Psychosocial risk under the microscope: Why regulatory scrutiny is increasing across Australia

Psychosocial risk has rapidly emerged as one of the most significant workplace health and safety, governance and enterprise risk issues facing Australian organisations.

Over the past several years, regulators across Australia have fundamentally shifted their approach to psychological health at work.

The introduction of dedicated psychosocial hazard regulations and Codes of Practice across multiple jurisdictions has been accompanied by a marked increase in inspection activity, compliance initiatives and enforcement action.

At the same time, boards and executive teams are increasingly recognising that many psychosocial risk factors are closely linked to broader organisational issues, such as workforce sustainability, productivity, employee retention, and organisational performance.

As a result, psychosocial risk is no longer being viewed solely through a wellbeing, culture or human resources lens.

Increasingly, it is being treated as a workplace health and safety risk with significant implications for governance, organisational performance and enterprise risk exposure.

The growing connection between psychosocial risk and organisational performance

One of the key reasons psychosocial risk is attracting greater attention is that the factors contributing to psychological harm are often the same factors affecting organisational performance.

Excessive workloads, constant organisational change, unclear accountability, workforce shortages, and leadership capability gaps can contribute to psychological harm while undermining decision-making, customer outcomes, productivity, and employee retention.

Consequently, psychosocial risk is increasingly being considered alongside workforce strategy, organisational resilience and leadership capability rather than being managed exclusively within safety, wellbeing or people functions.

Leading organisations are moving beyond simply responding to psychological harm after it occurs. Instead, they are focusing on understanding and managing the workplace conditions that create risk in the first place.

The emphasis is shifting away from individual resilience and towards work design, organisational systems and the way work is led and managed.

Increasing expectations from regulators and governance leaders

The growing recognition that psychosocial risk is closely linked to organisational performance, workforce sustainability and governance outcomes is occurring at a time when psychological injury claims continue to rise in frequency, duration and cost.

Organisations are facing a convergence of workforce, operational, and regulatory pressures, while regulators expect employers to proactively identify and control psychosocial hazards before harm occurs.

Increasingly, boards and executive teams want assurance that psychosocial risks are understood, appropriately managed and supported by effective governance, oversight and reporting.

Why regulators are paying attention

The increase in regulatory focus reflects a broader shift in how psychological harm is understood.

Historically, psychological injuries were often viewed as individual issues requiring support, treatment or rehabilitation. Today, regulators are increasingly focused on the workplace factors that create risk in the first place.

Psychosocial hazards arise from the design, organisation and management of work and may cause psychological or physical harm. Common examples include:

• Excessive workload and high job demands

• Fatigue

• Performance pressure and poorly managed performance processes

• Bullying, harassment and inappropriate workplace behaviours

• Poorly managed organisational change

• Low role clarity and limited job control

• Remote or isolated work

• Inadequate support from leaders and supervisors

While these hazards can arise in any workplace, they are often amplified during periods of workforce shortages, restructuring, business transformation, rapid growth or sustained operational pressure.

Importantly, regulators are increasingly focused on the systems and conditions that create these risks, including how work is designed, led and managed, rather than viewing psychological harm as the result of individual behaviour or resilience alone.

Regulatory activity is increasing across Australia

Across Australia, regulators are adopting a more proactive, systems-based approach to enforcing psychosocial risk.

In New South Wales, SafeWork NSW has increased psychosocial inspection activity through its Psychological Health and Safety Strategy 2024–2026 (opens a new window).

At the Commonwealth level, Comcare has expanded its Psychosocial Inspection Program.

Victoria has strengthened its framework through the Occupational Health and Safety (Psychological Health) Regulations 2025 (opens a new window), while Queensland continues active compliance monitoring against the Managing the Risk of Psychosocial Hazards Code of Practice.

Other jurisdictions are also recording increased psychosocial enforcement activity, often following complaints, significant workplace incidents or major organisational change.

Collectively, these developments signal a clear national trend. Regulators increasingly expect psychosocial risks to be managed with the same rigour applied to physical safety risks.

What we're seeing in the market

In conversations with clients across multiple industries, several consistent themes continue to emerge.

1. Workload remains one of the most significant psychosocial exposures. Organisations are often balancing competing priorities, resource constraints, and ambitious transformation agendas, which leads to sustained pressure on employees and leaders.

2. Organisational change is frequently a source of risk. Restructuring, technology implementations, and operating model changes can create uncertainty, role ambiguity, and increased workload if not carefully planned and managed.

3. Support mechanisms are often more mature than underlying risk controls. Many organisations have invested substantially in wellbeing initiatives but have not applied the same level of discipline to assessing workload, work design and leadership-related risks.

4. Psychosocial risk is increasingly being viewed through a governance and enterprise risk lens. Boards and executive teams are increasingly seeking greater assurance that psychosocial risks are understood, appropriately controlled and supported by effective governance, oversight and reporting mechanisms.

These trends suggest that psychosocial risk is becoming less about isolated incidents and more about how organisations operate day to day.

From a claims perspective, the same themes continue to emerge.

Organisations experiencing elevated psychological injury claim activity are rarely dealing with a single event or isolated issue.

More commonly, claims arise where prolonged workload pressures, workforce shortages, organisational change, people leadership challenges or workplace conflict have remained unresolved over time.

This reinforces the importance of viewing psychosocial risk as an operational and organisational issue rather than solely a workplace health and safety concern.

Rising psychological injury claims are also creating pressure beyond regulatory compliance. Many organisations are managing increased claim duration, workforce disruption, absence costs and heightened stakeholder scrutiny.

As a result, psychosocial risk is increasingly being discussed not only as a health and safety issue, but also as a workforce and business performance issue.

NSW's enforceable Codes of Practice raise the bar

A significant development occurred in New South Wales on 1 July 2026, when approved WHS Codes of Practice became enforceable (opens a new window) under section 26A of the Work Health and Safety Act 2011 (NSW).

Organisations must now either comply with relevant Codes of Practice or demonstrate that alternative controls achieve an equivalent or higher standard of health and safety.

SafeWork NSW describes Codes of Practice as the minimum performance standard expected unless a comparable or superior approach can be demonstrated.

The significance of this reform extends beyond compliance.

The change reinforces a broader expectation that organisations can justify decisions regarding workload, work design, organisational change, supervision, and psychosocial risk controls.

The move to enforceable Codes of Practice places greater emphasis on organisations demonstrating how psychosocial risks have been identified, assessed and controlled.

Risk assessments, consultation processes, governance oversight, documented decision-making and ongoing review processes are likely to become increasingly important in demonstrating that psychosocial risks are being effectively managed.

For boards and executive teams, the practical impact is greater accountability. Reliance on policies, awareness campaigns or employee support programs alone is unlikely to be sufficient if underlying psychosocial hazards remain unaddressed.

What inspectors are looking for

The focus of inspections has evolved significantly in recent years.

Inspectors are increasingly assessing whether organisations have effective systems in place to identify, assess and control psychosocial risks rather than simply verifying the existence of policies or procedures.

Areas commonly examined include:

• Psychosocial risk assessments

• Workload and fatigue management

• Performance management practices

• Organisational change processes

• Worker consultation arrangements

• Leadership and supervisor capability

• Governance and reporting mechanisms

• Monitoring and review processes

Regulators are seeking evidence that wellbeing initiatives and employee support programs are supported by practical workplace controls that address the underlying hazards and sources of risk.

Common gaps regulators are identifying

Recent regulatory activity has highlighted several recurring shortcomings.

Common issues include:

• No psychosocial risk assessment, or assessments that fail to address workload, fatigue or role design

• Performance management processes are creating risk without clear escalation pathways

• Workload and fatigue are not actively managed during periods of increased demand

• Policies that exist on paper but are not implemented or regularly reviewed

• Managers and supervisors lack the capability to identify and respond to psychosocial hazards

• Complaints handled procedurally without addressing underlying work design issues

A consistent theme across both regulatory activity and psychological injury claims is that organisations often address symptoms rather than underlying causes.

Employee Assistance Programs, wellbeing initiatives and mental health awareness campaigns remain important support mechanisms.

However, where excessive workload, poor work design, ineffective change management or leadership issues remain unresolved, these interventions alone may do little to reduce the underlying source of risk.

Regulators are increasingly examining these underlying conditions, while claims experience continues to demonstrate the consequences when they are left unaddressed

Recent cases reinforce the shift

Recent enforcement action demonstrates how courts and regulators are increasingly treating psychosocial hazards as work health and safety risks rather than purely employee relations or wellbeing matters.

In late 2025, a significant Commonwealth prosecution (opens a new window) resulted in a large federal government organisation being convicted and fined $188,000 after a court found foreseeable psychosocial risks associated with performance management processes had not been adequately managed.

The case focused on failures to identify and control psychosocial risks arising during a performance management process, reinforcing the expectation that employers proactively assess and manage risks associated with supervision, management practices and the organisation of work.

In Victoria, a landmark prosecution (opens a new window) concluded in October 2023 when a public sector body was fined almost $380,000 following findings that workers had been exposed to a toxic workplace culture and multiple psychosocial hazards over an extended period.

The matter highlighted the consequences of failing to identify and address psychosocial hazards before they result in significant psychological harm.

While the circumstances differed, both matters reinforce a common principle: psychological health risks are increasingly being assessed and enforced using the same risk management framework traditionally applied to physical safety hazards.

They also demonstrate regulators' willingness to pursue enforcement action where psychosocial hazards are foreseeable, known or capable of being identified, but are not effectively managed.

Questions boards and leaders should be asking

As psychosocial risk receives greater regulatory and governance attention, leadership teams should consider:

• Do we understand our most significant psychosocial risk exposures?

• Are workload and fatigue being actively monitored and managed?

• How are psychosocial risks considered during organisational change?

• Do leaders have the capability to identify and respond to emerging risks?

• Can we demonstrate that our controls are working?

• Would our current approach withstand regulator scrutiny?

These questions are increasingly becoming governance questions rather than simply safety or HR questions.

Is your organisation prepared?

As regulatory scrutiny increases, boards and executive teams are seeking assurance that psychosocial risks are effectively controlled and that their organisations can demonstrate this if regulators challenge them.

For many organisations, regulatory attention is simply highlighting risks that are already impacting workforce performance, employee retention, productivity and claims outcomes.

If you require support identifying potential gaps, strengthening controls or preparing for increased inspection activity, please reach out for a confidential discussion.

The contents of this publication are provided for general information only. Lockton is the provider of WHS consultancy services. Lockton arranges the insurance and is not the insurer. While the content contributors have taken reasonable care in compiling the information presented, we do not warrant that the information is correct. It is not intended to be interpreted as advice on which you should rely and may not necessarily be suitable for you. You must obtain professional or specialist advice before taking, or refraining from, any action on the basis of the content in this publication.