Mental health issues cut firm productivity by a quarter

28 May 2020

  • Mental health sickness sees a 25 per cent hit to firm productivity
  • Bosses surveyed cited remote working and job insecurity as risk factors
  • Report calls for firms to appoint ‘mental health leads’ to oversee wellbeing
  • Midands Engine is supporting employers with mental health challenges

Companies that don’t do enough to support their workers’ mental health risk seeing their overall productivity drop by a quarter, new research suggests.

The findings from a large-scale survey commissioned by the Mental Health and Productivity Pilot (MHPP), funded by Midlands Engine and conducted by the Warwick Business School-led Enterprise Research Centre found that, despite the potential hit to their bottom line, less than half of firms offer proactive support for mental health and many are unsure where to turn for advice. 

Responses from individual company bosses also suggest that a post-COVID ‘new normal’ with more remote working could exacerbate productivity-sapping mental health problems among employees.

Questioning 1,900 Midlands firms ranging from micro-businesses to large companies, the researchers found that on the eve of the COVID-19 lockdown, nearly a third (31 per cent) of all firms reported seeing sick leave due to mental health problems such as depression and anxiety in the past year.

And significantly, in firms that recorded a hit to their performance as a result, the overall productivity of the company – defined as turnover per employee – was cut on average by 24.5 per cent. It suggests firms that fail to address problems caused by stress could be putting both their workers’ health and their own viability at risk.

According to a recent study by Deloitte, mental health problems could be costing UK firms up to £45 billion per year from sickness absence, ‘presenteeism’ – being at work when ill but working less effectively – and higher staff turnover.

The ERC research found in interviews that employers believe a number of key factors contributed to poor mental health in the workplace, including isolation due to remote working, worries about job security and demands from clients and customers.

Sickness absence for mental health, meanwhile, impacted on firms by placing additional burdens on other workers, affecting staff morale and time spent on management issues, as well as creating extra costs from hiring temporary or permanent replacements – all leading to reduced efficiency across the business.

But despite the substantial costs to firms, only 44 per cent offered proactive support for mental health problems, while only a fifth (22 per cent) had a mental health plan for the business and just over a third (35 per cent) had a health and wellbeing lead on the board.

Nearly two-thirds (64 per cent) of companies said they wanted to offer more support. However, many firms tended to look internally or online for ideas to improve mental health, with just 14 per cent consulting specialist mental health charities.

The report recommends that firms should appoint a ‘mental health lead’, particularly in larger companies which tend to experience higher sickness absence for mental health reasons. It also calls for greater partnership working between employers, human resources specialists and mental health charities.

The researchers suggest more structured, open and proactive approaches are needed to address employee mental health, with issues dealt with in the same way as physical health problems.

Stephen Roper (pictured), Director of the Enterprise Research Centre and Professor of Enterprise at Warwick Business School, said: "This study shows that the scale of the mental health challenge in workplaces was already huge before the onset of COVID-19. Given the massive dislocation to people’s working lives since then, we can expect that situation to have worsened, especially because some of the risk factors highlighted by our study participants, such as remote working, have suddenly become far more commonplace.

“We’ve also shown that poor mental health among staff can have a big impact on the productivity of the entire firm. It may seem obvious that having people off sick or trying to work when ill would mean, ultimately, that sales suffer. But many, many firms aren’t measuring this impact in any real way, so may be seeing a far bigger loss of business than they realise.

“It’s therefore really important for firms to have a proper plan and policies in place. The more proactive ones are appointing mental health leads to take responsibility for this issue across the business and that’s a model that we believe needs to be mainstreamed.”

The ERC is the UK’s leading independent research institute on growth, productivity and innovation in small and medium-sized enterprises (SMEs). It said the findings, collected in the first quarter of this year just before coronavirus struck, would provide an important baseline for future studies on the effects of the virus on workers’ mental health.

Professor Guy Daly, Deputy Vice-Chancellor of Coventry University and MHPP Programme Lead, said: “We have been working on this seminal pilot programme since before the COVID-19 pandemic hit the world. As the nation and the region work on the recovery phase, the matter of mental health at work is even more significant with the meanings of ‘workplaces’ and ‘productivity at work’ being redefined.

"MHPP is a pilot with and for employers - small and large - and employees and is, therefore, a huge opportunity to co-create and pilot interventions that will add value to improvements in mental health and productivity in workplaces.”

To read the full report Employee well-being, mental health and productivity in Midlands firms: The employer perspective click here.

Join the conversation

WBS on social media