The Cost of Poor Mental Health in the Workplace

Understanding the Cost of Poor Mental Health in the Workplace

Employers should understand the cost of poor mental health in the workplace because mental health challenges can affect how employees work, communicate, attend work, and remain engaged. Addressing these concerns early can support employees while reducing avoidable workplace disruption and costs.

Mental health is also closely connected to workplace conditions. Workload, job demands, relationships, psychological safety, and access to support can all influence employee well-being.

Mental Health and Work Statistics in Canada

Recent Canadian data shows why workplace mental health deserves attention. A 2026 report summarized by the Institute for Work & Health estimated that mental health challenges cost Canada about $180 billion annually, with approximately $106 billion attributed to employers and businesses through disability claims, benefits, accommodations, insurance premiums, and related costs. The report also estimated $17 billion in lost productivity, with presenteeism accounting for most of those productivity losses. 

Statistics Canada also found that among employed Canadians with a mental health-related disability who had workplace accommodation needs, 35% had unmet needs in 2022. Among those who did not tell their employer about their accommodation needs, 56% were uncomfortable asking and 47% feared a negative outcome. 

These figures show that the cost of mental health in the workplace is not limited to treatment or disability expenses. Employers can also experience productivity losses when employees struggle to work effectively but do not feel able to seek appropriate support.

How Does Poor Mental Health Affect the Workplace?

Poor mental health can affect the workplace through absenteeism, presenteeism, reduced performance, turnover, workplace relationships, and difficulty maintaining consistent productivity.

1. Increased Absenteeism

Employees experiencing significant mental health challenges may need time away from work to manage their health or attend treatment. Frequent or prolonged absences can affect workloads, scheduling, and team capacity.

A 2022 Canadian federal workplace survey found that 9.5% of employees covered by federal jurisdiction reported taking leave for mental health reasons. Workload was also the most frequently reported source of workplace stress, with 28.5% saying they were always or often stressed by their volume of work.

2. Presenteeism and Lost Productivity

Presenteeism occurs when an employee is physically at work but is unable to perform at their usual capacity due to health concerns. It can be harder to identify than absenteeism because the employee is still present.

The 2026 Canadian report found that presenteeism accounted for almost 80% of estimated productivity losses related to mental health challenges. This highlights why simply tracking sick days does not provide a complete picture of workplace mental health costs. 

3. Higher Turnover

Employees who experience ongoing mental health difficulties without adequate support may become less satisfied with their work or decide to leave. Turnover can create additional costs through recruitment, training, lost experience, and reduced productivity while a replacement becomes established.

A supportive workplace cannot guarantee employees will stay, but better mental health practices can contribute to healthier working conditions and stronger retention.

4. Strained Workplace Relationships

Poor mental health can sometimes affect communication, concentration, patience, and participation. This does not mean that mental health concerns make someone difficult to work with, but untreated or unsupported challenges can create additional workplace pressures.

Managers need to avoid making assumptions about the cause of changes in behaviour. Instead, they should focus on observable workplace concerns and discuss appropriate support.

5. Delayed Access to Support

When employees fear judgement or negative consequences, they may avoid discussing mental health concerns until they become more difficult to manage.

Statistics Canada found that 35% of employed people with a mental health-related disability and workplace accommodation needs had unmet accommodation needs in 2022. Among those who did not tell their employer about their needs, fear of a negative outcome was one of the reported barriers.

Employers must know how to help employees with mental health issues. It helps focus on observable workplace changes, maintain confidentiality, discuss practical support, and avoid attempts to diagnose employees.

How Does Poor Mental Health Affect Productivity, Engagement, and Creativity?

The cost of poor mental health in the workplace extends beyond missed workdays. Mental health challenges can affect an employee's ability to concentrate, participate, solve problems, communicate, and contribute consistently.

1. Productivity

Poor mental health can reduce productivity when employees have difficulty concentrating, managing workloads, making decisions, or maintaining their usual work pace.

The impact can occur even when employees remain at work. This is why employers should consider both absenteeism and presenteeism when assessing the effects of mental health on workplace performance.

2. Engagement

Employees may become less engaged when they feel overwhelmed, unsupported, or disconnected from their workplace. Reduced engagement can affect participation, motivation, communication, and willingness to contribute beyond basic responsibilities.

Creating a workplace where employees can raise concerns and access support may help address problems before disengagement becomes more serious.

3. Creativity and Problem-Solving

Creativity requires attention, mental flexibility, and the ability to consider different approaches. Persistent stress or emotional distress can make it harder for employees to devote mental energy to these activities.

Employers should therefore view mental health support as more than an employee benefit. A healthier workforce can also support the conditions employees need to think, collaborate, and solve problems effectively.

How Can Employers Improve Workforce Mental Health?

Improving workforce mental health requires employers to address workplace conditions while making appropriate support accessible. A strong approach combines prevention, early support, manager training, and clear workplace processes.

1. Manage Workloads

Excessive workloads can contribute to workplace stress and burnout. Employers should regularly review deadlines, staffing, responsibilities, and workload distribution.

Canadian federal workplace data identified workload as the most frequently reported source of workplace stress, reinforcing the importance of addressing work design rather than focusing only on individual coping. 

2. Train Managers

Managers often notice changes in attendance, performance, behaviour, or communication before anyone else. Training can help them respond appropriately without diagnosing employees or asking unnecessary personal questions. 

Managers should know how to:

• Recognize observable changes.

• Start respectful conversations.

• Protect confidentiality.

• Discuss workplace barriers.

• Explain available resources.

• Follow accommodation procedures.

By training managers on how to respond to mental health issues among employees, it reduces stigma in the workplace and promotes a healthy work environment.

3. Create Psychological Safety

Employees should feel able to raise concerns without expecting embarrassment, retaliation, or unfair treatment. Psychological safety can make it easier to discuss workplace barriers and seek support earlier.

A 2022 federal survey found that 62.6% of employees covered by federal jurisdiction agreed or somewhat agreed that their work environment was psychologically healthy. This also means a substantial proportion did not give a positive response, showing why employers should continue assessing workplace conditions. 

4. Provide Confidential Support

Employees need to know where they can access appropriate support. Depending on the workplace, this may include employee assistance programs, counselling benefits, healthcare providers, mental health resources, or addiction treatment.

Confidentiality is particularly important when employees are concerned about stigma or potential effects on their employment.

5. Support Flexible and Appropriate Accommodations

Some employees may benefit from modified schedules, duties, workloads, or other workplace adjustments. The appropriate accommodation depends on the employee's circumstances, job requirements, and applicable workplace processes.

6. Address Mental Health and Substance Use Together

Mental health and substance use concerns can occur together, and workplace responses should avoid assuming that every change in performance has a single cause. Employers should know how to recognize workplace concerns, respond respectfully, and connect employees with appropriate support without attempting to diagnose them.

What Opportunities Do Employers Have to Improve Mental Health Support?

Employers have opportunities to improve mental health by moving from reactive responses to prevention, early intervention, and ongoing support. This means looking beyond individual employees and examining workplace conditions that may contribute to stress or psychological risk.

Review Workplace Risks

Employers can regularly assess:

• Workload and staffing

• Job demands and expectations

• Workplace relationships

• Harassment or conflict

• Employee autonomy

• Scheduling practices

• Access to support

• Return-to-work processes

The goal is to identify workplace conditions that may contribute to poor mental health and address them before they become larger problems.

Make Support Easy to Find

Employees should not have to search extensively to discover where they can receive help. Employers can clearly communicate available benefits, employee assistance programs, accommodation procedures, and external resources.

Support should also be available before an employee reaches a crisis point.

Build Mental Health Into Leadership

Mental health should be considered part of workplace management rather than treated as an occasional wellness initiative. Leaders can demonstrate this by setting realistic expectations, encouraging respectful communication, and responding appropriately when employees raise concerns.

Measure What Is Changing

Employers can monitor indicators such as:

• Absenteeism

• Employee turnover

• Employee engagement

• Workplace accommodation requests

• Use of support programs

• Employee feedback

• Return-to-work outcomes

These measures can help organizations identify patterns and determine whether workplace initiatives are addressing meaningful problems.

Provide Support for Employees With Addiction Concerns

Workplace mental health strategies should also account for employees experiencing substance use or addiction. Confidential addiction support can give employees another pathway to care while allowing employers to maintain appropriate workplace expectations.

Moving Toward a Healthier Workplace

The cost of poor mental health in the workplace can appear through absenteeism, presenteeism, turnover, reduced engagement, and lost productivity. However, employers can reduce these risks by addressing workplace conditions, training managers, creating psychological safety, and making appropriate support easier to access.

A healthier workplace is not one where employees never experience stress or mental health challenges. It is one where concerns can be recognized early, discussed respectfully, and connected to appropriate support.

If your organization is looking for confidential support for employees experiencing mental health or substance use concerns, Home Based Recovery provides virtual support across Canada. Visit our Contact Us page, call or text 1-778-700-2830, or email admin@homebasedrecovery.ca.

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