training which allows them to support colleagues and identify those who require more help. For trauma related peer support, formal post incidence procedures may be followed. Peer support programs may reduce stigma and encourage staff to access help or further services. Guidelines are available on developing peer support programs.

Employee Assistance Programs (EAPs), which provide confidential counselling and support to employees, are very common in Australian workplaces. A survey by AiG and Griffith University found EAP was the most common mental health intervention among those surveyed. The evidence on these are mixed, partially due to a lack of evaluation and a lack of quality standards across providers. Many EAP providers have relatively inexperienced practitioners and may not be providing high quality interventions.  The Productivity Commission inquiry noted that most organisations that engage an EAP do not evaluate the service provided by them, and many do not even get a report on usage. Those organisations purchasing EAP services must ensure that they are getting a high level of service, with appropriately qualified staff. EAP alone is not enough for strong mental health outcomes in the workplace.

Response and support

For employees that are suffering from mental ill health, access to appropriate services and support can assist them to continue their employment or transition back to work. These supports will be most effective if the basic foundations of positive mental health outcomes are in place, particularly supportive and knowledgeable managers who are willing and able to make appropriate changes to working conditions.

Some employees may be unable to work and require leave due to mental illness. There is evidence that in most situations being in work has improved mental health outcomes and that the longer an individual is on sick leave, returning becomes more difficult. There is emerging evidence that partial sick leave – where employees have flexibility to do a reduced role and more flexibility around work hours and duties can improve outcomes for employees and the organisation. It is also important that employees remain in contact with the workforce during any period of absence.

In some situations, where the mental ill health is directly attributable to work, workers’ compensation claims will be required, and employers should be supportive where appropriate. The rate of rejection of claims is very high (at up to 60 per cent, compared to around 10 per cent for physical workers compensation claims) as it is often very difficult to attribute the illness to the workplace. Delays in treatment while claims are being assessed can delay recovery. 

While many mental health services will be accessible through the general health system, in some cases there may be a role for employers to assist with access, whether financially or logistically, to ensure quicker and easier access to treatment.

Return to work plans have been used extensively for physical injuries and are now commonly used for mental health issues as well. There is some evidence that these are helpful, particularly when there is an element of cognitive behavioural therapy involved, but they need to be individualised and part of a broader treatment plan. The Productivity Commission noted that high levels of employer support, early contact with the manager as soon as injury or incident has taken place and assistance with lodging any claims has a positive impact on outcomes when employees return to work.

Added extras

Many organisations provide their employees with ‘wellbeing’ activities and benefits. This may be subsidised or free exercise classes, healthy meals, fruit boxes, massages or end of trip facilities. Wellness benefits are often a relatively inexpensive, high-profile way for organisations to show an interest in the broader mental and physical wellbeing of their staff.

There is certainly evidence that exercise and healthy eating have positive impacts on mental health. However, there is limited evidence on how successful these behaviours are. These activities are likely to appeal to those that are already undertaking them outside the workplace. These activities are also not likely to be helpful if they are not provided in an environment with a supportive organisational culture around mental health and wellbeing.

These benefits may be welcomed by staff but are unlikely to have any significant impact on mental health outcomes, particularly if the foundations of good mental health are not in place in the workplace. This does not mean that these activities have no value or should not be provided. However, they should be viewed as part of the employee value proposition, rather than core mental health outcomes. 

The regulatory environment

There is growing recognition that a workplace’s duty of care towards their employees extends to mental health. The regulatory environment around workplace safety has required the management of risks to psychological health as well as physical health for some time, but it is moving to support greater clarity, awareness and compliance with duties in relation to psychological health and safety. In the regulatory environment things creating a risk to mental health are described as psychosocial hazards, as distinct from physical hazards that workplace health and safety has more traditionally been concerned with.

Safe Work Australia develops national policy relating to workplace health and safety and prepares model work health and safety laws that are then implemented and enforced by the Commonwealth, states and territories. The Commonwealth and most states and territories have implemented the model work health and safety (WHS) laws, with the exception of Victoria. Safe Work Australia has recently amended the model WHS Regulations to clarify duties for psychosocial risks, in line with a priority recommendation from the Productivity Commission’s Inquiry. Jurisdictions are in the process of adopting the amended model regulations.

The new model regulations explicitly state that psychosocial hazards in the workplace must be eliminated or minimised so far as is reasonably practicable by following the risk management. These control measures are predominantly around workplace organisation and job design. 

The model WHS Regulations define psychosocial hazard as: a hazard that may cause psychological harm and arises from, or relates to:

• the design or management of work;
• a work environment;
• plant at a workplace; or
• workplace interactions or behaviours.

Safe Work Australia has also published a model Code of Practice on managing psychosocial hazards at work. Some states have also released codes of practice directly dealing with mental health and psychosocial hazards. For example, SafeWork NSW has the Managing Psychosocial Hazards at Work Code of Practice released in 2021 and WA’s Psychosocial Hazards in the Workplace Code of Practice released in 2022. These provide further explanation and more guidance on how to comply with WHS legislation. 

Western Australia in addition has a code of practice specifically for FIFO workers in the resources sector. The Mentally Healthy Workplaces for Fly-in Fly-out (FIFO) Workers in the Resources and Construction Sectors addresses particular issues around mental health in a challenging work environment. This approach could be adapted for other higher risk industries. 

Companies should be aware of their obligations under WHS legislation and the need to address psychosocial hazards and protect mental health. These moves to explicitly recognise and provide guidance on psychosocial safety are part of the picture to improving mental health outcomes, but should be considered as a baseline. Many businesses report that there remains limited guidance on how to address psychosocial risks through control measures. Companies that want to promote thriving organisations with high productivity will need to go further than a purely risk management focused response. 

The changes to model WHS regulations are new, and there is likely a need for promotion to workplaces and education to understand their obligations. WHS regulators also need to encourage and enforce compliance where possible. But organisations should not be waiting for regulators to tell them what to do. The business case for investing in mental health is strong and employers should be proactive. 

What is the role of different stakeholders?

This report has focused on the role of employers, who have the most control and ability to influence the foundations of a mentally healthy workplace. However, workplace mental health is complex and employers are only one part of the solution. 

INDUSTRY GROUPS

There is a strong role for industry groups and peak bodies to play. This may include industry led promotion and awareness campaigns, particularly for industries with higher risk factors – such as difficult working conditions or exposure to trauma. There are positive examples of this across a few industries: MATES in construction or for FIFO workers. The National Workplace Initiative’s series on industry initiatives provides case studies and examples of how industry can establish these programs.

There is also a role for tailored industry training – such as the management mental health training or mental health literacy training. There is a role for industry groups to work with researchers to tailor training responses to specific industries to improve outcomes. 

GOVERNMENT

Government has a role to play in the promotion of mentally healthy workplaces – both to improve productivity and business outcomes and also to lessen the pressure on the broader health system.

There are the regulatory issues described earlier in the paper, and governments should adopt the updated model WHS that explicitly includes psychosocial risks and provides guidance on application of the regulation. This may include industry specific codes of practice where appropriate.

There may also be a role for government in reviewing regulations for sick leave to more easily allow for partial returns to work and looking at the workers compensation system. The Productivity Commission has recommended that Workers compensation schemes should be amended to provide and fund clinical treatment and rehabilitation for all mental health related workers compensation claims irrespective of liability. 

There is also a broader role for government to play in the funding and allocation of research. Workplace mental health remains an area that is under researched, with potential for more research and evaluation of where to best intervene for results. The National Mental Health Commission, through its National Workplace Initiative, is investing in providing an evidence base for workplace mental health and this role could be expanded beyond its current four years of funding. 

At a state government level, there may also be benefit in grants, particularly for  management training for smaller businesses, similar to the program Safe Work NSW provides for some businesses.

INDIVIDUAL 

The role of the individual cannot be left out of this discussion. Individuals have a responsibility for managing their own health and contributing broadly to a mentally healthy workplace for themselves and their colleagues.

There may be some benefits to employers providing training that focuses on building personal resilience and problem solving, to enable individuals to build their own awareness and understanding of mental health issues or learn techniques for reducing stress and improving healthy lifestyles. 

Employees are more likely to feel empowered to advocate for their own and colleagues’ health and wellbeing in a supportive organisational culture. Good job design will allow workers to better manage their own wellbeing and have opportunities for healthy lifestyle practices. 

Summary of roles

Summary of recommendations for business: matrix

Businesses may feel unsure about where to start in addressing mental health in their workplace. While the suggested interventions will benefit the business as well as employees, many of them are time consuming and will not immediately show results. It is understandable that businesses often fall back on easy to implement initiatives such as healthy eating and exercise options. However, the research shows this will not achieve results. 

Building a supportive leadership culture around mental health in the workplace, and redesigning jobs along established principles will provide good long-term improvements in mental health and productivity. These processes will take time and investment to be done well. In the meantime, there are steps that businesses can take that are easier to implement and backed by the evidence.

Conclusion

There is a strong link between employment and positive mental health outcomes and employers have a legal duty towards their employee’s mental health. But compliance alone should not be the driving force behind investment in mental healthy workplaces. Investing in improving mental health outcomes for staff is a sound business decision. Increasing mental health related workers compensation claims add to the argument for employers to understand their obligations and increase their interventions around mental health in the workplace. 

With a focus on prevention and early intervention, we are looking at promoting high levels of mental wellbeing before employees develop mental illness. Businesses may feel unsure about where to start in addressing mental health in their workplace. It is understandable that businesses often fall back on easy to implement initiatives such as healthy eating and exercise options. However, this research shows that these initiatives are ineffective. Workplaces will need to have a range of different responses across the spectrum of mental health. The best returns will come from businesses focusing on the prevention and early interventions space. Our suggested framework focuses on building the strong foundations – through job design, management capability and organisational culture.  However, businesses also need to prepare for how to respond to employees with acute or complex mental health issues or illness. This means there is appropriate support for all in the organisation to thrive, and individualised support for those that need it. These processes will take time and investment to be done well. In the meantime, there are steps that businesses can take that are relatively easier to implement such as investing in management training. 

Australia has seen substantial improvements in physical safety risks in the workplace in recent decades. Making mental health as important as physical safety in the workplace will have significant dividends– for individuals, businesses and the economy.