Mentally unsafe: Australian businesses are falling short on psychological hazard management

Australian workers are labouring under growing rates of mental ill-health. Better psychosocial risk management could be the answer.

The Black Dog Institute estimated that mental ill-health in the workplace is costing Australian businesses up to $39 billion every year, while the costs and frequency of mental health-related worker compensation claims are rising.

Understanding psychosocial risks and implementing effective management plans will play a major role in making businesses more psychologically healthy.

This was the subject of Ashurst’s inaugural global survey, Psychosocial and Psychological Risks in the Workplace 2023. Currently, the survey found, Australian businesses are falling short. Let’s explore the insights and ask what psychosocial leaders are getting right.

Psychosocial risk

A psychosocial risk is an “adverse workplace interaction or condition of work” that negatively impacts your health and/or wellbeing. A psychologically unhealthy workplace is one that falls short of any of the following three metrics:

• Promotes mental health and wellbeing.
• Protects mental health by reducing work-related risk factors.
• Works to prevent mental illness and injury from occurring.

“For too long, organisations have focused on the physical hazards in their workplaces without realising the psychological hazards until it is too late and one of their people sustains a psychological injury,” said Deloitte. “Understanding the psychosocial hazards in your workplace is a good place to start.”

Safe Work Australia (SWA) recognises 14 common workplace psychosocial hazards ranging from those associated with job demands, low control over your work, poor support, and lack of role clarity to poor organisational change management, inadequate reward and recognition pathways, and poor organisational justice.

Compared with physical injuries, workplace psychological injuries tend to have longer recovery times, higher costs, and require more time off work. Effective management of such risks not only protects workers but “also decreases the disruption associated with staff turnover and absenteeism, and may improve broader organisational performance and productivity,” explained SWA.

Workers’ compensation claims for mental health-related injuries are on the rise. Such claims cost an average of 17 weeks of missed work and a median total cost of $27,700 for serious claims – compared with $10,700 for serious physical claims.

The return on investment for psychosocial hazard management is clear. According to Deloitte, effective interventions could save Australian businesses $5.4 billion per annum, and each dollar spent in managing psychosocial hazards can return up to $4.70.

When it comes to psychosocial risk, “businesses are aware of the issues – but they are at very different stages, and some at quite early stages, of their journey in addressing psychological health as a ‘safety’ issue”, explained Ashurst.

Falling short

Against this backdrop, the current inadequacies in organisational approaches to psychosocial hazard management are concerning. For instance, the Ashurst report found:

• Nearly a third of respondents said their organisation did not report to senior management or a board on psychosocial risks.
• Over 50 per cent of respondents said their organisation had not taken any steps or that they were unsure whether their organisation had taken any steps to deal with the psychosocial risks associated with misconduct and safety investigations.
• Only 12 per cent of respondents use data analytics and technology to manage psychosocial risk.
• One-third (32 per cent) rely on workers to manage their own psychosocial risks in workplace investigations through resilience training.

Despite this, Australia did appear to perform considerably better than the UK, in which only 26 per cent of respondents saw psychological issues as a safety issue (as opposed to an HR issue) – compared with 80 per cent in Australia. Similarly, while 56 per cent of Australian respondents said their safety and HR teams worked together in managing psychosocial risks, only 21 per cent of UK respondents said the same.

Seeing psychosocial hazards as a safety issue is important, according to Ashurst. Collaboration between HR and WHS teams recognises the systemic causes of psychosocial hazards.

“In Australia, psychosocial risk has captured the attention of governments and regulators, with both safety regulators and discrimination agencies putting efforts into education and enforcement,” said Ashurst employment partner Trent Sebbens.

“To meet their duties, employers must be far more proactive about addressing psychosocial risk in workplace investigations and other traditional ‘HR’ areas and place a safety lens on those issues.”