Impact of psychosocial hazards on the workplace: Actions employers can take to reduce the risks


  • In this article we explore how employers can identify psychosocial hazards in the workplace and how early intervention plays a big part in reducing the risks.

  • The benefits to employers and employees in decreasing psychosocial hazards.

  • Legislative obligations and reforms employers need to be aware of.

Psychosocial hazards

Most employers would be aware of the importance of maintaining a healthy and safe working environment for their workers.

However, what might be less understood are the intangible and more complex health and safety risks that can arise from workplace psychosocial hazards.

In brief, a psychosocial hazard is something that could lead to psychological harm, from very common workplace issues such as heavy workloads to more extreme hazards like harassment or overexposure to traumatic events or material.

Unlike physical safety hazards, psychosocial hazards can be more challenging to identify and mitigate. It’s important that executive teams have an open dialogue about mental health with people leaders in the workplace.

In a 2023 report commissioned by the New South Wales Government (opens a new window), the Centre for Work Health and Safety found that psychosocial harm in the workplace is on the rise.

People leaders should ensure that they implement policies and procedures that prevent these types of hazards from occurring, regularly review control measures to ensure they’re effective and make observations of their staff.

Additionally, early intervention is key and will go a long way in providing the needed support to an employee before the risks escalate.

If the risks are neglected, they can evolve into a more detrimental mental health issue such as anxiety or depression which can also manifest into physical issues or physical accidents, and injuries – putting other employees in harm’s way.

Four actions employers can take

1. Diagnostic tools and data

It’s important that organisations can show they have measures in place to care for their employees and address psychosocial hazards.

Through data and analysis, organisations can identify trends that indicate psychosocial hazards that require attention, from which a health and well-being strategy can be designed, implemented and measured.

Once in place, understanding the impact of the intervention program will help to better inform employers.

2. Open dialogue on psychosocial hazards

Employers should communicate openly about different types of psychosocial hazards, how to identify them and provide people leaders with the necessary tools to appropriately address them. This can help promote an accepting and understanding culture.

3. Invest in employee wellbeing programs

When it comes to psychosocial hazards, a well-being program might not be enough to combat some of the issues that can arise.

However, when executed effectively, such a program can play an important role in helping to maintain the well-being of the workforce.

Employers need to first approach well-being through a holistic lens, rather than seeing well-being as a list of services to offer.

4. Psychosocial hazard management plans

A consistent, coordinated, tailored and targeted approach to psychosocial risk management is critical in helping to safeguard employees' well-being and support them through any hardship.

Such an approach can also positively impact claims outcomes and help lead to ultimately lower premiums. According to Lockton claims data, on average, psychological claims cost 330% more than a physical claim.

Importance of early intervention

Early intervention is critical for positive outcomes for both the individual and the organisation. Some of the benefits of early intervention include:

  • A productive and supportive workplace.

  • Prevent or reduce long-term absence from the workplace. Research by WorkSafe (opens a new window) shows that the longer a person is absent from the workplace, the less likely they are to ever return to work. Employees absent for over 70 days typically have only a 35% chance of ever returning to work.

  • Increased probability of return to work.

  • Improved outcomes for the employee.

  • Promotion of health and wellbeing amongst employees.

Legislation reforms and obligations

On 19 May 2023, the Victorian Government advised of some significant legislative changes expected to come into effect in 2024. These changes will only apply to retrospectively received claims and include the following:

  • Workers suffering from stress and burnout will no longer be able to access weekly benefits from WorkCover – instead, they will be eligible for provisional payments for 13 weeks to cover medical treatment.

  • An update to the current test for workers receiving WorkCover weekly payments beyond two-and-a-half years, introducing a Whole Person Impairment test of greater than 20 percent.

  • Entitlements will still exist for employees who suffer from physical injuries and mental injuries arising from workplace harassment, bullying and traumatic events such as those experienced by frontline workers.

  • A legislated review will take place no earlier than three years after the changes come into effect.

The introduction of the above changes will increase the spotlight for employers as a PCBU (person conducting a business or undertaking).

A PCBU has a duty to ensure the health and safety of workers and other persons in the workplace. A PCBU must seek to eliminate risks to health and safety so far as reasonably practicable. If a PCBU cannot eliminate risk, they must minimise the risks so far as is reasonably practicable.

The way employers and managers/supervisors respond to a workplace incident is critical. It may not be easy to know what to say, or when to say something after an incident has occurred and taking such action can seem daunting.

Opening the lines of communication early after a workplace incident, whether psychological or physical, can make the return-to-work process easier for both managers or supervisors and the injured team member.

Keeping in touch with the injured or unwell workers can help them feel valued and supported. Ongoing communication during their recovery is also key in helping to achieve a fast and durable recovery.

Some simple steps, tips and tricks can include:

Step 1: Ask, “Are you ok?”

Step 2: Listen without judgement.

Step 3: Encourage action.

Step 4: Check in regularly.

Final takeaway: it’s a win-win

Proactive management of psychosocial hazards helps provide significant business benefits too. By reducing psychosocial hazards in the workplace, both employers and employees can reap the benefits, such as:

  • Greater business productivity – staff working in healthy environments that are inclusive, structured, safe, and offer fair working hours and reasonable work obligations, are more likely to be highly engaged, productive, and happy.

    These factors combined mean that staff are likely to be less stressed and better equipped to manage workplace distress.

    According to a study undertaken by Oxford University (opens a new window), "happy workers are 13% more productive".

    Additionally, researchers found that happy workers do not work more hours than their discontented colleagues – they are simply more productive during their time at work.

  • Reduced absenteeism and presenteeism – with heavy workloads, pressured working environments and increased demand from businesses, employees might feel compelled to continue working despite the psychosocial issues that face them in the workplace or take frequent absences to escape them.

    Workers in this position will be more likely to have their performance suffer as a result, and this can become a vicious cycle.

    Resulting absenteeism can also burden other staff with extra workloads, which can lead to further absences, and mental and physical illness/injury.

    By addressing these issues early on, not only can absenteeism and presenteeism be reduced, but workers’ compensation claims can be positively affected.

    Workplace absenteeism can also lead to a massive cost to Australian businesses in lost productivity. In fact, according to a study by Frost & Sullivan (opens a new window), absenteeism cost Australian businesses an eye-watering $24.2 billion in lost productivity last year.

  • Improved staff retention – job satisfaction plays a huge role in staff retention.
    There are varying factors that influence job satisfaction, all of which are unique to an individual.

However, workers in a healthy working environment, where they feel valued, safe and where their employer supports them and meets their needs, are more likely to have job satisfaction.