From $146,000 to $288,542 – is the staggering increase for each NSW psychological injury cost in just 6 years. Less than 50% of workers with psychological injuries return to work within a year. Mental health claims now cost three times more than physical injuries and take four times longer to resolve.
This is personal for me. In 2000, I was riding high as Vice President at global management consulting company Kearney, co-leading their executive search division during the e-commerce boom. Then the tech crash hit in March 2000, and almost overnight our business dried up. As a leader, I felt I had to remain positive while stress took a serious toll on my health. That severe depression led to me being out of work for 5 years before recovering.
There were many shortcomings in the way my case was handled, and I’m assured there has been good progress, but as you will see the financial and legal risk on business is significant and growing.
The Hidden Crisis Costing Australian Business Billions
Research from EML and Monash University’s “Inside the Minds of Australia’s Workplaces” reveals an alarming reality: we’re facing a mental health crisis of unprecedented scale and cost. Nearly one in three Australian workers – over four million people – reported having a mental health condition lasting at least six months in 2022. The most commonly reported illnesses were anxiety disorders (affecting 23% of the workforce) and mood disorders (14%).
Despite this massive burden, only 13,379 mental injury claims were accepted in 202https:/www.eml.com.au/wp-content/uploads/2025/05/EML_Mental-Health-White-Paper_Inside-the-Minds-of-Australias-Workplaces_WEB.pdf1-22, REPRESENTING JUST 0.33% OF AFFECTED WORKERS. This stark contrast shows that claims data captures only the tip of the iceberg when it comes to workplace mental health challenges.
Mental health claims are both expensive and complex, and the median time lost per claim of more than 34 weeks – over four times longer than physical injuries. Between 2015 and 2020, Working Years Lost due to mental injury more than doubled, rising from approximately 5,700 to nearly 11,800 – a 105% increase that occurred before the COVID-19 pandemic.
Currently, 81% of managers don’t know how to reduce their teams’ psychosocial risk (harmful work stress) (LinkedIn, 2025), while Safe Work has appointed 50 new inspectors specializing in psychological injury. The NSW government plans to change the whole person impairment measure from 15 per cent to 31 per cent by July next year – a change that could eliminate virtually every psychological injury claim, potentially pushing vulnerable workers toward devastating outcomes.
The Business Case for Immediate Action
The statistics are sobering: in Europe it estimated that 75% of work deaths are due to harmful stress, with 93% being men. The causes are suicide and coronary heart disease attributable to harmful stress at work. Only 25% of deaths are due to physical accidents according to the European Trade Union Confederation.
But there’s a positive side to this story. Companies that get workplace mental health right see wonderful benefits. Research shows that every dollar invested in effective mental health programs generates an average return of $2.30 through improved productivity, reduced absenteeism, and lower staff turnover. Gallup research demonstrates that career wellbeing is the most important predictor of overall wellbeing.
For boards and leaders, the financial and legal risks of not being proactive are substantial. The Productivity Commission has identified that mental ill-health costs the Australian economy more than $70 billion each year, including over $39 billion in lost participation and productivity. Without targeted action, these costs will continue to escalate.
For example, a 2025 case involving Cobar Management highlights the urgent need for proactive workplace mental health strategies. Two accountants suffered psychological injuries due to excessive workloads and unclear roles. Cobar entered an enforceable undertaking with over $1.2 million in commitments. This case underscores the importance of identifying and reducing psychosocial hazards early.
For young people and women, the risks are particularly acute. Workers under 25 are almost 2.5 times more likely to report a mental health condition than workers over 65. Women experience an 81% higher rate of mental health-related productivity loss per 10,000 full-time employees compared to men, yet men’s psychological injury claims last longer.
The EML and Monash research comes from four main sources: the Household, Income and Labour Dynamics in Australia (HILDA) survey, the National Data Set for Compensation-Based Statistics, the National Health Survey, and the National Return to Work Survey.
Your 4 Step Action Plan for Transformation
- Measure and Address Root Causes Organisations must systematically identify psychosocial risks using workplace surveys and formal risk assessments. Research shows 70% of Australian workers experience poor psychosocial job quality, with 43% reporting low autonomy and 42% affected by high job demands. Implement the “hierarchy of controls” approach, placing prevention at the centre of risk management.
- Walk the Talk and Train Managers: Boards and executives must demonstrate visible commitment by incorporating psychological safety into leadership KPIs and performance reviews. They must also walk the self-care talk. Provide managers with training to recognize and respond to signs of distress, foster cultures where seeking help is normalised, and ensure mental health conversations become part of everyday work. Leaders must model healthy boundaries and respond empathetically to team stressors.
- Implement Early Intervention Systems Develop proactive support pathways that identify emerging concerns before they escalate into claims. Use biopsychosocial profiling tools to assess recovery risks early and provide immediate support even before liability is determined. Research shows offering support in the first 2-4 weeks can reduce claim durations by up to 40%.
- Monitor Results and Reset Establish regular measurement cycles through employee pulse surveys, wellbeing metrics, and claims data analysis. Create feedback loops to identify what’s working and adapt strategies based on emerging needs. Use insights to continuously refine your approach and celebrate successes.
The Competitive Advantage of Caring Organizations
The benefits of implementing comprehensive psychosocial risk (PSR) management are substantial and measurable. Organizations that prioritize mental health and care see:
- Enhanced Performance: Teams with strong wellbeing cultures experience 26% higher employee engagement and 21% higher productivity. Gallup research shows that employees who strongly agree that their supervisor or someone at work cares about them as a person demonstrate higher productivity, profit, customer service levels, and employee tenure.
- Financial Returns: Every dollar invested in mental health initiatives delivers an average return of $2.30 through reduced absenteeism (25-30% decrease), lower turnover, and improved performance.
- Risk Mitigation: Proactive approaches significantly reduce the likelihood of costly psychological injury claims and associated legal risks, while ensuring compliance with evolving WHS regulations.
- Competitive Advantage: Mentally healthy workplaces become magnets for top talent in a market where employees increasingly value care, purpose, and wellbeing.
When organizations embed psychological safety into their DNA, they don’t just reduce claims – they build resilient, high-performing cultures where people feel genuinely supported to reach their full potential.
Sincere congratulations to the EML and Monash Team that produced some of the findings published above.
