Psychosocial Hazards – A WHS Obligation
Since 1 July 2026, employers in NSW have needed to navigate changes to how psychological injury claims are assessed under the Workers Compensation Scheme.
While the reforms introduce a higher threshold for claims, they do not lessen the expectation on employers to actively manage workplace risks. At the same time, psychosocial hazards remain a key focus for regulators, with increasing scrutiny on how organisations design work, manage behaviour and respond to issues.
The changes are now in effect, meaning employers should be reviewing their current practices against both the updated workers compensation framework and their ongoing WHS duties.
Psychosocial hazards are aspects of work that can cause psychological harm, such as workload, workplace behaviour or organisational change.
In NSW, these risks are regulated in the same way as physical hazards under the Work Health and Safety Act 2011. This means employers have a proactive duty to identify psychosocial hazards, assess risks, and eliminate or minimise those risks so far as is reasonably practicable. Importantly, these obligations are ongoing and preventative, not limited to responding to complaints.
SafeWork NSW data highlights the growing importance of this area, with psychosocial hazards making up approximately 19.5% of workplace complaints in NSW in 2025, comparable to traditional safety risks such as falls. Against this backdrop, changes to the NSW Workers Compensation Scheme now impose stricter requirements for psychological injury claims.
Key Legislative Changes Now in Effect
The changes introduced from 1 July 2026 apply to eligibility requirements for primary psychological injury claims in NSW. In practical terms, a worker will generally only be eligible for compensation where all the following criteria are met:
- The injury arises from a clearly identifiable workplace event, or series of events
- There is a real and direct connection between the event(s) and the worker’s employment
- Employment is the main contributing factor to the injury
These reforms also included an update to the definition of psychological injury, the NSW Government defining it as:
“a mental or psychiatric disorder that causes behavioural, cognitive, or psychological dysfunction.”
Importantly, the type of event such as bullying or excessive work demands will influence whether the claim is eligible, how the claim is assessed, and what compensation or support may be available.
Why This Matters for Employers
While these reforms introduce a higher threshold for psychological injury claims, they do not reduce employer obligations.
In practice, employers should be aware that:
- WHS duties remain unchanged – businesses still have a proactive obligation to identify, assess and manage psychosocial risks, regardless of whether a claim is ultimately successful.
- Regulatory scrutiny is increasing – psychosocial hazards are a growing focus for the NSW Government, with expectations around documentation, consultation and risk control continuing to rise.
- Claims may become more complex – the stricter eligibility criteria may shift greater focus onto the specific circumstances, management practices and workplace systems in place at the time of the alleged injury.
- Workplace practices will be under closer review – including how issues such as workload, performance management, communication and behaviour are managed can directly influence both WHS compliance and claim outcomes.
For employers, this reinforces the need to take a consistent, preventative, and well‑documented approach to managing psychological risks in the workplace.
Practical Steps for Employers
Immediate priorities
- Review WHS and HR policies to ensure psychosocial risks are addressed
- Identify and manage any immediate or obvious risk areas such as workload and organisational change
- Reinforce consistent documentation practices for management decisions
Ongoing compliance actions
- Conduct a targeted review of psychosocial risks across the team
- Implement or formalise reporting and escalation pathways
- Review and strengthen complaint handling processes
- Deliver practical training for managers on communication, leadership and workplace conduct
Longer-term governance
- Introduce or embed a structured psychosocial risk assessment process within WHS systems
- Align HR, WHS and leadership practices for a consistent organisation-wide approach
- Review workplace data (e.g. absenteeism, turnover, feedback) to identify emerging risks
- Schedule regular reviews of control measures to ensure they remain effective
How Allan Hall HR Can Help
Allan Hall HR supports employers to implement practical, compliant and consistent approaches to managing psychosocial risk and meeting WHS obligations.
Our services include:
- Psychosocial risk assessments
- Policy development and implementation
- Manager training on workplace behaviour and leadership
- Complaint handling frameworks
- Compliance audits
- Ongoing HR and WHS advisory support
Need HR Assistance?
If you are unsure whether your current approach aligns with the 2026 reforms and WHS requirements, Allan Hall HR can help. To learn more about our services, please click here. Alternatively, please feel free to call us on 1300 916 764 or contact us here.
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