Psychological claims at work: why they cost so much and why you need to prevent them

Psychological claims are devastating in a way that your workplace could easily miss — and these claims can be even more devastating for an employee suffering from a mental health disorder. Not only are there hidden financial costs, but the current passive approach of reacting with employee assistance counselling once a crisis occurs is resulting in a downward spiral that some employees will never get out of.

During 2014–2015 there were just over 4,000 claims for psychological claims at work in Queensland alone.

Collectively, they cost $52M in claim payments.

However, there are hidden costs that are not captured here that are worth exploring because your business might be under-focused on an injury area that can be prevented with proper attention. Firstly, long processing times associated with psychological claims mean higher costs for the business, while for employees their symptoms deteriorate the longer that a claim endures.

Although psychological claims accounted for only 2.5% of all time claims finalised, they were the most expensive (over $52,000 in 2014–15).

They take 169 days to determine compared with the average of 49 days for other claims.

The second hidden cost of these claims is potentially gigantic: the cost of the claims that are rejected. Employees whose claims are rejected don’t take the rejection lightly and just get back to work. More often than not they leave the company or return to work angry and complaining to others while doing far less work than before. Strikingly, the average rate of rejection for a claim is 7% whereas over 65% of psychological claims were rejected in 2014–2015 in Queensland.

Employees whose claims are rejected are more likely to make a common law claim. Psychological claims account for just 4.7% of statutory claims but they represent 10.0% of common law lodgements.

This points towards the real cost of rejecting a psychological injury: the employee becomes embittered and is more likely to seek legal compensation through other means, leave the company or be less productive for an employer they see as having rejected them. If 65% of claims are rejected then the real cost of a psychological injury could be more than double the $52 million worth of claims that are accepted.

Thirdly, if an employee suffers a physical injury it’s common that they develop psychological problems as well. Having an injury usually means a person will suffer from depression if they can’t get back into work or some other satisfying life role quickly. However, employees with physical claims and their employers are often unaware of how quickly a psychological problem can develop once a person is off work with an injury. Most employers aren’t set up to effectively manage the fallout from a psychological injury that develops with a physical one. The table below shows that the consequences can be terrible.

An employee who develops a psychological injury along with their physical injury is half as likely to return to work at all.

So what does this all mean for your workplace? It means you might be underestimating what mental health problems are costing you. It also means that employees are typically being underserved when it comes to effective management of mental health in the workplace. Most workplaces are very aware of the importance of focusing efforts to reduce physical claims. However, few workplaces are as focused on preventing psychological claims. Preventing psychological claims is now possible through recent developments involving the digitization of psychological treatments that have been delivered face-to-face for decades. For the past 10 years a growing tide of research supports the use of certain online approaches such as internet-based cognitive behavioural therapy. These approaches are capable of preventing psychological claims and can be deployed at scale.

Some examples of university research centres that offer evidenced-based online treatments include Mindspot and Mental Health Online. Our company, Uprise also offers online programs that are specifically tailored for the workplace and designed to work as an early responder system to prevent mental health problems in stressed employees. For more information contact Dr Jay Spence (CEO, Uprise: jay@getuprise.com.au).