What is Psychosocial Safety, and Why Does it Matter for Your Business?

Simply put, it’s protecting the psychological health of your workers. It's the proactive management of workplace factors that could cause psychological harm such as stress, anxiety or depression. This is different from "psychological safety," which is about creating an environment where people feel safe to speak up without fear of being shamed or punished. Psychosocial safety is the broader, legally recognised term that encompasses the entire system of work and its potential impact on mental health.

Approximately two-thirds of workers around the world report experiencing daily negative emotions at work (Gallup, 2024).

When the human brain experiences frequent negative emotions, its health, function and performance is dramatically impeded. This profoundly impacts both the Individual and the Organisation.

In Australia we have seen a:

•       46% increase in Mental Health Claims (2019-2023)

•       39% increase in average days taken off work due to mental health hazards. (Allianz, 2024).

Nationally, the legislative framework is clear. Updated Work Health and Safety (WHS) laws across the country now explicitly require Persons Conducting a Business or Undertaking (PCBUs) to manage psychosocial risks just as they would physical risks. This means that factors like high job demands, poor support, bullying, and lack of control are all now considered hazards that must be identified, assessed, and controlled.

So, beyond the legal requirements, why does this matter for your business? The benefits extend far beyond mere compliance.

1. Improved Productivity and Reduced Absenteeism 

Work-related stress, burnout, and other psychological injuries are a leading cause of absenteeism in Australia. The average psychosocial injury claimant is off work 4 times the length of a physical injury claimant. That’s 175 days compared with 44 days--and a huge impact on worker productivity.

The average absence days lost per employee pa increased by 2.6 days since 2019.  That’s a significant loss of work given 58% of businesses surveyed say their absenteeism has increased (Direct Health Solutions 2023 Absence Management and Wellbeing Report).

A workplace with high psychosocial safety is a more productive workplace. When employees feel supported and safe, they are more engaged and motivated. They can focus on their work, rather than on navigating a toxic environment or managing overwhelming stress. This leads to better quality work, a stronger collective commitment to achieving business goals, and reduced need to escape and avoid work stressors. Conversely, a workplace with unresolved psychosocial hazards can lead to presenteeism—where employees are at work but not fully productive due to poor mental health—which is a hidden but significant cost to businesses.

2. Enhanced Corporate Social Responsibility and Employee Retention and Attraction 

Only 43% of workers reported they were "Living Well, Despite Struggle.” These statistics worsen amongst more socially marginalised workers. Only 23% of lower-income employees and 45% of higher-income employees feel their workplace is psychologically safe (AHRI Workplace Report, 2019-2022).

In today’s competitive job market, an organisation’s culture and its commitment to employee wellbeing are major drawcards. Businesses that are proactive about psychosocial safety demonstrate that they genuinely care for their people. This makes them more attractive to top talent and, critically, helps them retain their best employees. When staff feel valued and their mental health is a priority, they are far more likely to stay, reducing costly staff turnover and the loss of institutional knowledge.

Professor Ian Shochet, one of Australia’s leading mental health researchers, reports his overwhelming finding that the strongest predictor of mental health and wellbeing is connectedness and belonging (Shochet, 2016). Organisations that invest in their workplace’s psychological and psychosocial safety will reap returns in employee attraction, retention and commitment--and social responsibility brand reputation. These are tangible levers for corporate performance and growth.

3. Reduced Workers' Compensation Claims 

Across Australia, workplace relations case volume and intervention costs are increasing. Safe Work New South Wales identified a 53% increase in workplace psychological injury in 2024.  Physical injury claims were up 3.5% over the same period (Safe Work NSW, 2024).

The average claim cost ($85,000) to organisation is four times that of a physical injury claim ($21,000) (Safe Work Australia, 2024).

A proactive approach to managing psychosocial risks can substantially decrease the likelihood of workers' compensation claims for psychological injuries, which can be complex, costly and damaging to your business. Indeed, 59% of Australian organisations rank psychosocial safety risks as amongst their top 10 risks ( APS Future of Work, 2023).

Safe Work Australia authorities have made it clear they will increase workplace psychosocial safety investigations in the coming years. However,  29% of organisations do not report to their board on these risks. These risks are as high as 60% in social services.  To avoid the legal risks that can be associated with workplace health and safety claims, organisations need to demonstrate that they have been working actively across the organisation to prevent and reduce psychosocial risks (Ashurst Global survey, 2023).

4. Stronger Workforce Performance and Resilience 

Around 80% of staff say feeling psychologically safe at work is key to their performance (APS Future of Work, 2023; Ashurst Global survey, 2023). A psychologically safe workplace is better equipped to handle change and adversity, and foster innovation, problem-solving and growth outcomes.

This is particularly important in an era of rapid technological change, economic shifts, and a growing global demand on health and social services. Indeed, numerous health researchers have found that even mild patterns of unsafe workplace behaviour dramatically shrink cognitive function and increase team mistakes and avoidance (Riskin, 2018; Leonard, Graham & Bonacum, 2012).

When employees feel supported and have a strong sense of trust, safety and belonging in their workplace community, they are more resilient in the face of challenges. Studies show a high failure rate of projects, strategic initiatives or mergers—each over 50%--due to unsafe behaviour (Reisyan, 2017).

The movement to create socially safe workplaces is not just another workplace wellness fad; it's a fundamental shift in how we think about the function and performance of our workforce. For Australian businesses, it represents a clear path to not only meeting legal obligations but also building a more resilient, high-performance, people-centred organisation that furthers the purpose for which the organisation exists.