Surge in Mental Health Absences Recorded in Australia, With Many Unreported

The findings are detailed in Sedgwick’s 2026 Mental Health Absence in Australia report, released on October 5. The report combines Sedgwick’s absence management data with research from Safe Work Australia, advocating for an absence-focused strategy in managing psychological risks.

According to the report, the annual cost of mental health-related absenteeism and presenteeism to Australian employers is approximately $6 billion. The Australian HR Institute, utilizing Productivity Commission modeling, estimates that presenteeism alone will cost employers $8.5 billion in 2023-24 due to reduced productivity of employees present at work but unable to function effectively.

The median cost of a psychological injury workers’ compensation claim stands at around $67,000—over four times higher than the median for other serious claims logged by Safe Work Australia. Employees with mental health conditions typically take around 35.7 weeks off work, nearly five times longer than those recovering from physical injuries.

Short-term absences, which make up about 90% of all absence cases, often remain unreported in claims data, leading to ongoing productivity losses and indicating unmanaged workplace risks.

The report identifies bullying and harassment as the leading cause of mental health absences at 33%, followed by work pressure at 24% and exposure to violence or trauma at 16%. Risks are not uniformly distributed across industries; for instance, healthcare and social assistance sectors experience high exposures to trauma and emotional labor, while education professionals face increased risks due to administrative burdens and burnout. Additionally, remote and FIFO (fly-in-fly-out) workers contend with isolation and lack of support networks.

Christina Wunder, head of Sedgwick Health Solutions in Australia, noted that organizations are increasingly required to demonstrate proactive identification and management of psychological risks. She emphasized that managing absence data effectively can prevent harm before it escalates.

The report’s insights occur within a workers’ compensation framework that is under strain. Safe Work Australia reported 17,600 serious mental health claims in 2023-24, reflecting a 161% increase over the last decade. In New South Wales, psychological claims represent 12% of total workers’ compensation claims but account for 38% of the total costs. The average cost for a psychological injury claim in the state rose significantly from $146,000 in 2019-20 to $288,542 in 2024-25.

In response to these challenges, New South Wales implemented the Workers Compensation Legislation Amendment Act 2025 and subsequent reforms, effective from July 1, 2026, which redefined compensable claims for work stress and interpersonal issues.

Additionally, the Australian HR Institute found that workplace mental health interventions yield approximately $3 for every $1 invested, reinforcing the importance of early intervention both as a financial necessity and an employee management strategy. The current situation raises critical questions for brokers about client risks, existing psychosocial frameworks, and whether companies have proactive measures to address mental health before claims become necessary.