There is currently insufficient research guiding policymakers concerning the influence of the presenting health condition of disability welfare recipients on both their receptivity to health intervention and potential eventual return to work. In the current study, all participants were unemployed and claiming disability welfare, due to either physical (N = 1,463) or mental health conditions (N = 2,352). Intervention consisted of a voluntary and pan‐health condition seven‐session group psycho‐educational programme. Groups aimed to increase health condition management skills to enable return to work and this research therefore provided evidence concerning the effectiveness of a ‘health‐first’ policy approach. Data was routinely gathered as a means of evaluating the effectiveness of the programme. Employment and psychological outcomes were longitudinally tracked at four time points: pre‐intervention, post‐intervention, at short‐term (three months) and long‐term (12–30 months) follow‐up. Results illustrate that at a group level participants with mental health conditions were more likely to return to work in both the short and long term and to achieve a greater degree of psychological change over the course of the intervention. At an individual level, higher rates of physical health participants met the criteria for psychological recovery during the intervention. The results of the study are discussed in terms of methodological concerns, how to maximize employment outcomes for welfare recipients who present with differing health conditions and the associated policy implications.