Psychosocial Risk and the Critical Role of Leaders

As organisations across Australia grapple with the evolving landscape of workplace mental health, the role of leadership in addressing psychosocial risks has come under the spotlight.  With a rise in psychological injury claims and concerning trends in employee wellbeing, the need for effective leadership has never been more evident. This article explores the vital role leaders play in managing psychosocial risks, addressing challenges, and fostering opportunities for positive change. From understanding the impact of psychosocial hazards to investing in leadership development, we uncover strategies to foster healthier and more productive workplaces.

What are Psychosocial Hazards?

SafeWork Australia (SWA) defines psychosocial hazard as “anything that could cause psychological harm” (e.g. harm someone’s mental health). SWA recognises 14 common workplace psychosocial hazards ranging from high work demands and low job control, to bullying, harassment, exposure to traumatic events, work isolation and poor support. [1]

Moreover, Safe Work Australia highlights that work-related mental health conditions cost Australian businesses $11 billion annually. Implementing effective mental health interventions, including training for managers, can reduce these costs and improve employee engagement and wellbeing​.

Psychological Injury Claims are Increasing

Psychological injury claims at workplaces are surging in New South Wales, far surpassing the increase in physical injury claims. Over a four-year span leading to mid-2023, physical injury claims saw an 11% rise, while psychological injury claims skyrocketed by 30%. This trend has caught the attention of the state’s safety watchdog, prompting a cautionary note for businesses. Failure to improve practices could result in compliance checks and prosecution.

Workforce Mental Health is Declining

Deloitte’s second Wellbeing at Work Survey [2] discovered that many employees are still struggling with low levels of wellbeing. Findings from a survey of 3,150 C-suite executives, managers and employees found that only around one out of three employees (32%) feel their job has a positive impact on their mental wellbeing. Even more alarmingly, 40% of employees say their job negatively affects mental wellbeing.

What’s more, the survey also revealed that while employees’ mental wellbeing worsened or stayed the same as the year prior, more than three out of four executives mistakenly believed that their employees’ wellbeing had improved.

Leaders Lack Skills to Perform their Roles Effectively

Despite the positive role that leaders can play in creating a mentally health work environment, it is evident that many leaders lack the skills and confidence they need to fulfil their roles effectively.

Based on a survey of 10,000 Australian workers across 19 industries, The 2023 Indicators of a Thriving Workplace report[3] shows:

*41% of leaders lack the essential skills to perform their job effectively.

* 46% of participants who identified as having a mental health condition said their workplace has either caused or exacerbated their condition.

* Only 11% of people with a mental health condition said work had a positive impact on their mental health.

These findings highlight a clear opportunity for organisations and leaders to positively influence the wellbeing of their employees. To bridge the gap, it’s vital to ensure that managers at all levels receive adequate training and support. This investment builds the capability of managers to mitigate stressors, establish a culture of wellbeing, and prioritise early intervention. By providing leaders with the necessary skills, tools, and resources, employers can empower them to foster a mentally healthy work culture.

The Benefits of Leadership Upskilling in Mental Health

Upskilling your leaders goes beyond merely reducing psychosocial risks and avoiding injury claims or compliance penalties. Prioritising proactive and preventive workplace mental health training for leaders and managers unlocks a host of benefits for your business.

Here are four key advantages you can expect:

1. Return on Investment

According to the Black Dog Institute, for every dollar spent on mental health training for managers, organisations can expect a return of $10. This high return is due to increased productivity and reduced absenteeism and compensation claims​. Additionally, leaders who promote a safe workplace for their team can contribute to a reduction in staff turnover.

2. Increased Productivity and Performance

A mentally healthy workforce is a more productive workforce. When people have positive mental health, 63% say they are committed to their work and 80% say they’re energised[4]. By giving managers the skills to proactively identify and respond to psychosocial risks in their workplace, they can create a shift in workplace culture, moving safety beyond a narrow focus on the absence of harm, to a proactive approach that supports positive mental health and productivity in the workplace.

3. Reduced Absenteeism and Presenteeism

Mental health issues can have a significant impact on absenteeism and presenteeism in the workplace. According to a report by PwC Australia, untreated mental health conditions cost Australian employers approximately $10.9 billion annually in absenteeism and presenteeism[5]. Furthermore, the Australian Bureau of Statistics (ABS) found that mental health-related absenteeism accounts for around 12 million days of reduced productivity each year.[6] Training leaders to recognise and address mental health issues means they can provide better support to employees facing challenges. This support can prevent issues from escalating to the point where employees feel compelled to take time off work due to mental health concerns.

4. Positive Organisational Reputation and Employer Brand

In an era where corporate social responsibility and employee wellbeing are in the spotlight, organisations that prioritise mental health are viewed more favourably by employees, customers, and other stakeholders. By demonstrating a commitment to employee wellbeing through mental health training for leaders, organisations can enhance their reputation as an employer of choice and attract top talent. A positive organisational reputation and employer brand can also contribute to higher levels of employee retention and engagement.

In closing, it’s clear that leadership plays a pivotal role in tackling the challenges of psychosocial risk management. With the rise in psychological injury claims and declining mental wellbeing among our workforce, the need for supportive and responsive leaders has never been more crucial.

But amidst these challenges lies a significant opportunity for organisations to make a positive impact on their employees’ wellbeing. By investing in leadership training and support, we can create workplaces that foster productivity and wellness. This proactive approach not only minimises psychosocial risks but also delivers tangible benefits such as increased productivity, reduced absenteeism, improved brand reputation, and a solid return on investment.


[5] PwC Australia. (2014). “Creating a Mentally Healthy Workplace: Return on Investment Analysis.
[6] Australian Bureau of Statistics (ABS). (2007). “National Survey of Mental Health and Wellbeing: Summary of Results.

How Aspect Can Help

​Aspect is the go-to partner for organisations seeking tailored expertise in leadership development. Collectively, our team has coached and developed over 5000 managers and senior executives across many industries. Enhancing the skills and capability of leaders strengthens your organisation’s preventative capabilities and ensures compliance with current WHS regulations. Beyond compliance, our programs empower leaders to embrace an integrated approach to workplace mental health. This evidence-based approach, entails mitigating work-related risk factors, promoting the positive aspects of work, and effectively responding to mental health concerns within their teams.