Better management of work-related stress and employee absenteeism could save UK companies a total of £1.5bn a year out of the annual sickness bill of £10bn.
According to a joint employment risk survey by Marsh and Glasgow Caledonian University, major gaps exist in the way organisations handle employment risks.
The study found 70% of private sector and 80% of public sector company executives admitted they needed to do more in terms of employee risk management.
Stress among employees was the risk considered most likely to increase in the next few years, but most companies admitted they did not have adequate systems for measuring stress.
Only a quarter of organisations screened potential employees for mental health problems before taking them on, compared with 60% for physical health problems. Those surveyed said the introduction of formal policies and training for senior managers was the best way of lowering employment risks.
Marsh UK senior vice president John Humphrey said: "Employee stress and absenteeism are increasingly high-profile issues that managers need to address before problems arise."