Why psychosocial risk management should be on your radar

The regulatory landscape has shifted dramatically in recent years, with organisations now expected to take a more proactive approach to managing psychosocial safety in the workplace.

At the same time, mental-health related workers’ compensation claims are rising sharply. Safe Work Australia reports a 161% increase in serious mental-health related claims between 2014 and 2024.¹ This type of claim is the most costly, often involving higher compensation and more time away from work.

The leadership mandate has never been clearer, with the benefits of effective psychosocial hazard management extending beyond individual safety to organisational productivity and performance.

What are psychosocial hazards?

Psychosocial hazards are comprised of anything in the design or management of work, or work environment, that could cause psychological harm.

When exposure to these hazards is frequent, prolonged, or severe, it can lead to psychological harm and health conditions such as depression and anxiety, and even physical issues like cardiovascular disorders.

Common examples include:

• high job demands,
• low job control,
• workplace conflict, and
• poor organisational change management.

In reality, these risks rarely appear in isolation. Workers are often exposed to a combination of psychosocial hazards at once.

Proactive risk management is mandatory

Workplace health and safety laws across Australia require organisations to proactively manage psychosocial hazards as part of their broader duty to ensure the health and safety of workers.

In practice, this involves implementing a risk management process to identify hazards, assess risks, and implement and review controls.

The duty is always to eliminate the hazard where possible. If that’s not reasonably practicable, organisations must implement other control measures. What is ‘reasonable’ will depend on factors like the size of the organisation, resources available and other contextual factors.

Meeting these obligations requires more than policy. It calls for the right safety systems and processes, accountabilities, training and reporting.

Compliance starts at the top

Safety culture is shaped by leadership. It cascades from governance and management systems to the front line, which makes leadership buy-in essential.

Leaders who are considered ‘officers’, including directors and senior executives, also have personal legal obligations. They must take reasonable steps to ensure the organisation complies with its work, health and safety (WHS) duties.

This typically includes:

• keeping their WHS knowledge up to date,
• having an understanding of operations and risks, and
• ensuring the proper resources, systems and processes are in place, used and monitored.

Like the duty of the organisation, the officer’s duty cannot be delegated or transferred to another person. Leaders need to take an active role in overseeing psychosocial risk management.

Redesigning risk management

In an environment of constant change, organisations and leaders must be alert to new and emerging hazards, which must be identified and addressed on an ongoing basis. We are already seeing significant workforce impacts due to increasing economic pressure and technological advancements.

Leaders must take an active role by accessing and engaging with information about organisational hazards and risk management, ensuring adequate governance and reporting mechanisms are in place, and ensuring organisations are operating with adequate and effective resources and capability.

Board-level red flags may include:

• regulatory attention,
• limited reporting on psychosocial risk,
• no risk assessment or safety management plan,
• infrequent review of controls, and
• limited training on psychological health and safety.

Organisations that take psychosocial risk seriously are better positioned to support their people and sustain performance over time.

The real question for leaders is not whether these risks exist, but whether their organisation is equipped to manage them effectively.

How we can help

Hall & Wilcox helps organisations and leaders to manage their obligations and drive meaningful outcomes. For further information visit the Hall & Wilcox website.

¹ Safe Work Australia, ‘Key Work Health and Safety Statistics Australia 2025’ (16 October 2025) https://data.safeworkaustralia.gov.au/insights/key-whs-statistics-australia/latest-release