The Most Overlooked Mental Health Risk in the Workplace
In today’s business landscape in Europe, marked by economic uncertainty, restructuring, and rising performance pressure, companies are being forced to do more with less. While much attention is placed on cost control and efficiency, a critical performance driver is often overlooked: the mental health of the workforce.
For many companies, the focus tends to be on two groups of employees: those who are functioning well and those who are absent or struggling. However, the reality is far more nuanced. Mental health is not a fixed state; it evolves along a continuum, with many employees falling somewhere in between.
Recent nilo data from more than 500 customers and thousands of users shows that:
- 19% of employees are in the green zone
- 66% are in the yellow zone
- 15% are in the red zone
The Mental Health Spectrum: More Nuanced Than it Seems
Employees in the green zone report stable well-being, emotional balance, and constructive coping strategies. They are able to manage pressure and maintain productivity without significant psychological strain.
At the other end of the spectrum, employees in the red zone show elevated stress symptoms, depressive episodes, or early burnout signals. Without timely support, this group faces an increased risk of absenteeism, long-term leave or turnover.
However, the most relevant finding lies in the middle: Two-thirds of employees are in the yellow zone.
What this means: They are functioning and delivering results. But: they are not fully resilient either. Being in the yellow zone can look different for everyone: Some might experience relationship issues that decrease their focus at work, some might grieve a loved one and struggle unleashing their creativity, and others might have trouble sleeping which makes them physically but not mentally present in the office.
The Performance Problem Most Leaders Don’t See Coming
From a company perspective, this is where most of the overall potential is wasted. Employees that are functioning, but not at their best, are significantly less productive, creative, innovative and passionate than they could be.
The yellow zone represents the most underestimated risk factor for organizational stability. Because the strain is gradual and often invisible, it can remain unaddressed until performance metrics begin to shift – when employees move from yellow to red. Therefore, focusing on employees in the yellow zone through prevention and care is one of the most important levers in securing your company’s productivity and wellbeing.
The Real Cost of Inaction: Mental Health, Performance, & Risk
Mental health is not something employees leave at the doorstep before entering the office. Rather, it directly shapes how they think, decide, and perform at work. For organizations, this means that mental health is not just a well-being topic, but a core performance driver.
One of the most important dynamics to understand is where costs actually originate. Contrary to common assumptions, the biggest impact does not come from employees who are absent, but from those who are still showing up to work, yet not able to perform at their full capacity.
This is where the concept of a mental health continuum becomes critical.
nilo data shows that during the last working week:
Employees in the yellow zone report three times as many unproductive days as employees in the green zone (1.8 vs. 0.6) and four times as many absent days (0.8 vs. 0.2). In the red zone, the burden increases even further: unproductive days rise by another 61%, while absent days increase by 113% compared to the yellow zone.
How This Data Translates into Real Cost
These differences are not just marginal, they compound into significant financial impact.
To understand the scale, it is important to look at where these costs actually arise. Poor mental health impacts organizations across three main dimensions: presenteeism, absenteeism, and turnover:
- Presenteeism: Employees that are struggling with stress or mental health challenges often experience reduced concentration, slower decision-making, and lower creative output.
- Absenteeism: As mental strain increases, employees are more likely to take mental health–related sick leave.
- Turnover and replacement costs: When employees leave due to prolonged strain or burnout, companies face additional expenses through recruiting, onboarding, and lost institutional knowledge.
Importantly, presenteeism is often the largest hidden cost (typically around twice as high as absenteeism) as employees remain at work but operate below their full capacity. At the same time, turnover represents the most significant cost per individual case, with replacement costs often ranging between 1.5x-2.5x annual salary per employee.
To illustrate the magnitude, consider a company with 500 employees and an average salary of €55,000. This corresponds to a daily cost of €229 per employee (assuming ~240 working days).
Based on typical benchmarks, employees experience on average 3.74 mental health-related absence days per year. Across the workforce, this results in:
→ 500 × 3.74 × €229 ≈ €428,200 in annual absenteeism costs
Presenteeism typically accounts for roughly twice that amount, as reduced performance affects a much larger share of employees:
→ ≈€856,400 in productivity losses
The largest cost driver, however, is turnover. With an assumed annual attrition rate of 7% (35 employees) and replacement costs of 1.5x salary, this results in:
→ 35 × 1.5 × €55,000 ≈ €2.9 million
In total, poor mental health leads to ~€4.1 million in annual costs – the majority of which remains largely invisible in traditional HR metrics.
What makes this particularly critical is that these costs develop gradually and remain largely invisible in traditional HR metrics. This is where prevention becomes a strategic lever.
The Business Case for Prevention
This dynamic makes prevention one of the most powerful levers for organizations. When companies focus only on employees already in severe distress, they miss the opportunity to stabilize the much larger group whose well-being is still recoverable.
This is why early intervention is so critical. Studies consistently show that investing in preventive mental health support has a positive return on investment, with some analyses indicating returns of up to five times the initial investment through improved productivity, lower absence rates, and stronger employee retention.
For organizations, the message is clear: the cost of inaction is not theoretical. It is already present in everyday productivity losses across the workforce, especially among employees who are still functioning but no longer operating at their full potential.
How HR Can Turn Insight into Action:
- Stabilizing employees in the yellow zone: Because most employees fall into the yellow zone, this is where the greatest impact can be achieved. These employees are still functioning, but often already experience reduced focus, energy levels, and resilience. Providing the right support at this stage can stabilize their well-being and even help them move into the green zone, improving productivity, engagement, and long-term performance.
- Supporting employees in the red zone: For employees already experiencing acute stress, timely intervention is essential. Targeted mental health support can help stabilize individuals and move them from a high-risk state into a more manageable one, reducing the likelihood of absence, burnout, or turnover.
- Moving more employees into the green zone: Beyond stabilization, organizations have the opportunity to actively improve workforce performance. Supporting employees in building resilience, focus, and emotional balance can help shift more individuals into the green zone and thereby unlocking higher productivity, engagement, and long-term performance.
Real Impact: What Effective Support Looks Like
The good news is that mental health can improve with the right, structured support, and this is where nilo comes in. Through personalized, evidence-based interventions, we help employees manage and improve their mental health, preventing issues from escalating.
Here’s what we’ve observed:
- Among employees whose mental health was in the red zone when they began using nilo (the highest level of distress), 59% made a positive shift, moving into the yellow or green zone after engaging with nilo’s support. This shows that even individuals with more severe symptoms can experience meaningful improvement with early intervention.
- Among employees who were already in the yellow zone, the results were even more promising: 96% either stabilized or improved further into the green zone after using nilo. This demonstrates that for employees who are functioning but not thriving, structured support can help them move into a higher state of well-being.
The Right Support Can Change the Outcome
HR leaders should focus on the effectiveness of early, personalized support to stabilize employees before their mental health declines further. Even employees with acute symptoms can show meaningful improvement, reinforcing the value of offering timely and structured support, such as:
- Access to mental health resources: Providing personalized care to address specific employee needs.
- Flexible interventions: Tailoring solutions to individual stressors or challenges, rather than using a one-size-fits-all approach.
This approach not only improves employee well-being but also boosts productivity, engagement, and retention, making it an essential strategy for long-term success. HR should prioritize interventions that are evidence-based and customized to individual needs for maximum impact.
Industry Snapshot: Retail
The numbers presented above are averages. They are dynamic and dependent on many factors. In today’s organizational landscape, we see differences in mental health states and mental health needs dependent on the type of work that employees engage in and size and structure of organizations they work at. To illustrate how these dynamics play out in practice, it is useful to examine mental health patterns within specific industries.
As we have shown above, the overall distribution in our sample of employees across the three different zones of mental health follows a 19/66/15 pattern at this point in time. Let’s take a look at the retail industry as an example and explore the numbers that we can find there.
Retail is a particularly demanding example: employees are often in customer-facing roles, work under constant time pressure, and experience both physical and emotional strain. Combined with high turnover and limited access to health resources in many organizations, this creates structurally higher levels of mental stress. This is directly reflected in the distribution of mental health states.
In the retail sector:
With a registration rate of 37%, engagement levels indicate both high need and strong relevance of mental health support in this segment.
What This Means for HR & Leaders
For HR teams, it’s critical to tailor mental health initiatives to address the unique stressors employees face. By understanding the unique mental health needs of employees in specific industries, HR teams can provide more effective, personalized care. This tailored approach ensures that employees get the support they need to remain engaged and productive.
Why This Matters Now
In 2026, workplace mental health challenges are increasingly characterized by gradual destabilization rather than sudden breakdowns. Many organizations only take action when significant issues surface in the red zone, but by then, the cost of inaction has already compounded.
The real cost of inaction is far greater than many realize. When companies wait for visible symptoms like absenteeism or disengagement to trigger intervention, they end up paying twice: once for handling the acute issue and once for helping employees bounce back.
Early intervention, however, is more efficient. Focusing on prevention can stop issues before they reach the red zone, preventing long-term costs.
It’s crucial to act now, and there are several pathways to get started:
- Create awareness: Help employees and leaders understand the importance of mental health and the early signs of distress.
- Train employees and managers: Equip everyone with the tools to recognize, address, and support mental health needs.
- Provide resources: Make accessible mental health resources available to employees at all levels.
- Partner with experts: Collaborate with partners like nilo to deliver personalized and proactive mental health support.
By taking these steps now, organizations can avoid paying the high price of delayed action and build a resilient, healthy workforce that can thrive in the long term.
