Psychosocial Hazards In The Workplace: Why They Are Important Considerations For Businesses

In part 1 of this series, we discussed the introduction of psychosocial hazards into the WHS Act 2011, which came into effect on April 1, 2023. The Act was amended to provide further information to organisations on how to identify psychosocial risks associated with psychological injury, and the appropriate control measures to mitigate those risks¹, along with guidelines and frameworks for action. 

A quick recap on what the psychosocial hazards are:

“Psychosocial hazards refer to factors that can influence a worker’s psychological health and safety.^”

They are hazards that:

• arise from or in relation to:
  • the design or management of work
  • the working environment
  • workplace interactions or behaviours; and
• may cause psychological and physical harm.²

Psychosocial hazards relating to work design and demands are some of the most common in the workplace, that can cause stress and psychological harm if not properly managed. To effectively assess the risk that these psychosocial hazards present, it is important to consider the following:

• the duration, frequency and severity of exposure to the psychosocial hazards;
• how the psychosocial hazards may combine or interact; and
• the design, and systems, of work including how work is managed, organized and supported.

Why it is important to consider psychosocial hazards in your organisation

1. Economic, productivity and people-cost

Chronic stress resulting from unmanaged psychosocial hazards can have significant impacts on both the employee and the organization. For employees, chronic stress can lead to burnout, fatigue, depression, anxiety, poor sleep, emotional dysregulation, illness and chronic disease,^3,4 all of which may result in increased absenteeism and presenteeism, lost productivity, disengagement, attrition, and decreased performance.

For organisations, the economic costs are significant. Untreated mental health conditions are estimated to cost Australian companies $10.9 billion per year, including $4.7 billion in absenteeism, $6.1 billion in presenteeism, and $146 million in compensation claims.⁵

Additionally, research commissioned by Medibank examining the economic impacts of work-related stress specifically, found that absenteeism and presenteeism cost the Australian economy $14.81 billion per year, and directly cost employers $10.1 billion per year.⁶

Work-related stress also resulted in a 1.36% labour productivity loss, and 3.2 days lost per employee per year⁶, and led to increases in human error, accidents, higher turnover, and poor performance.⁴

If you require further convincing of the significance of psychosocial hazards in the workplace and why they need to be addressed, Comcare claims data from 2021-22⁴ showed that:

• 24% of accepted psychological claims were due to work pressures
• 31% of costs were associated with psychological injury claims
• 25 weeks off work was required on average for psychological injury claims

Given the evidence demonstrating the impact of psychosocial hazards in the workplace, the business case is clear:

“Taking proactive measures to reduce risk of psychosocial hazards results in greater employee wellbeing, stable productivity, and a reduction in economic loss in organisations.”

2. Psychosocial hazards leading to burnout

In part 1, I highlighted the crossover between psychosocial hazards (associated with work design and demands) and causes of burnout – both of which are linked to unmanaged chronic stress.

The economic and people-cost of burnout compounds that of the psychosocial hazards discussed previously. Burnout in the workplace has risen year-on-year since 2020 (29.6% to 38.1% in 2022)⁹, and has affected employees and workplaces in the following ways^8-10:

• reduced productivity in 73% of burnt out employees
• reduced quality of work in 56% of burnt out employees
• reduced overall wellbeing in burnt out employees (a difference of 61.8% between burnt out and non-burnt out employees)
• increased the likelihood of taking a sick day by 63%
• increased the likelihood of leaving their current employer by 23%
• was the key reason for leaving in 40% of job-leavers in 2021
• cost organisations $322 billion globally in turnover and lost productivity
• cost organisations 15-20% of total payroll in voluntary turnover

On the other hand, cultivating a healthy and thriving workplace with healthy employees can boost your business, as non-burnt out workers reported⁹:

• 49% increase in engagement
• feeling 50% more psychologically safe
• feeling 30% higher sense of belonging
• feeling 217% more supported by their organisation

Creating a workplace culture that actively engages employees and supports their health and wellbeing also offers a competitive advantage, by retaining talent in a tight labour market, reducing turnover costs, and improving productivity and performance.

In the 3^rd instalment of this series, we will discuss how to identify the signs and ways to reduce the risk of psychosocial hazards in your organisation.

References:

1. Australian Government. Work Health and Safety Amendment (Managing Psychosocial Risk and Other Measures) Regulations 2022 – Explanatory Statement. https://www.legislation.gov.au/Series/C2011A00137.
2. Comcare. People at Work. www.PeopleatWork.gov.au
3. American Psychological Association. Stress effects on the body. November 2018. https://www.apa.org/topics/stress/body
4. Comcare. Work demands: Practical guidance for employers. https://www.comcare.gov.au/about/forms-publications/documents/publications/safety/WD-employers.pdf
5. Australian Government. Job Access. Mental health inaction costing business $11bn annually. November 2022. https://www.jobaccess.gov.au/news-media/mental-health-inaction-costing-businesses-11bn-annually
6. Medibank Private. The cost of workplace stress in Australia. August 2008. https://www.medibank.com.au/content/dam/client/documents/pdfs/The-Cost-of-Workplace-Stress.pdf
7. World Health Organisation. Burnout an occupational phenomenon: International Classification of Diseases. 2019. https://www.who.int/news/item/28-05-2019-burn-out-an-occupational-phenomenon-international-classification-of-diseases
8. Infinite Potential. 2021 Global Workplace Burnout Study. https://infinite-potential.com.au/2021-burnout-report
9. Infinite Potential. 2022. State of Global Workplace Burnout Report. https://infinite-potential.com.au/2022-burnout-study
10. Gallup. Employee wellbeing is key for workplace productivity. 2022. https://www.gallup.com/workplace/215924/well-being.aspx

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