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Effects of Mental Health in the Workplace & Why It’s Important

  • Human Resources
  • Article
  • 6 min. Read
  • Last Updated: 04/04/2023

a group of employees discussing the effects of mental health in the workplace

Table of Contents

As many as two in five employees are experiencing some combination of mental health concerns, performance issues, and stress.1 Workers reported problems such as depression, lack of motivation, reduced focus, insomnia, and decreased teamwork.1 When employees and leaders cannot focus on their jobs, the effects on a business can be devastating.

What Is Employee Mental Health?

Mental health describes our state of social, psychological, and emotional well-being and is an integral part of our overall wellness. A vast body of research links mental and physical health, which work together influencing how we think, feel, and act. The National Institute of Mental Health (NIHM) reports that chronic illnesses such as cancer, heart disease, or diabetes can make a person more likely to have or develop a mental health condition. Conversely, some mental health conditions, like depression, may play a role in increasing a person's risk of physical illness.

Mental health touches every aspect of our lives, especially workplace performance. Key performance indicators such as productivity, creativity, and social engagement can all take a hit if an employee's mental health is suffering. Prioritizing mental health in the workplace can help your workers flourish and reach their full potential, which is what businesses need to thrive and grow.

What Causes Poor Mental Health at Work?

Almost half of adults experience a mental health issue in their lifetime.2 Of the employees surveyed, 57.9 percent say work had at least a moderate impact on their mental health.2

There are many ways a work environment can contribute towards poor mental health at work. Excessive stress and frustration due to toxic relationships, inexperienced leadership, and unclear communication can build up over time. Layer this with a lack of clear roles and expectations, long or inflexible work schedules, unrealistic demands, and lack of support for employees and it's no surprise a worker can feel unsatisfied, depressed, and exhausted. Other factors can compound the issue, such as:

  • Too many unpleasant or repetitive tasks
  • No sense of teamwork
  • Being subjected to discrimination
  • Watching favoritism play out with coworkers
  • Harassment or bullying

Don't overlook the ripple effect of mental health at work as employees struggle to balance personal and work demands as well as growing financial pressures.

Importance of Talking About Mental Health in the Workplace

Make no mistake, the success and longevity of a business rely on the collective, positive mental health of its workers. Positive mental health gives a person resiliency against life's stressors, challenges, and setbacks — obstacles that often go hand-in-hand with a job. Being fortified against the negative emotions and anxiety that accompany difficult times can help a person navigate with agility and remain productive.

While the employers we surveyed said they are aware of the costs of mental health issues to their business, they may not be as aware of the extent of employees' mental health struggles.

One reason may be that employees don't feel comfortable talking about their personal or mental health issues with superiors. More than half of respondents — 54% — said they felt uncomfortable talking to their supervisors about mental health.2 Some even feared that discussing it could lead to being fired or furloughed (30%) or cost them a promotion (29%). If employees did talk about their personal issues, they were most likely to confide in co-workers.2

When a manager or supervisor makes a habit of addressing the importance of mental health in the workplace, everyone benefits. A healthy state of mind can translate to higher levels of creativity along with a greater sense of self-worth and sense of happiness. These are prized attributes for nurturing high performance and strong corporate culture.

Impact of Poor Employee Mental Health in the Workplace

Lost productivity, absenteeism, having to recruit and train employees due to high turnover, and even higher health insurance costs are all potentially related to poor employee mental health. Even for small businesses, these costs can add up.

Business leaders say mental health issues can have a negative impact on their operations in the following ways:1

  • Revenue decreased (40%)
  • Profitability decreased (39%)
  • Loss of customers (30%)
  • Diminished output (26%)
  • Reduced competitiveness (20%)

In fact, business leaders report that stress negatively affects their life outside of work, including reduced sleep, worsened work/life balance, and less time with the family.3

Given that mental health can have an impact on finances, productivity, and turnover, supervisors considered mental health when making business decisions. Over 35% of supervisors say they were extremely likely to consider their employees’ mental health when making decisions, with female supervisors being more likely than their male counterparts to do so.2

Effects of Mental Health in the Workplace info graphic

Poor Relationships With Managers or Superiors

With the hierarchical structure of most businesses, managers and superiors typically hold sway over their employees, which can leave employees feeling anxious and vulnerable. For instance, an overbearing boss who micromanages every detail can leave workers feeling an absence of trust in their competence and ability to do their roles. Other times, managers may hold unrealistic expectations for deadlines, sales quotas, or deliverables.

Working under an umbrella of constant stress will lead to strained relationships. Moreover, an over-tasked employee is at risk of being unable to meet expectations, including those of customers.

Workplace Errors & Poor Decision Making

Good decision making requires being able to focus on the issue at hand and weigh all possibilities. An employee burdened with mental health issues may be more likely to be distracted. Inability to focus on a task can increase the likelihood of making errors in the workplace ranging from inputting the wrong data into a computer, struggling to develop creative solutions to challenges, or failing to communicate in a timely fashion. Personal time management, project planning, and general control of the work environment may decline all of which can impact employee performance.

Declining Company Revenue

Revenue for any business is the cumulative result of many efforts. Innovation, attention to detail, and excellent service are just a few. Bottom line: strong employee mental health in the workplace fuels strong profits.

When energy is spent on managing difficult relationships rather than producing creative ideas and being productive, a business loses the valuable employee contributions it needs to keep an edge over its competition. Customers can also sense when a worker is unhappy or stressed and may seek to take their business where they will be greeted with a genuine smile and customer service backed with employees who have ownership in the client relationship.

Low Morale & Increased Risk of Job Flight

Employees who are satisfied with their job and have strong social networks in the workplace tend to exhibit high loyalty. Conversely, when interactions with colleagues and supervisors are tense and the business's internal structure leaves little room for growth, low morale is likely. Unless action is taken to help an employee feel valued and cared for, they are at risk of leaving the business to search for a more suitable arrangement elsewhere.

Damaged Reputation & Negative Brand Association

In an age when customers value how a business treats its staff and don't hesitate to share their experiences on social media, it's likely that low employee morale will make itself known to consumers, clients, and the public at large. Employees and the work they do give a face and reputation to the business. An employer who does not pay attention to workers' mental health needs risks having its corporate brand associated with callousness and negativity. It's likely that an adverse impact on talent acquisition and sales will ensue.

How Can Employers Support Mental Health in the Workplace?

Supporting mental health in the workplace does not have to be expensive or complicated. There are many strategies that will nurture a culture of mental health and well-being.

  • Offer a rich mix of benefits. Employers can help their workers feel less stressed about their health and their financial future with affordable health insurance, an employer-sponsored retirement plan, programs specifically dedicated to supporting employee mental health, and programs that offer financial fitness support.
  • Flexible scheduling or remote work.Allowing employees to work flexible hours or the ability for some remote work can be a relatively simple, low-cost option that may help employee work/life balance.
  • Check-ins with supervisors. Regular meetings may give supervisors the opportunity to gauge how the employee is feeling. Discussions can include issues the employee has, solutions available to them, and career pathing to keep the employee engaged and working towards goals.
  • A confidential online communication system. If a question or issue should arise, employees may contact their HR professional or supervisor online through an internal communication system. This can be a convenient, confidential way to keep leaders and employees connected. It can also allow the leader to respond quickly and take any necessary steps.
  • Opportunities for enjoyment and enrichment. Consider including in your rich mix of benefits, other types of workplace perks. This can range from challenges or programs to improve physical and mental health to handwritten thank you cards acknowledging a job well done or appreciation of service during challenging times.
  • An employee assistance program (EAP). Help your staff get the support they need with confidential assistance that connects employees to a broad range of services that can include everything from finding childcare to fitness programs to counseling referrals. According to our 2023 Priorities for Business Leaders study, 19% of employers are extremely or very likely to start offering an EAP in the next 12 months.3

Effects of Good Mental Health in the Workplace

Wellness programs and benefits can be major factors for today's job seekers.

Sixty percent of employees surveyed say that employee wellness benefits will factor into the selection of their next job. Eighty percent between the ages of 18-39 will prioritize these benefits in a job search. And sixty-six percent of employees report feeling better about their employer after using a benefit.

Increase productivity with healthier, happier employees and create a more vibrant, supportive workplace. It’s a worthwhile investment for an employer to address the many ways a work environment can impact an employee’s health. A proactive approach can catch small problems before they escalate into something greater. Taking meaningful action to protect employees’ mental health is also a way to show your employees that you care about them as individuals. Doing so is an investment in overall employee performance.

Learn how a mentally healthy workplace is good for business and take steps today to improve the mental health of your employees. Examine the key role of mental health in the workplace here.

[1] 2023 Make Employee Wellness a Priority Guide, Paychex.

[2] Based on information from two Paychex surveys: one of 996 current employees and one of 383 supervisors. “Employees” were defined as workers who identified being in entry-level or intermediate job positions. “Supervisors” were defined as workers in middle-management roles or higher and had to report they had subordinates who reported to them.

[3] 2023 Priorities for Business Leaders, Paychex.


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* This content is for educational purposes only, is not intended to provide specific legal advice, and should not be used as a substitute for the legal advice of a qualified attorney or other professional. The information may not reflect the most current legal developments, may be changed without notice and is not guaranteed to be complete, correct, or up-to-date.

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