Managing Psychosocial Hazards: An Employer’s Guide to the New Workplace Mental Health Regulations

Mental health at work is no longer a topic employers can afford to handle informally. With Victoria’s Occupational Health and Safety (Psychological Health) Regulations 2025 taking effect on 1 December 2025, and NSW having already strengthened its Work Health and Safety Regulation 2025 earlier this year, the message from regulators is clear: psychological safety must be managed with the same rigour as physical hazards. Consultants at HSE Direct state that while special and distinct rules apply in VIC; the principal stays the same in all States.

​This guide breaks down what these changes mean in practical terms and what you need to do to get your policies, procedures in order for minimal business impact.

The Scale of the Problem

Before diving into compliance and the new legislation, it helps to understand why regulators have stepped up enforcement. The numbers paint a sobering picture.

Mental health conditions now account for 12% of all serious workers’ compensation claims in Australia, representing a staggering 161% increase over the past decade. In Victoria alone, 17% of all workplace injury claims to WorkSafe were reported as mental injuries during 2024-25.

​What makes psychological injuries particularly costly is their duration and impact. Workers with mental health claims take roughly five to six times longer to return to work compared to those with physical injuries. The median compensation paid for a psychological injury claim has skyrocketed from $146,000 in 2019-20 to $288,542 in 2024-25. Mental stress claims now represent 38% of total workers’ compensation costs despite making up just 12% of claims.

​These aren’t just statistics; they represent real people whose working lives have been disrupted, often permanently. For employers, they also represent significant financial risk they must cater for and operational disruption.

What Exactly Are Psychosocial Hazards?

A psychosocial hazard is anything in the work environment that could cause psychological harm. Safe Work Australia identifies several common hazards that employers must address:

Job demands encompass excessive workload, unrealistic deadlines, and work that requires constant emotional effort. Low job control refers to situations where workers have little say over how they do their work, when they take breaks, or how their time is allocated. Poor support includes inadequate supervision, lack of access to resources, and insufficient guidance from managers.

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Lack of role clarity happens when workers don’t understand what’s expected of them, or when responsibilities overlap confusingly between team members. Poor organisational change management covers situations where restructures, new systems, or shifting priorities are communicated poorly or without adequate consultation.

​Then there are the behavioural hazards: bullying, harassment, sexual harassment, violence and aggression. These can come from colleagues, managers, customers, or members of the public. Exposure to traumatic events or content affects workers in healthcare, emergency services, social work, and increasingly those moderating online content.

​​The regulations recognise that these hazards rarely exist in isolation. High job demands combined with poor support and low control creates a particularly toxic combination. Employers must consider how hazards interact when assessing risks.
For a complete checklist of all universal hazards and their controls download the checklist now.

​What Victorian Employers Must Do

The Occupational Health and Safety (Psychological Health) Regulations 2025 introduce specific duties that go beyond general obligations under the OHS Act.

​Victorian employers must now identify psychosocial hazards in their workplace. While the regulations don’t prescribe exactly how this must happen, they point to the existing consultation requirements under section 35 of the OHS Act. Speaking with your workers; through surveys, one-on-one discussions, team meetings, or safety committee processes; is essential. Your Health and Safety Representatives must be involved in this consultation.

​Once hazards are identified, employers must eliminate any associated risk so far as is reasonably practicable. If elimination isn’t feasible, the risk must be reduced through appropriate control measures.

The Victorian regulations introduce a modified hierarchy of controls for psychosocial risks. Employers can reduce risk by altering work design, management practices, plant, systems of work, or the workplace environment. Information, instruction, and training can also be used but critically, training cannot be the primary control measure where other options are reasonably practicable.

This last point deserves emphasis. For years, many businesses have relied heavily on training programs and awareness sessions as their main response to psychosocial hazards. The new regulations explicitly state this approach is insufficient when more effective controls could be implemented.

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Employers must also review and revise control measures after any notifiable incident involving psychosocial hazards, if controls aren’t working effectively, after changes that might affect risks, or upon request from a Health and Safety Representative.

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WorkSafe Victoria has published a Psychological Health Compliance Code that provides detailed guidance on meeting these obligations. While following the code isn’t mandatory, it will be used as evidence of what was reasonably practicable in any enforcement proceedings.

​What NSW Employers Must Know

NSW’s Work Health and Safety Regulation 2025, which commenced on 22 August 2025, brought significant changes to how psychosocial risks must be managed in that state.

The key change is that the hierarchy of controls now applies to psychosocial hazards in the same way it applies to physical hazards. Previously, the regulations carved out psychosocial risks from this requirement. No longer.

​This means NSW employers must consider controls in order of effectiveness: elimination first, then substitution, isolation, and engineering controls. Administrative controls (policies, procedures, training) come next, with personal protective equipment as a last resort.

​In practical terms, this requires businesses to demonstrate they’ve genuinely considered higher-order controls before relying on policies and employee assistance programs. A business that simply rolls out a mental health awareness training module and calls it a day will find it difficult to argue they’ve done what was reasonably practicable.

​SafeWork NSW must now report to the Minister for Work Health and Safety every six months on psychosocial matters. This signals ongoing regulatory attention in this area.

​Practical Steps for All Employers

Whether you’re in Victoria, NSW, or elsewhere in Australia, the direction of travel is clear. Here’s how to approach compliance in a way that actually protects your workers rather than just ticking boxes.

Start with genuine consultation. Talk to your workers about what’s actually happening in their day-to-day roles. What causes them stress? Where do they feel unsupported? What aspects of work design make their jobs harder than they need to be? Anonymous surveys can help surface issues people might not raise in person, but don’t rely on surveys alone.

​Review your current policies and systems. Do your existing OHS policies address psychosocial hazards explicitly, or do they focus primarily on physical safety? Are your managers trained to recognise signs of psychological distress and respond appropriately? Is there a clear process for workers to report concerns without fear of reprisal?

​Conduct a proper risk assessment. Document the psychosocial hazards you’ve identified, assess the likelihood and severity of harm, and consider who might be affected. WorkSafe Victoria has published a prevention plan template that provides a useful structure for this process; while prevention plans aren’t mandatory in Victoria, having documented records demonstrates systematic risk management.

​Implement controls that address root causes. If workers are experiencing stress due to excessive workload, the answer isn’t resilience training; it’s addressing the workload. If poor communication from management is creating uncertainty, improve the communication rather than expecting workers to cope better. Think about work design, supervision practices, resource allocation, and how decisions get made.

​Train your managers. Front-line supervisors and middle managers have enormous influence over the daily experience of workers. They need to understand psychosocial hazards, recognise early warning signs, respond appropriately to concerns, and model healthy behaviours themselves.

​Update your incident reporting. Make sure your systems capture psychosocial incidents, not just near-misses involving physical hazards. A worker who reports bullying or harassment is reporting a safety incident that triggers review obligations.

Monitor and review regularly. Managing psychosocial risks isn’t a project with an end date. It requires ongoing attention, regular check-ins with workers, and willingness to adjust controls that aren’t working.

The Business Case Beyond Compliance

Smart employers recognise that managing psychosocial hazards isn’t just about avoiding fines and claims. Workers who feel psychologically safe are more engaged, more productive, and more likely to stay with your organisation. For more support and to avoid costly litigation refer to a reputed OHS consultancy as HSE Direct.

​The construction industry provides a stark example of what happens when psychological safety is neglected. Depression, anxiety and stress levels among Australian construction workers are estimated to be 40% higher than the general population. A construction worker takes their own life every two days on average. A rate six times higher than workplace fatalities from physical accidents.

​Industries across the board are grappling with these challenges. Healthcare and social assistance, public administration, and education consistently record high rates of psychological injury claims.

​Creating psychologically healthy workplaces requires genuine commitment from leadership, adequate resourcing, and a culture where people feel safe to speak up. It also requires recognising that wellbeing programs and mental health first aid training, while valuable, cannot substitute for addressing the organisational factors that cause harm in the first place.

Looking Ahead

The regulatory landscape will continue to evolve and get harder with time. Already Icare is losing 6 million a day in NSW. Safe Work Australia is currently reviewing Australia’s model WHS laws, with unions advocating for stronger legislative protections for workers exposed to psychosocial hazards. Victoria has established a specialist Psychosocial Inspectorate, signalling increased enforcement focus.

​Employers who get ahead of these requirements by building genuine capability in identifying and managing psychosocial risks will be better positioned than those scrambling to comply after an incident or enforcement notice.

The regulations aren’t asking employers to guarantee perfect mental health for every worker. They’re asking employers to take reasonable steps to identify what might cause harm and do something about it. That’s been the fundamental obligation under workplace safety law for decades. What’s changed is that regulators are now making clear this obligation extends to psychological health with the same force it applies to physical safety.

The most important thing to note is Psychological damage cause in the way of reasonable action is not entitled to workers compensation claim!
This essentially means a worker may suffer and be able to establish mental harm – he is not automatically eligible for workers compensation if the worker place was reasonable in their direction.