Mental health-related absences rose 35% year-on-year across Australian organisations, according to new data from Sedgwick – a figure that points to an exposure building inside workforces long before it registers as a workers’ compensation claim.
The firm’s 2026 Mental Health Absence in Australia: Trends, Costs and Compliance Guide, released on October 5, draws on Sedgwick’s own absence management data alongside research from Safe Work Australia and analysis prepared for PwC Australia. It frames mental health not as a wellbeing issue sitting alongside workers’ compensation risk, but as a core absence management problem with direct financial and legal consequences.
The guide puts the combined annual cost of mental health-related absenteeism and presenteeism to Australian employers at $6 billion. For context, separate analysis by the Australian HR Institute – drawing on Productivity Commission data – puts the presenteeism component alone at $8.5 billion in 2023-24, reflecting a broader methodology and a wider definition of productivity loss.
According to Safe Work Australia’s Key Work Health and Safety Statistics 2025 report, the median compensation paid for a mental health condition serious claim in 2022-23 was $67,400 – more than four times the $16,300 median across all serious claims. Median time off work for mental health conditions ran to 35.7 working weeks, almost five times the 7.4-week median across all serious claims.
What makes the Sedgwick data particularly relevant is where it draws the line. Short-term absences account for roughly 90% of all absence cases – the portion that almost never appears in a claim 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%.
Safe Work Australia’s Key Work Health and Safety Statistics 2025 report puts the national picture in similar terms, with harassment and bullying leading serious mental stress claims at 33.2% and work pressure at 24.2%. The consistency across both datasets makes the hazard profile harder to dismiss as sector specific.
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 being expected to demonstrate 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 Sedgwick findings sit against a workers’ compensation system already under structural pressure.
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 still. NSW Treasurer Daniel Mookhey told Parliament in March 2025 that psychological claims make up 12% of all NSW workers’ compensation claims but account for 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. Under the new framework, general work stress and interpersonal friction are no longer compensable. NSW work health and safety codes, including the psychosocial hazards code, are now legally enforceable rather than advisory – meaning non-compliance carries prosecution risk, not just civil exposure.
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The Sedgwick guide’s broader argument is that absence data gives organisations an earlier read on psychological risk than claims data alone – and that acting on it carries a measurable return.
The Australian HR Institute calculates that workplace mental health interventions generate approximately $3 for every $1 invested, in 2023-24 terms. For clients carrying self-insurance or large deductible structures, that figure reframes early intervention as a claims cost reduction argument.
For brokers, the Sedgwick data raises a practical question: do clients’ current coverage and risk management arrangements reflect a workforce where mental health absence is rising at 35% per year, where most of that exposure never surfaces as a formal claim, and where psychosocial duties are now enforceable?
The hazard drivers are documented. The cost trajectory is established. The gap sits between what clients currently have in place and what the data now shows they are carrying.
