Mental health is a business issue: How companies are supporting their employees

Putnam Investments, 03/24/21


  • Prevalent and often undertreated mental illness imposes heavy costs on society and employers.
  • Companies are beginning to focus more on mental health at work, due in part to the costs of absenteeism, presenteeism, and direct healthcare expense.
  • Leading companies go beyond providing underutilized employee assistance programs (EAPs) to offer innovative supports.
  • The COVID-19 pandemic has brought increased attention to mental health issues, leading to greater challenges and potential new solutions.

Mental illness is widespread and undertreated in the United States, and those who are afflicted confront multiple barriers that limit access to treatment. Since nearly one in five American adults live with a mental health condition, the human impact of these conditions is widespread. Additionally, mental illness often comes with increased costs to individuals, society, and businesses.

Company responses to mental illness can be an important element for investors to consider given the potential impact on costs, culture, recruitment, and retention. Efforts to provide a more proactive and multifaceted approach to mental health can produce human and economic benefits. We analyze the challenges presented by mental illness, which the COVID-19 pandemic has amplified, and the responses from leading companies. We discuss these issues in greater detail in our "Mental health: Insights and investment implications" white paper.

Challenges facing companies

Beyond essential human empathy, employers have direct business incentives to address mental health. Direct and indirect costs of mental illness are one set of considerations. Some of the challenges firms face include:

Absenteeism: Depression in individuals can result in 26 additional absences a year when compared with employees who do not suffer from depression. Absenteeism related to mental disorders accounted for an estimated 7% of global payroll, surpassing other disorders.

Presenteeism: Impaired work performance or productivity loss, also known as presenteeism, is an even larger cost for employees than absenteeism. Though harder to calculate, it is estimated the total cost of presenteeism is 3–4 times greater than the cost of absenteeism.

Healthcare costs: The costs associated with employer-based insurance are more than twice as high for employees with mental illness when compared with costs for other employees.

Effective mental health programs can create a high return on investment

The World Health Organization found that every dollar put into mental health treatment produces a four-dollar improvement in health and productivity for employees and businesses. Effective investment in employee health is likely to create a high "return on investment" for companies. Still, employer approaches to mental health have been somewhat piecemeal so far.

The World Health Organization found that every dollar put into treatment produces a four-dollar improvement in health and productivity for employees and businesses.

One key offering has been Employee Assistance Programs (EAPs), which connect employees to professionals to treat mental health issues including, stress and depression. While more than 97% of large U.S. companies offer EAPs, the utilization of these programs is only about 3%–5%. In response, organizations like the National Alliance on Mental Illness (NAMI) have launched initiatives and pledges for companies to destigmatize mental health and promote increased workforce engagement.
Source: https://ceoroundtable.heart.org/wp-content/uploads/2018/12/MENTAL-HEALTH-FULL-REPORT-FINAL-20181212.pdf

Companies showing leadership

Many corporate leaders acknowledge the importance of mental health in the workplace, but only some companies provide more than the traditional (and underutilized) offerings noted above. Indicators of corporate leadership in this area include providing education and training for managers, advocating for cultural acceptance, and destigmatizing mental illness. Leadership also includes offering a more complete range of supportive and preventive care, such as stress management and physical fitness tools, and creating a more flexible and accommodating work environment.

For example, Deloitte — a private company — launched a Mental Health at Work campaign. That program includes Mental Health First Aid training and educational opportunities. Other companies have created more holistic mental health initiatives by providing resources in stress management, fitness and wellness, and financial budgeting. And some other firms are providing employees and immediate family members confidential counseling services 24/7.

The pandemic has exacerbated the challenge, and also accelerated certain solutions

The pandemic has brought mental health care into even greater focus for employers. This is well justified as the pandemic has exacerbated the challenges of mental illness. A June 2020 CDC survey found that more than 40% of respondents reported an adverse mental health condition (31% from depression or anxiety). This compares with about 10% prevalence of depression and anxiety pre-pandemic.
Source: CDC Morbidity and Mortality Weekly Report, Vol. 69, No. 32, August 14, 2020.

In response, some large companies have expanded online resources to improve mental, physical, and emotional health. Other firms have focused on supporting employees during remote work. Salesforce.com has shared resources on emotional health and provided face-to-face video counseling. Salesforce.com chief executive office Marc Benioff has publicly stated this is a key priority. Walmart is increasing mental health resources available to employees, including free counseling sessions. The company is also expanding access to low cost ($1 per minute) counseling for customers at many of its new health clinics. The expansion of these clinics in existing Walmart locations could lead to better access to mental health care, especially in rural communities.

Certain smaller companies are also leading the way in mental health support. Etsy — an online marketplace for unique and creative goods — has provided unlimited mental health days as part of its unlimited sick leave and its unlimited coaching and therapy sessions for employees.

The pandemic has also accelerated the adoption of telemedicine, supported by various regulatory changes. Telemedicine is one potential solution that can help facilitate lower cost and more convenient interactions between patients and their providers. This could help remove several key barriers to mental health treatment.

The COVID-19 pandemic has brought mental health care even more into focus for employers.

We expect some of these recent changes and solutions to result in longer-term shifts and opportunities for employees and employers. Investors have the opportunity to identify leadership and solutions that could lead to improved long-term business prospects alongside the essential human benefits of improved mental health.

Disclosure:
As of 12/31/20, Deloitte was not a holding of the Sustainable Future and Sustainable Leaders strategies; Etsy accounted for 0.90% and 0.77% of the Sustainable Future and Sustainable Leaders strategies, respectively; Salesforce accounted for 0.76% and 0.46% of the Sustainable Future and Sustainable Leaders strategies, respectively; and Walmart accounted for 1.74%, of the Sustainable Leaders strategy and was not a holding in the Sustainable Future strategy.

This material is not intended to be relied upon as a forecast, research, or investment advice, and is not a recommendation, offer, or solicitation to buy or sell any securities or to adopt any investment strategy. The companies mentioned above are intended solely to help illustrate how mental health and employer responses to mental health may potentially impact human and economic prospects. It should not be assumed that an investment in the companies identified was or will be profitable. As with any investment, there is a potential for profit as well as the possibility of loss. Holdings are for a representative account and are shown for illustrative purposes only. Each account is managed individually. Accordingly, account characteristics may vary. The inclusion of holdings information should not be interpreted as a recommendation to buy or sell or hold any security. The securities identified do not represent all the securities purchased, sold, or recommended for client accounts.