Depression in the Workplace - Challenges for Employers

The challenges of workplace depression

In 2009 research was conducted by IBI (Gifford, Parry and Jinnett) demonstrating what a daunting challenge workforce depression presents to employers. In IBI’s experience employers are most likely to tag depression costs to those associated with Short Term Disability (STD) costs. These cover the costs of disability absences or significant lost time. It seems to be here where employers calculate the costs of depression. They don’t take into account medical treatment costs.

If however, the focus should cover the combined costs of STD and include health-related loss of productivity, pharmacy costs and medical care, the full picture of costs to the employers is still not seen.

Depression acts as an aggravating, potentially undetected condition that damages health and reduces productivity. It is the costs of undermined health and loss of productivity more generally that need to be taken into account.

Effects of Short Term Disability and Depression

Most employers don’t reach far enough in recognising the effects of depression in employees or investing in the resources to manage them.

When IBI surveyed a large sample of employees with STD claims, they found that STD claims without depression had significantly less lost time than those with STD claims with depression.

Other costs associated with disability are opportunity costs - the ease with which an employer can replace workers and the time value of output lost.

When we add these lost productivity costs to STD, medical and pharmacy costs we get a different take than if we looked only at medical and pharmacy costs.

Costs that come with loss of productivity make management of depression even more significant to an employer. Lost productivity costs can’t be avoided by shifting them to others when disability happens. This means lost productivity costs stay with the employer as added operating costs. The major cost burden remains with the employer whatever containment or cost shifting measures he takes.

The IBI 2009 survey found that while depression related medical costs were $605, additional costs of $7,752 came from the full cost spread.

Cost of productivity loss beyond STD

IBI’s analysis shows that 28% of employees report depression, but they report 70% of these workers are currently not receiving professional depression treatment. IBI also report that a higher rate of sick day absences is occurring in depressed employees.

Based on combined analysis, STD claims for depressed employees resulted in only 19% of lost days. However, more than 80% of the cost-time comes from presenteeism and sick day absences. It’s not surprising that presenteeism at 63% of total lost work-time is so prevalent considering the large share of employees with untreated depression.

These results should guide the need for employers to treat health related lost productivity rather than just medical claim costs or even disability results.

Managing depression - the EAP’s role

While employers recognise the problem of depression, they often view it as a medical, drug and disability problem. However, IBI’s research demonstrates the large overall effect resulting from employees suffering from depression.

Your company’s EAP has an important role to play in identifying, preventing and managing depression in the workplace. The occurrence of depression creates a need to help prioritise services to help minimise the excess medical, drug, lost productivity and lost time costs associated with depression.