The business case for assessing and addressing psychosocial infrastructure
You have a workforce that seems to be travelling fine, an Employee Assistance Program (EAP), training, return to work programs, health and safety and dispute resolution policies and HR team working away. Also, you and other ambitious folks had to put in the extra hours and deal with intense demands – it’s just part of the job.
Why then do you need to further concern yourself with psychosocial infrastructure? There isn’t really anything wrong, right? Even if there is, is it really that pressing? Isn’t it more of a nice to have?
The short answer is that establishing and maintaining mature, sustainable and compliant psychosocial infrastructure is a complex and evolving process that spans across an entire organisation. Failure to do so can have negative impacts across the board, and potentially result in significant legal and financial cost.
Firstly, what is psychosocial infrastructure?
Broadly speaking, psychosocial infrastructure refers to the ways organisations identify and address psychosocial hazards and risk. It includes things like feedback, surveys, analysis of existing data (rosters, timesheets, incident reports etc.), policies, EAPs, training and wider measures e.g. refusing to serve customers who have a high risk of being violent or aggressive.
Psychosocial hazards include high and/or low job demands, low job control, poor support, low role clarity, poor organisational change management, low reward and recognition, poor organisational justice, poor workplace relationships, remote or isolated work, poor environmental conditions, traumatic events, violence and aggression, bullying and harassment, including sexual harassment.
You must comply with a complex legal landscape
Obligations typically associated with psychosocial hazards are found in legislation, regulations and codes of practice regarding work health and safety (WHS). At a high level, employers have duties to address psychosocial hazards at work by eliminating or reducing them so far as reasonably practicable and consult with employees and other stakeholders about hazards. Precise obligations are nuanced across Australian jurisdictions so it is important to grasp your specific duties.
There are also obligations in other areas, such as the positive duty on employers to prevent workplace sexual harassment, sex discrimination and victimisation under the Sex Discrimination Act 1984 (Cth).
Obligations can apply to both businesses and individuals, and penalties for breach can result in:
- Significant financial penalties
- Imprisonment
- Workers’ compensation claims
- Issuing of various compliance notices e.g. improvement notices or prohibition notices
- Revocation, suspension or cancellation of authorisations or enforceable undertakings
- Investigations
- Litigation
- Fair Work Commission applications e.g. stop bullying order, stop sexual harassment order
- Claims for breach of employment contract, if the alleged conduct is such that it could be considered a party has acted in a way inconsistent with contractual obligations or if a relevant policy governing health and safety has been incorporated as a contractual term.
Poor psychosocial infrastructure may have flow on effects to the industrial relations space. For example, it may be argued:
Unfair dismissal:
Failure to address and manage psychosocial hazards during a performance management process made or contributed to a dismissal being harsh, unjust or unreasonable.
Constructive dismissal:
Psychosocial hazards were so poorly managed by an employer that they had no choice other than to resign.
Current psychosocial infrastructure may not be enough in and of itself to achieve compliance
WHS acts, regulations and codes of practice contain requirements regarding the identification, assessment and control of psychosocial hazards. In some jurisdictions, the hierarchy of control is a legislative requirement or obligation. In others, it is noted in guidance material e.g. code of practice that can be relied on to demonstrate compliance with duties and obligations.
Practically, this means in all jurisdictions typical lower order administrative control measures like EAPs, dispute procedures, policies, training and the like won’t be enough to meet the relevant duties, unless higher order controls like job design and work control have been properly assessed and determined as not reasonably practicable.
Health and safety regulators are set to ramp up enforcement
Governments and regulators are zeroing in even further on psychosocial hazard management, as evidenced by a growing amount of guidance material and proposed legislative changes (see section 5 below).
For example, the New South Wales 2024 – 2026 strategy for psychological health and safety is heavily focused on compliance. There will be a significant increase in regulatory action, particularly across high risk and large businesses and government agencies.
It is anticipated this strategy will inform the approach of many other jurisdictions moving forward.
Further changes are coming to the legal landscape
National notification requirements
Nationally, we are set to see changes to the model Work Health and Safety Act that will address gaps in notification requirements regarding psychosocial hazards.
Though the precise amendments are yet to be released, based on the Consultation Paper – WHS Incident Notification it is anticipated changes will align with broader mandates across the psychosocial space that require a proactive approach.
Victorian regulations
The Victorian government is considering options for development of the Occupational Health and Safety Amendment (Psychological Health) Regulations (Proposed Regulations). If accepted in their current state, these will require:
Requirement to identify:
Identification of psychosocial hazards so far as is reasonably practicable.
Risk management:
Elimination of any risk associated with a psychosocial hazard so far as is reasonably practicable, and where not reasonably practicable the employer should reduce the risk in accordance with the order set out in the Proposed Regulations.
Written prevention plans:
Development and implementation of a written prevention plan where employers have identified one of 5 key psychosocial hazards – aggression or violence, bullying, exposure to traumatic content or events, high job demands and sexual harassment. The plan must identify the risk, measures to control the risk and includes a plan for implementation of any identified measures.
Duty to report:
Employers who have a threshold number of employees must periodically report to WorkSafe about the number of complaints received about bullying, sexual harassment and occupational violence and aggression. The required information includes the type of psychosocial hazard, gender of persons involved and description of workplace relationship between persons involved in the complaint.
You may not be able to rely on insurance or indemnities for WHS penalties
In some jurisdictions, broadly it is prohibited to provide or receive the benefit of insurance or indemnification for any penalty imposed under WHS laws. Any such arrangements will be considered void, and it is an offence to enter, provide or take benefit from them.
Prohibitions of this nature have been adopted in Victoria, New South Wales, Western Australia and Queensland.
Financial cost of lost productivity
It is estimated that the financial cost of lost productivity because of mental illness is $39 billion a year[1].
Mental health conditions are substantial contributors to lost productivity at work through factors like burnout, job performance, sick leave and absenteeism, presenteeism and lower participation rates.
Absenteeism:
People with ill mental health take an average of 10 – 12 days per year off due to psychological stress[2]. The annual cost of absenteeism when people are away due to mental ill health is estimated at $825 per employee[3].
Burnout:
Burnout can lead to a reduction in both effectiveness and quality of work, with a study finding that 57% of people who were burned out reported their productivity falling in the past 12 months[4].
Presenteeism:
A significant proportion of the economic cost of lost productivity can be attributed to presenteeism (being at work but unable to function at full capacity because of a mental health issue). It is estimated the average yearly cost of presenteeism is $1,680 per employee[5].
Lower participation:
Over a year, the impact of poor mental health can reduce productivity for up to 107 work days (average of 8.2 days every 4 weeks) and result in up to 50 days absent from work (average of 3.8 days every 4 weeks) for every employee experiencing poor mental health[6]
Financial cost of workers compensation claims
Workers’ compensation claims for mental health cost more time and money, have poorer return to work outcomes and are growing fast.
In 2022-23 mental health conditions accounted for 10.5% of all serious workers compensation claims. This is a 19.2% increase on 2021 – 2022, and a 97.3% increase compared with 10 years ago[7]. In 2021-22:
Time lost:
Time lost for mental health conditions more than five times the median time lost for serious claims for all other injuries and diseases – 37 working weeks compared with 7.2[8].
Compensation:
Compensation paid for mental health conditions serious claims is nearly four times higher than that paid for all serious claims – $65,400 compared with $14,400[9].
Return to work:
Mental health condition claims have poorer return to work outcomes – 79.1% compared with 91.6% for all injuries[10].
Financial cost of poor retention
One in ten workers are planning to leave their employer within the next year[11].
Failure to retain workers comes at substantial direct and indirect cost. Significant time and money can be spent hiring new people, whether it be through your internal team or using a recruiter. Then comes the cost and lost productivity associated with onboarding and training new employees.
Financial cost of negative reputation and brand value
Awareness and literacy around psychosocial risks and hazards among the working population and Australians in general is at an all-time high and expected to increase. Further, the emphasis on compliance in the psychosocial hazard space means that employers are vulnerable to significant scrutiny by the media.
Organisations that don’t proactively implement and manage their psychosocial infrastructure may therefore face difficulty in sourcing and retaining talent and managing the financial ramifications that often flow from reputational impact.
There can be a substantial economic return on investment in mental health
For every $1 spent to improve mental health at work, organisations can achieve returns of up to $15. This is through the follow-on effects of increased productivity and retention, and reduction in work injury claims[12].
Where to from here?
Information around psychosocial hazards is overwhelming and it can be difficult to know where to start.
It is no longer enough to have psychosocial infrastructure that centres on a reactive, individualistic response. A strategic, shared and systematic approach is required to meet obligations and mitigate risk.
The first step is to assess where you are. You don’t need to wipe the slate clean and get rid of all existing infrastructure; rather it is about identifying and addressing the gaps. This can be achieved through things like psychosocial hazard and risk assessments, cultural surveys, desktop reviews of existing data and focus groups.
Administrative controls like employee training, return to work programs, health and safety policies and dispute resolution procedures need to be built on. Once you know the lay of the land, you can then develop strategies and systems that will embed effective psychosocial hazard controls within your organisation.
Connect with us
Mapien’s interdisciplinary team brings workplace health and safety, industrial relations, human resources and organisational psychology expertise into a suite of both proactive and reactive services designed to enable organisations to strengthen psychological health and safety.
Get in touch with our experts at hello@mapien.com.au to start assessing and designing your psychosocial infrastructure.
This article is intended to provide commentary and general information. It does not constitute and should not be relied upon as legal advice.
[1] Productivity Commission, Mental health, Report no. 95. Chapter 3: The cost of mental ill-health and suicide. 2020
[2] Productivity Commission, Mental health, Report no. 95.
[3] UTS CHERE and University of Sydney, 2017, Mentally healthy workplaces: a return on investment study.
[4] Infinite Potential. (2023). The State of Workplace Burnout 2023.
[5] UTS CHERE and University of Sydney, 2017, Mentally healthy workplaces: a return on investment study.
[6] Indicators of a Thriving Workplace 2023 Key Insights, SuperFriend
[7] Key Work Health and Safety Statistics Australia 2024, Safe Work Australia.
[8] Key Work Health and Safety Statistics Australia 2024, Safe Work Australia.
[9] Key Work Health and Safety Statistics Australia 2024, Safe Work Australia.
[10] Psychological health and safety in the workplace, SafeWork Australia, February 2024.
[11] Indicators of a Thriving Workplace 2023 Key Insights, SuperFriend.
[12] Mentally healthy workplaces, Return to Work SA.