How can companies prevent poor mental health harming productivity?

It is easy to see why workplace mental health has risen up the national agenda. 

The Health and Safety Executive (HSE) reports that an estimated 1.9 million people suffered from work-related ill health in the UK during 2024/25. More than half were struggling with stress, depression, or anxiety. 

That amounts to 964,000 workers and a combined 22.1 million working days lost. 

Not only is this a sharp increase from the 776,000 workers who suffered from work-related mental illness during the previous year. It is also higher than the year before the Covid-19 pandemic hit. 

Alongside this, rates of poor mental health among the general population have doubled during the last decade, according to analysis from The Health Foundation. 

This is a major problem for employers, as well as individual workers. A 2024 study by Deloitte estimated that poor mental health costs employers £51 billion per year in the UK, up from £45 billion just five years earlier.

Why is presenteeism a big problem for businesses?

This is not solely caused by working days lost due to sickness absence. 

There is also the cost of increased staff turnover, such as recruiting and training staff to replace those who leave due to poor mental health. 

And the Deloitte study warns that the greatest cost stems from presenteeism – people working when they are ill. 

Employees are unlikely to work to the best of their ability when they are ill. They may suffer from reduced motivation, engagement, and commitment, which in turn affects their performance. 

This begs the question, could there be a link between the increase in mental ill health and the pattern of slow productivity growth, which has been a stubborn feature of the UK economy since the global financial crisis? 

Perhaps surprisingly, the connection between mental health and productivity has been underexplored. However, there are signs it is now coming into sharper focus. 

The recent Keep Britain Working Report, published by the Government, identified poor mental health as a major factor in economic inactivity, long-term sickness absence, and poor performance at work. 

The mental health-productivity relationship was also the theme of a major study recently published by the Enterprise Research Centre (ERC).

How does poor mental health affect company performance?

Our research gathered six years of survey data on workplace mental health in UK businesses, as well interviews with managers, an employee survey, and a set of organisational case studies. The research began just before the Covid-19 pandemic and tracked developments over a turbulent period in the UK’s workplaces. 

Our research addressed an important gap in our understanding of mental health in the workplace.

The majority of existing research on workplace mental health focuses on the experiences of the individuals personally affected by it, rather than the employer perspective. 

By looking through the employer lens, our study aimed to shine a light on the impact upon productivity and identify actions that could reduce the costs of mental ill-health at work. 

Our findings indicate that mental health issues are widely experienced by UK businesses. A quarter of the companies we surveyed reported absences caused by mental health related sickness and more than a third said presenteeism was an issue. 

The findings also confirm that mental health issues impact on performance. Nearly half the firms that had experienced mental health absence said it impacted negatively on their operations. 

Alongside this, our qualitative research showed that employee mental health issues, if not properly managed, were felt to have detrimental impacts on team performance. 

Yet action to prevent or address these issues was far less common.

What are businesses doing about mental health?

Only half of the businesses we surveyed had adopted mental health initiatives. 

There was an increase in the proportion of firms adopting mental health initiatives during and immediately after the Covid-19 pandemic as companies recognised the toll it was taking on staff. But adoption of these initiatives then stalled and fell back. It is now at its lowest level since early 2020. 

A fifth of businesses we surveyed had no mental health initiatives in place and no plans to adopt them in the future. Smaller firms were less likely to adopt them, but at the same time were more likely to report that mental-health absences had a negative impact on their performance. 

We also matched the employer survey findings with wider business productivity data. This revealed that the long-term adoption of mental health budgeting, wellbeing data monitoring, and the provision of physical wellbeing support were associated with productivity gains. 

Additional analysis also showed that training line managers in managing mental health was associated with improved performance. In particular, it was linked to lower long-term sickness absence, enhanced staff recruitment and retention and improved customer service. 

The findings from our employee survey also demonstrated the importance of an organisation’s Psychosocial Safety Climate (PSC) for mental wellbeing and performance. 

Employees associated firms with a higher-rated PSC with stronger resources (support and leadership), lower demands (workload and emotional strain), better health (lower burnout and higher wellbeing), more positive attitudes (higher engagement and satisfaction), and generally more favourable perceptions of performance (quality and productivity). 

Five steps for firms to manage employees' mental health

We also conducted a number of case studies to examine the factors that helped or hindered the implementation of mental health and wellbeing practices in the workplace. 

These highlighted the importance of strong leadership and organisational culture in sustaining these practices. On the other hand, financial constraints and limited resources emerged as a common barrier to adoption and implementation. 

Our findings point to a number of lessons for employers. 

1 Ensure you collect, monitor and analyse key data on employee mental health. 

This could include simple systems to monitor absence and the reasons for it as well as collecting other wellbeing data through employee surveys or performance review meetings. 

This can prevent mental health issues from escalating and having a detrimental impact. 

2 Adopt a set of mental health initiatives that are appropriate for your organisation’s needs. 

Be prepared to invest in these for the long term and evaluate their effectiveness. 

3 Invest in quality training for your line managers in how to identify and manage mental health issues effectively.

4 Make efforts to create a psychologically safe working environment, where employees feel able to raise issues without fear. 

Use existing support available from specialist organisations and charities, such the Advisory, Conciliation and Arbitration Service (ACAS) and Mind. 

5 Build a positive leadership culture that values mental wellbeing, in which leaders display their active commitment to staff mental health through their actions and communications. 

It is not just businesses that need to act. We also identified a number of policy recommendations, such as providing a free mental health support service tailored to the needs of smaller businesses, creating a national training programme for line managers, and encouraging the adoption of digital innovations in workplace mental health that can be widely used at relatively low cost. 

There is no easy cure for the rise in poor mental health. But we need to manage it effectively if we want to prevent it undermining productivity and driving the economy into depression.

• This article is based on the findings of a six-year study of how mental health affects company productivity and how firms manage employee mental health. The researchers have published a number of peer-reviewed journal articles including Hassard, J., Teixiera, D., Bourke, J., Wishart, M., Roper, S., Belt, V., Leka, S., Pahl, N., Bartle, C., Thomson, L., Blake, H. (2024) The relationship between line manager training in mental health and organisational outcomes, PLOS One, doi.org/10.1371/journal.pone.0306065

Further reading:

What we get wrong about resilience - and the cost to your organisation

Why organisations should help those experiencing a midlife crisis

How to create better employee health initiatives

Can joy improve our performance at work?

Vicki Belt is Director of Engagement and Impact for the Enterprise Research Centre and the Gillmore Centre for Financial Technology.

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