Psychosocial risk: Why workplaces need to pay attention

Do you know what psychosocial hazards are and why workplaces must start paying attention to them?

If you’re part of an Australian company, this question is especially pertinent. As of April 1, 2023, Australia has amended its Work Health and Safety (WHS) laws to include regulations on managing psychosocial risks and hazards at work. In other words, organisations are now legally obligated to manage the risk of psychosocial hazards in the workplace.

We recommend you consult your legal team regarding your compliance with the new legislation and specifics relating to your workplace/circumstances. However, to help organisations understand and respond to the implications of these new laws, we put together this three-part blog series taking on the topic of psychosocial hazards. In this first part, we explain:

• What a psychosocial hazard is
• How the new WHS regulations may affect your company
• Why leaders should care about mitigating psychosocial hazards.

What is a psychosocial hazard?

According to Comcare, psychosocial hazards are “aspects of work that have the potential to cause psychological or physical harm.”

Every workplace likely has a unique set of potential psychosocial hazards they should keep an eye on, but common hazards, as identified by Safe Work Australia, include:

• Excessive job demands
• Low job control
• Poor support
• Lack of role clarity
• Poor organisational change management
• Inadequate reward and recognition
• Poor organisational justice
• Traumatic events or material
• Remote or isolated work
• Poor physical environment
• Violence and aggression
• Bullying
• Harassment, including sexual harassment, and
• Conflict or poor workplace relationships and interactions.

A single psychosocial hazard may not be a risk on its own, but it’s important to note that psychosocial hazards rarely occur in isolation. When enough hazards occur simultaneously, the risk of injury increases substantially. Thus, mitigating psychosocial risk – the likelihood of harm based on exposure to hazard(s) – requires organisations to identify and understand the most prominent psychosocial hazards in their specific workplace.

How do the new regulations affect your company?

Companies operating in Australia now have a legal duty to manage the risk of psychosocial hazards in their workplace. This includes any hazards from third parties' harmful acts, including clients, visitors, and customers.

These regulations apply to all work and workplaces covered by the WHS Act, and cover employers, workers, contractors, subcontractors, self-employed individuals, apprentices and trainees, work experience students, and volunteers. Moreover, they also apply to other people in the workplace, such as customers, visitors, and other third parties.

As with any other obligation or duty outlined in the WHS Act, organisations will be penalised for failing to manage psychosocial hazards. The penalty may include prosecution and fines, depending on the degree of seriousness or liability involved.

How will this change the way your company operates?

To meet this new obligation, organisations are expected to eliminate or minimize psychosocial risks as much as possible. You can do this by applying the same risk management process you would use to manage physical risks:

1. Identify hazards - Find out what can cause harm at your company
2. Assess risks - Understand how the hazard can cause harm, how serious the harm could be, and how likely the harm is to happen.
3. Control risks - Strive to eliminate or mitigate the risk and ensure the control measures remain effective over time.
4. Review control measures - Check in to ensure control measures work as planned. Make changes as necessary.

What is the impact of psychosocial risk?

Beyond avoiding litigation and fines for breaching health and safety laws, why should companies – including those outside of Australia – care about psychosocial hazards and risks?

Put simply, mitigating psychosocial risks is necessary for building an engaged, productive, and inclusive workplace. This is because exposure to psychosocial hazards is associated with stress, burnout, anxiety, depression, or generally poor mental health.

By prioritising the management of psychosocial hazards, organisations can:

• Increase employee productivity. Employees facing psychosocial hazards are often less productive than their peers – a ComPsych survey found that 37% of people say they lose an hour or more a day in productivity due to work-related stress.
• Decrease absenteeism. Research published by Beyond Blue in Australia highlighted that one in five Australians (21%) had taken time off work in the past 12 months because they felt stressed, anxious, depressed, or mentally unhealthy. This statistic more than doubles for those employees who consider their workplace mentally unhealthy (46%).
• Improve physical wellness of employees. Exposure to psychosocial hazards has been correlated with the development of unhealthy behaviours that affect employees’ physical health, such as physical inactivity, excessive drug or alcohol consumption, and poor sleep quality. Mitigating psychosocial hazards can help improve the physical health of your employees, which can lead to significant cost savings and improved productivity. As a matter of fact, a study by the Integrated Benefits Institute found that ill-health-related lost productivity costs U.S. employers $530 billion.
• Boost employee engagement. Removing or reducing the work-related stressors associated with psychosocial hazards shows employees that the organisation prioritises their wellbeing at work, which in turn improves employee engagement.
• Reduce turnover. Whether it’s because of unsustainable workload, negative workplace interactions, or inadequate levels of recognition, employees that experience psychosocial hazards often burn out – and then leave. This is supported by data, with one study finding that 46% of HR leaders believe burnout is responsible for up to half of annual turnover.

As you can see, there are some very good reasons to care about managing psychosocial hazards, even if there’s no legal requirement. It’s not just the right thing to do for your employees’ wellbeing – it’s the smart thing to do as a business.

Mitigate psychosocial risk in your workplace

Psychosocial hazards can have a profoundly negative effect on your people and your organisation – which is one key reason Australia has decided to write into law the obligation of employers to protect their people from those hazards.

Even in countries with no legal duty to manage psychosocial hazards, mitigating the risk of these hazards can drive tremendous benefits to your organisation in the form of increased productivity and engagement, and decreased absenteeism and turnover. A key part of successfully mitigating psychosocial risk is ensuring that the day-to-day employee experience supports not just the success, but the wellbeing of every employee.

Over the next few weeks, we will be publishing two other pieces on the topic:

• Best practices for measuring psychosocial hazards and associated risk factors
• Actionable tips for monitoring and controlling psychosocial hazards to reduce risk at your workplace

Advance your approach to psychosocial health

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