Psychosocial Risk - R U ready?

Australia is witnessing a transformative shift in workplace health and safety with new legislation elevating psychosocial risk management to the forefront of organisational responsibility. Leaders are now expected to champion psychological safety with the same rigour as physical safety. This evolution isn’t just regulatory—it’s cultural, ethical, and strategic.

R U ready?

The Legislative Landscape

Recent reforms across Australian states, particularly in New South Wales and Victoria, have elevated psychosocial risk to a legal priority. Victoria’s Occupational Health and Safety Regulations (effective December 2025) mandate employers to identify and manage risks such as bullying, harassment, aggression, and exposure to trauma. These changes align with ISO 45003:2021, the international standard for managing psychosocial risks within occupational health systems.

In NSW, reforms to the WHS Act now include new jurisdictions for workplace bullying and sexual harassment, reinforcing psychological safety as a core component of workplace wellbeing.

Why It Matters: The Cost of Inaction

The statistics are sobering:

• Mental health conditions are the most expensive and disruptive category of workplace injury in Australia.

• In 2020–21, the median compensation for serious mental health claims was $58,615, compared to $15,743 for other injuries.

• The median time lost was 34.2 working weeks, over four times longer than for physical injuries.

• In 2024–25, 17% of workplace injury claims in Victoria were for mental injuries.

These figures highlight the dual burden of financial cost and productivity loss, making psychosocial risk management not just a compliance issue, but a business imperative.

The Leadership Imperative

Effective psychosocial risk management starts at the top. Leaders are no longer just responsible for performance by objectives; they are now responsible for human performance measured by employee wellbeing, engagement, and psychological safety.  Studies continually show that leaders who can develop and motivate human performance create high performing cultures and greater productivity in organisations.

Key Leadership Mindsets for Psychosocial Safety

1. Self-Awareness

   When leaders understand their own responses to workplace stress, bias, and their leadership style are able to foster empathy and reduce the risk of inadvertently contributing to psychosocial harm.

2. Empathy and Relational Intelligence

   Building trust, listening actively, and responding to emotional cues are essential for creating psychologically safe teams.

3. Accountability and Courage

   Leaders who are willing and able to address difficult conversations, challenge toxic behaviours, and take ownership of team wellbeing are most effective at reducing the risks of inadvertently contributing to psychosocial harm.

6 Critical Skills for Managing Psychosocial Risk

1)       Identification and assessment of psychosocial hazards

2)       Conflict resolution and de-escalation

3)       Trauma-informed leadership

4)       Psychological first aid

5)       Job design and workload management

6)       Creating inclusive, respectful cultures

Coaching for Change

Coaching has emerging as a powerful tool to support leaders in navigating psychosocial risk. It helps managers:

• Recognise early warning signs of stress and burnout

• Build confidence in handling emotionally complex situations

• Develop preventative strategies for team wellbeing

• Align leadership behaviours with legal and ethical obligations

Leading with Purpose

Psychosocial risk management is not a box-ticking exercise, it’s a leadership challenge that demands responsibility, adaptability, and compassion. As Australia’s workplaces evolve, leaders must evolve too. By investing in leadership development and coaching, organisations can build cultures of safety, resilience, and trust: where people thrive, and performance follows.

To access leadership coaching and workshops for developing mindset and the 6 critical skills for managing psychosocial risk in the workplace please contact Paulsaunders@LNC.com.au