Tracking mental health-related absences early can cut employers' legal and employee relations risk, guide finds
Employers can use absence data to spot psychological hazards early and reduce their legal exposure, according to Sedgwick Health Solutions.
"For organisations, absence data is becoming increasingly important in demonstrating proactive risk management and identifying psychological hazards before harm escalates," said Christina Wunder, head of Sedgwick Health Solutions in Australia.
"By adopting an absence-focused approach that prioritises early support and consistent management, organisations can significantly reduce their legal and employee relations risk."
Wunder's comments accompany the release of Sedgwick's 2026 Mental Health Absence in Australia: Trends, Costs and Compliance Guide.
Psychosocial hazards under scrutiny
The guide notes that work health and safety (WHS) laws now explicitly require employers to identify and manage psychosocial hazards in the same way as physical risks. These include excessive workloads, poor role clarity, workplace conflict, inadequate support, exposure to traumatic events and poorly managed organisational change.
Failure to address these hazards can lead to greater workers' compensation exposure, regulatory scrutiny, legal risk and reputational damage, the guide states.
It also points to overlapping obligations under employment and anti-discrimination law. Employees experiencing mental illness may be protected from adverse action, may require reasonable workplace adjustments and may be entitled to procedural fairness during absence management.
To meet these obligations, the guide recommends consistent absence processes, well-trained managers, appropriate documentation, and clear return-to-work planning.
Absence as an early warning
According to the guide, many mental health-related absences begin as short-term or intermittent leave before escalating into prolonged absence, performance concerns or psychological injury claims.
It identifies several indicators employers can monitor, including repeated stress-related leave, increased unscheduled leave and absence patterns that follow organisational change.
Costs of psychological injury
Safe Work Australia data cited in the guide shows workers with psychological injury claims spend more than four times as long away from work as those with physical injuries, while compensation costs are more than three times higher.
The median cost of a psychological injury claim is approximately $67,000, the guide states, citing Safe Work Australia's Key Work Health and Safety Statistics Australia 2025.
A 2016 Safe Work Australia report, also cited in the guide, estimated that low levels of psychosocial safety climate cost Australian employers approximately $6 billion a year.
The guide concludes that organisations should use absence data to identify emerging risks, equip managers for wellbeing and return-to-work conversations and intervene before absence escalates.
