Mental health-related absences rose 35% year-on-year across Sedgwick’s client organisations in Australia – a trend the firm says points to an exposure building inside workforces long before it registers as a workers' compensation claim.
The figures come from Sedgwick’s 2026 Mental Health Absence in Australia: Trends, Costs and Compliance Guide, released on October 5. The guide draws on the firm’s own absence management data alongside research from Safe Work Australia. Sedgwick sells absence management services, and its report argues for an absence-focused approach to managing psychological risk – a context worth keeping in mind when reading its findings.
Sedgwick puts the combined annual cost of mental health-related absenteeism and presenteeism to Australian employers at $6 billion. Separately, the Australian HR Institute, drawing on Productivity Commission modelling, estimates that presenteeism alone cost employers $8.5 billion in 2023-24 – reflecting the productivity loss of employees who are at work but not functioning well.
The median cost of a psychological injury workers’ compensation claim sits at approximately $67,000, according to the guide – more than four times the median for all other serious claims recorded by Safe Work Australia. Median time off work for mental health conditions runs to around 35.7 weeks, nearly five times longer than for physical injuries.
Short-term absences account for roughly 90% of all absence cases, according to Sedgwick. That is the portion that rarely surfaces in claims data but steadily erodes productivity and signals unmanaged workplace risk.
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The guide identifies bullying and harassment as the primary cause of mental health absence at 33%, ahead of work pressure at 24% and exposure to violence or trauma at 16%.
Sedgwick’s guide notes that mental health absence risk is not evenly distributed across industries. Healthcare and social assistance workforces face high exposure to trauma, emotional labour, and workforce shortages. Education and professional roles are seeing increasing risk linked to administrative burden and burnout. Public sector and emergency services carry elevated risk from trauma exposure, fatigue, and shift work. Construction, trades, and blue-collar sectors show higher levels of presenteeism and underreporting, while remote and FIFO workforces face unique pressures including isolation and separation from support networks.
Christina Wunder, head of Sedgwick Health Solutions in Australia, said organisations are increasingly expected to show they identified and acted on psychological risk before it escalated. “For organisations, absence data is becoming increasingly important in demonstrating proactive risk management and identifying psychological hazards before harm escalates. By adopting an absence-focused approach that prioritises early support and consistent management, organisations can significantly reduce their legal and employee relations risk,” Wunder said.
The guide’s findings sit against a workers’ compensation system already under significant strain.
Safe Work Australia recorded 17,600 serious mental health claims nationally in 2023-24, a 161% increase over the past decade. In NSW, the trajectory has been sharper. NSW Treasurer Daniel Mookhey told Parliament in March 2025 that psychological claims account for 12% of all NSW workers’ compensation claims but 38% of total scheme costs. The average cost of a psychological injury claim in the state rose from $146,000 in 2019-20 to $288,542 in 2024-25. The nominal insurer was holding just 85 cents in assets for every dollar it owed injured workers.
NSW moved to address the position through the Workers Compensation Legislation Amendment Act 2025 and the Workers Compensation Legislation Amendment (Reform and Modernisation) Act 2026, both effective from July 1, 2026. General work stress and interpersonal friction are no longer compensable under the new framework. NSW work health and safety codes – including the psychosocial hazards code – are now legally enforceable, meaning non-compliance carries prosecution risk, not just civil exposure.
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The Australian HR Institute calculates that workplace mental health interventions generate approximately $3 for every $1 invested, in 2023-24 terms – a figure updated from a 2014 analysis prepared for beyondblue.
For clients with self-insurance or large deductible structures, that figure makes early intervention a claims cost argument as much as a people management one.
For brokers, the Sedgwick data raises practical questions about where client risk actually sits. Workers' compensation is largely statutory – the lever is not coverage, but what sits around it. Are clients’ psychosocial risk frameworks current and enforceable? Is early intervention built into their absence management, or does the response begin only once a claim is lodged? Are claims handling arrangements set up to support return to work for psychological injuries, which take nearly five times longer to resolve than physical ones?
The hazard drivers are documented. The cost trajectory is established. The gap is between what clients currently have in place and what the data shows they are carrying.
