Psychosocial harm: the risk boards may not see

If your organisation operates in Australia, or if you are watching where New Zealand employment law is developing, psychosocial risk (PSR) belongs on your board agenda. It should be treated as a risk to be identified, controlled, monitored and reported, rather than as a once-a-year wellbeing update.

Australia has moved decisively. In New South Wales alone, nearly one in five workplace complaints is now psychosocial. SafeWork NSW recorded more than 1,400 requests for service related to psychosocial harm in just six months last year.

The New South Wales Government has committed $344 million to workplace mental health, added 20 dedicated psychosocial inspectors, and tightened the regulatory framework so that psychosocial risks must be managed through the same hierarchy of controls applied to physical hazards.

According to Safe Work Australia’s most recent published figures, workers’ compensation claims for mental health conditions cost a median of $58,615 per serious claim, compared with $15,743 for physical injuries. Enforcement is active, and the direction of regulatory travel in New Zealand is consistent with where Australia has already arrived.  

New Zealand organisations do not need to wait for legislation to catch up. The duty to protect workers’ psychological health already exists under the Health and Safety at Work Act 2015. Australia demonstrates what active enforcement looks like and what it costs when organisations are caught without systems in place. The question for New Zealand boards is whether they can show how that risk is being managed. 

Why boards struggle with this risk

Psychosocial risk sits at the intersection of health and safety, employment law, organisational design and culture. That makes it complex to govern. One executive I spoke with recently described it as an intangible, sensitive space, with rising legal and personal grievance exposure, where leaders and boards feel unsure how to get the right mitigations in place.  

Part of the complexity is structural. Most workforce health reporting to boards relies on lagging indicators: exit interview themes, sick leave trends and quarterly Employee Assistance Programme (EAP) utilisation rates.

By the time these signals surface, the harm has often already occurred. Organisations need leading indicators, including real-time data on how work is actually being done, not only a retrospective picture of what went wrong.  

There is also a tendency to treat psychosocial risk as an HR or EAP problem. It is not. Psychosocial hazards arise from how work is designed, managed and experienced: excessive job demands, unclear expectations, poor communication, lack of support and exposure to difficult behaviour.  

These are structural and systemic issues. They can result from governance and leadership decisions about workloads, restructures, AI-driven role change and redundancies. The economic environment, with its overlay of geopolitical uncertainty, rapid technological change and cost pressure, is actively generating new psychosocial hazards. 

What boards should expect to see 

Organisations getting this right are not running psychosocial risk as a compliance checklist. They are treating it as an organisational risk with identifiable hazards, measurable indicators and active management.In practice, boards should expect to see:  

• • Leadership is held accountable. Psychosocial safety shows up in everyday leadership behaviour, not just policies. How managers communicate, support their teams and respond early when someone is struggling matters more than what a policy says.  
  • Risk is identified early. Smart organisations are moving beyond annual wellbeing and engagement surveys. They are using diagnostic tools and real-time sentiment data to identify psychosocial hotspots before they escalate into formal complaints, sick leave, or legal claims. 
  • Support reaches people before crisis point. Traditional EAPs are typically accessed by the people who already know they need help. That is a small proportion of the workforce. Effective psychosocial risk management reaches people earlier, with accessible support and clear pathways to specialist care when it is needed.  
  • Boards receive the right data. That means leading indicators, not just lag data. Boards need to see patterns across teams, business units or sites, and reporting that shows whether risk is increasing, reducing or shifting. 

Questions directors should ask 

1. Do you understand your existing legal obligations? Under the Health and Safety at Work Act 2015, New Zealand employers already have a duty to manage psychosocial risks. That duty is being interpreted more broadly over time. In Australia, enforcement is active and escalating.  
2. Are you across what our Australian footprint requires? If your organisation operates across the Tasman, Australian work health and safety legislation applies to those workers. The gap between what New Zealand expects and what Australia requires is significant and growing.  
3. Are you receiving the right data? If the board is only receiving exit survey results and EAP utilisation rates, you do not have a meaningful picture of psychosocial risk. Ask what leading indicators management is tracking.  
4. Are you treating people decisions as risk management decisions? Restructures, redundancies and AI-driven role changes are significant psychosocial hazards. How those processes are designed and communicated is not just a culture question, it is a risk management question.  
5. What is the cost of inaction? Mental health claims cost nearly four times more per serious claim than physical injury claims in Australia. Reputational exposure from high-profile cases is real and lasting. The business case for proactive psychosocial risk management is clear.

Act before harm shows up in the data 

Workforces are absorbing economic uncertainty, geopolitical instability, post-pandemic fatigue and rapid technological change at the same time. Boards are moving from one crisis to the next. Employees often are, too. Psychosocial risk has legal, financial and reputational consequences. It also tests whether an organisation understands how work is being experienced by its people. The organisations that build proactive, data-led approaches to psychosocial risk now will be better placed legally and commercially than those waiting for a claim to prompt action. Handled well, this work can also support better performance and retention.  

Kim Severinsen is Chief Science Officer at Groov, a New Zealand-based organisational intelligence and wellbeing platform. Groov works with organisations to understand and improve workforce health, performance, and psychosocial risk through data-led diagnostics and proactive support.