The Financial Benefits of a Mental Health Workplace Strategy

“[…] Whether an illness affects your heart, your leg, or your brain,
it’s still an illness and there should be no distinction”

– Michelle Obama

Two heads are better than one. It is understood that one person cannot execute the same amount of work as many. This is why businesses commonly hire employees to handle the large number of tasks associated with running a small, medium or large firm. In a way, businesses function like a well-oiled machine where each member contributes to the companies’ income. On the other hand, people are not machines and require proper care to be productive members of their organization.

Regardless of the size of your organization, investigating the financial aspects of your business related to employee mental health is great business practice that will help identify and reduce costs associated with the mental health of your employees, whether the concern is simple such as lack of motivation or complex such absences due to depression. Identifying your costs remains the best approach to developing your mental health strategy, as it will give you custom facts about your financial costs instead of how much Canadian businesses spend as a whole on mental health.

As mentioned above every employee has a specific function in the organization. As such each employee needs to adopt and/or apply behaviours specific to their function to achieve high levels of performance and productivity. These are called key performance behaviours, also known as KPB’s, which include behaviours such as coping styles or employee resiliency. KPBs are essential as it impacts employee health, self efficacy, engagements with clients and coworkers, and productivity.  

It is a widely established fact in the scientific branch of business called Industrial/Organizational psychology, that by optimizing employee mental health, one will gain more productive, efficient and engaged employees . Current reports indicate that all Canadian businesses spend up to 20.7 billion dollars annually on employee mental health and the projections indicate that at this rate in 2030 the cost will reach 30 billion dollars (Stonebridge, & Sutherland, 2016). However, by implementing a mental health strategy, businesses may reduce their costs by proactively investing in health. As mentioned above, using general findings to determine the need to invest in mental health is not the best approach when building a business case for change with one’s senior leaders. In reality, building a request to invest in healthy minds requires personalized information about the specific business costs associated with employee mental health.

Dig in the Data and Get your Financial Facts!

Developing metrics on strategic organizational objective’s such as the optimal numbers of sick days for employees is a great approach. When creating the matrices, it is important to understand the reasons why they were constructed, and what consequences would arise from failure to achieve these goals.

How Much Do I Already Spend on Mental and Physical Health?

The important question is how to determine the average sick days taken by employees and factor in any further expenses such as staff replacement and replacement staff training.  Here are some great tips to determine the financial expense:

  1. To assess the total amount of lost days due to physical and mental illness one must multiply the average amount of sick days by the total number of individuals in the organisations full time work force.
  2. To establish the annual cost of sick days in your organisation simply multiply the number calculated from step 1 with the mean cost of a single sick day.
  3. Finally, to establish the total disability costs, you can add the days lost over the past year and workers compensation claim’s related to mental health. Adding this number to the number from step 2. This will calculate the totality of the expense relating to employee disability without the inclusion of administration and management costs.

Furthermore, in addition to absenteeism loss described and calculated above, presentism is a major mental health expenditure! It has been assessed to costs 7.5 times the number of absent days in an organisation.

Insurance premiums are clear expenses relating to employee physical and mental health, and more abstract financial burdens such as work conflicts and management interventions can be calculated just like absent days! Instead of simply looking at the costs covered by payroll on employee benefits, look at the total amount the organization spends per employee on things like mental health support resources (i.e. prevention and promotion).

How to Approach Senior Management with a Case for Change ?

When trying to describe the costs associated with mental health make sure to share a simple picture. Describe costs and the risk factors they are associated with. Here is what we mean by this; let’s say you are a medium size business owner with 500 employees who take an average of 7 sick days. Furthermore, let’s also say that the average cost of each sick day is 250$, that would equate an annual cost of 875 000$ which reflects the clear cost of physical and mental health. With the addition of abstract costs such as presentism the total cost would equate 7 437 500$ annually. From this, one can conclude that if this business had no growth in size and sustained itself for 10 years it would have spent a total of 74,375,000$ leading to slower growth and prosperity.  

References

  • Stonebridge, C., & Sutherland, G. (2016). Healthy Brains at Work: Estimating the Impact of Workplace Mental Health Benefits and Programs. Retrieved from http://www.conferenceboard.ca/e-library/abstract.aspx?did=8242
  • Howatt, B., & Bradley, L. (2017). Calculating the business cost of ignoring mental health. The Globe and Mail. Retrieved from https://www.theglobeandmail.com/report-on-business/careers/workplace-award/calculating-the-business-cost-of-ignoring-mental-health/article35103946/

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