Mar 27, 2025 • 6 min read
The Hidden Cost of Psychosocial Hazards at Work
Psychological injuries are on the rise. Learn practical solutions for managing psychosocial risks and protecting employee wellbeing.
Written by: Eisabess Chee
Imagine going to work every day feeling like you’re walking on eggshells. Your heart races, your stress levels are through the roof, and the thought of another workday fills you with dread.
This isn’t just a bad day; it’s a growing epidemic that’s catching the attention of workers compensation authorities.
The Rising Tide of Psychological Injuries
Recent data from Safe Work Australia paints a troubling picture of mental health in Australian workplaces.
The Psychological Health and Safety in the Workplace report reveals a dramatic transformation in work-related psychological injuries:
- Mental health conditions now account for 9% of all serious workers compensation claims—a staggering 36.9% increase since 2017-18.
- The median time lost for mental health claims is more than 4 times greater than physical injury claims.
- Compensation for mental health conditions is more than 3 times higher than for physical injuries.
The return to work statistics are even more alarming:
- 88% of workers with physical injuries typically return to work within 13 weeks.
- In stark contrast, 40% of workers with psychological injuries remain separated from their workplace after one year.
What Workplace Psychological Injuries Really Cost You
The financial implications are profound.
While psychological claims currently make up 12% of total workers compensation claims, they account for a shocking 38% of the total cost. The average cost of a psychological injury claim has also dramatically escalated from $146,000 in 2019-20 to $288,542 in 2024-25.
As NSW Treasurer Daniel Mookhey recently highlighted in Parliament, these figures warn of a workers compensation system that will collapse under the rising toll of workplace psychological injuries.
Understanding Psychosocial Risks and Hazards: What's the Difference?
You’ve probably heard of both of these terms. Though often used interchangeably, but the terms have crucial distinctions.
Think of psychosocial hazards as the potential sources of harm, while psychosocial risks are the likelihood and potential severity of harm resulting from those hazards.
Psychosocial Hazards: The Root Causes
Psychosocial hazards are the workplace conditions, practices, and interactions that have the potential to cause psychological harm. These are the underlying factors that can negatively impact an employee’s mental health and well-being.
Common psychosocial hazards include:
- Excessive workload and unrealistic deadlines
- Poor communication and lack of support from management
- Workplace bullying or harassment
- Lack of role clarity
- High job insecurity
- Poor work-life balance
- Minimal control over work processes
Psychosocial Risks: The Potential Consequences
Psychosocial risks emerge from these hazards. They represent the probability and potential impact of psychological harm occurring.
In other words, psychosocial risks are the estimated likelihood of an employee experiencing negative mental health outcomes due to the existing workplace hazards.
How Psychosocial Hazards Turn Into Psychosocial Risk
Imagine a workplace with poor communication and high workload (hazards). The psychosocial risk increases as these factors compound, potentially leading to:
- Increased stress and anxiety
- Reduced productivity
- Higher absenteeism
- Decreased job satisfaction
- Potential long-term mental health conditions
- Significant financial costs through workers compensation claims
The more intense or prolonged the psychosocial hazards, the higher the psychosocial risks become.
Practical Solutions: What Can You Do?
For Workers
- Communicate openly about your workplace challenges
- Seek support from HR, managers, or workplace counselling services
- Document any incidents that contribute to your workplace stress
- Know your rights under workers compensation legislation
- Prioritise self-care and seek professional help if needed
For Employers
- Develop comprehensive mental health policies
- Provide regular training on recognising and managing psychosocial risks
- Create open communication channels
- Implement flexible working arrangements
- Regularly assess workplace culture and address potential stressors
- Offer Employee Assistance Programs (EAPs)
Legal Considerations in NSW
In New South Wales, workers compensation schemes recognise psychological injuries as legitimate workplace health concerns. If you’re experiencing a work-related psychological injury, you may be entitled to:
- Medical treatment expenses
- Partial wage replacement
- Rehabilitation support
- Potential lump sum compensation for permanent impairment
Protect Your Workplace Mental Health Today
Workplace mental health isn’t a luxury—it’s a necessity. By recognising, addressing, and proactively managing psychosocial risks, we can create healthier, more supportive work environments that benefit everyone.
Whether you’re a worker feeling overwhelmed or an employer committed to employee wellbeing, knowledge is the first step to change.
Want to learn more? Book a complimentary consultation with our workplace wellness experts, who can walk you through our corporate wellness programs. Together, we can create healthier, more supportive workplaces.
Want to Make a Change? Share with Anyone, Anywhere.
Don’t forget to share!
TABLE OF CONTENTS
Eisabess Chee is a seasoned writer with over 8 years of diverse experience in education, journalism and marketing. At AusRehab, she oversees content creation through research, writing, editing, and the crafting of resources that tackle workers compensation and workplace injury. Eisabess also curates the AusRehab newsletter, ensuring it’s packed with valuable and well-researched insights.
Subscribe to stay updated on the latest workplace news.
Resolve your work
place injury today