What Managers & Small Business Owners Need to Do for Psychosocial Safety

Overview

Psychosocial hazards are the parts of a job that can damage someone’s mental health. Under Australian work health and safety law, a business must manage those hazards as seriously as a wet floor or a faulty ladder.

If you manage people, you are how most of that management happens in practice. If you own the business, the legal duty sits with you. In both cases, a second problem rarely gets mentioned: the person expected to protect everyone else’s wellbeing is often the most stretched person in the building.

We’ll go through what the rules ask of you and what you can do in your workplace this month. This article is for new and experienced managers, team leaders, and small business owners with 1 to 50 staff.

Key takeaways

1. Psychosocial hazards are a safety issue under the law, and every state and territory now regulates them.
2. In NSW, the Code of Practice for managing psychosocial hazards became an enforceable benchmark on 1 July 2026. A business must follow it or show its own approach is at least as good.
3. Serious mental health claims reached 17,600 in 2023 to 2024, up 14.7% in a year, with a typical 35.7 weeks off work.
4. Training, posters and an employee assistance program help, but regulators expect you to change the work itself first.
5. Leaders are under pressure too. Gallup found manager engagement worldwide dropped from 27% to 22% in 2025.
6. Small business owners carry both roles at once, and 57% report burnout.

What a psychosocial hazard actually is

A psychosocial hazard is anything in the design or management of work, or in how people treat each other at work, that could cause psychological harm. Sometimes it causes physical harm as well, because long periods of stress show up in the body.

The word sounds clinical, but the examples are ordinary. A roster that never lets anyone recover. A new system rolled out with a single email. A team member who gets shouted at by customers every shift. 

Psychosocial safety and psychological safety are different things

People swap these terms all the time, and it could cause real confusion.

Psychological safety is about trust inside a team. It describes whether people feel able to ask questions, admit mistakes, or disagree with the boss without fear of punishment. We have a practical guide to building it if that is what you are after.

Psychosocial safety is the legal and practical job of identifying workplace factors that could harm mental health, then reducing them.

Think of it like a house. Psychological safety is whether people in the house feel comfortable telling you they can smell smoke. Psychosocial safety is checking the wiring. You want both. A team that trusts you will tell you about hazards early, making the second job much easier.

What changed in 2026

The duty itself is not new. Australian safety law has long covered psychological health. What has changed is how specific and how enforceable the expectations are.

• Victoria’s psychological health regulations commenced on 1 December 2025, which means every state and territory now has explicit rules.
• In NSW, a change to the Work Health and Safety Act took effect on 1 July 2026. Approved Codes of Practice used to be guidance. Now a business must follow the Code or show its own approach gives equal or better protection.
• Regulators are busy. SafeWork NSW has reported more than 2,200 requests for service and over 190 incident notifications involving psychosocial hazards.

The numbers behind the rules

Safe Work Australia’s latest national figures explain why regulators have moved.

Look at the time off work. A psychological injury typically keeps someone away for most of a year, close to five times longer than other serious injuries.

The causes are worth knowing, too, because they show where a manager can act. Harassment and bullying account for 33.2% of serious mental stress claims, and work pressure accounts for 24.2%. Together, that is more than half, and both are things a team leader sees up close long before anyone lodges a claim.

Who is responsible for what

New managers tend to ask this as “am I personally on the hook for this?”

The short answer is that the main duty belongs to the business, but you are not a bystander. Safety law spreads responsibility across four groups.

A manager is usually a worker in the legal sense. A manager who makes decisions that affect the whole business, or a large part of it, may also count as an officer. In a small business, the owner is often both the officer and the manager, which we come back to further down.

Say you lead a team of six. Your director keeps adding projects and won’t replace the person who left. Where does that leave you?

Start with what you can control: priorities and deadlines within the team. Then tell your director in writing what the workload risk is and what you recommend, and keep a copy. Nobody expects you to conjure headcount, but you are expected to notice, act within your authority and escalate the rest.

The 14 common hazards

The national model Code of Practice lists the hazards that turn up most often. You do not need to memorise them. It helps to read them once and notice which ones make you think of a particular person or a particular week.

1. Job demands that are too high, or too low
2. Low job control
3. Poor support from managers or colleagues
4. Lack of role clarity
5. Poorly managed change
6. Inadequate reward and recognition
7. Poor organisational justice, meaning decisions that feel unfair or inconsistent
8. Traumatic events or material
9. Remote or isolated work
10. A poor physical environment
11. Violence and aggression
12. Bullying
13. Harassment, including sexual harassment
14. Conflict or poor workplace relationships

Hazards rarely travel alone. High demands with low control and little support is the classic combination, and it is far more harmful than any one of the three by itself.

A team hazard checklist

You could run this once a quarter, and again after any big change. Do it with your team where you can, because the law expects you to consult workers and because they know where the problems are better than you do.

☐ Has anyone regularly worked well past their hours in the last month, or is anyone covering a vacant role?
☐ Can people decide the order and pace of their own work, at least some of the time?
☐ Could each person tell you their top three priorities, and would their list match yours?
☐ When did each person last have a proper one-on-one with you?
☐ Is anything changing soon that people have heard about through rumour before hearing it from you?
☐ Are rosters, leave and the unpleasant jobs shared in a way people would call fair?
☐ Has good work been noticed out loud in the last fortnight?
☐ Is there anyone people avoid, joke nervously about, or go quiet around?
☐ Does anyone face aggression, abuse or distressing material as part of the job?
☐ Does anyone work alone, remotely, or on shifts where help is hard to reach?
☐ Have you written down the date, who you spoke to, what came up and what you’ll do? (Half a page is enough.) That last step matters more than it looks. If a regulator ever asks what you did, a dated half page beats a good memory.

Fix the work before you try to fix the worker

When someone is struggling, the instinct is to help that person cope. Send them to the employee assistance program, suggest a resilience workshop, tell them to take a day off. Those are kind things to do, and none of them changes what made the person unwell.

Regulators use the same priority order for mental health as for physical hazards. Remove the hazard if you can. If you cannot, change the work to reduce it. Only then rely on training, information and support services, and never rely on them alone.

Here are some examples of what psychological hazards you may have to address:

Who looks after the leader?

Everything so far asks more of managers. Scan for hazards, consult, redesign the work, keep records, escalate. All of it is reasonable, and all of it lands on people who are already carrying a lot.

Gallup’s 2026 State of the Global Workplace report quantifies that. In Australia, 21% of employees are engaged at work and about half say they felt a lot of stress the previous day. Globally, manager engagement fell from 27% to 22% in a single year, down nine points since 2022. Gallup also found that leaders are more likely than other staff to report daily stress, anger, sadness and loneliness, even though their overall wellbeing scores are higher.

Why the middle gets squeezed

A manager typically sits between two sets of demands. Pressure from above, such as restructures and budgets. And pressure from their team. A manager would normally absorb both and pass on a calmer version in each direction.

Sometimes situations also catch managers off guard. I.e., a team member is stretched, so you quietly take some of their work. Then another. Six weeks later your team’s hours look healthy, and yours do not. You have moved the hazard onto yourself, and it is still there.

Remember that you are a worker too. Every hazard on the list of 14 applies to your own role, too.

If you own the business, you wear every hat

A manager in a large organisation has a boss to escalate to, an HR team to call and a budget someone else worries about. A small business owner has none of those. You are the business with the legal duty, the officer who must ensure it is met, the manager who carries it out, and often the person serving customers.

The duty does not shrink with the size of the business. A cafe with four staff is covered by the same safety law as a bank. What changes is what’s reasonably practicable, so nobody expects a four-person cafe to run staff surveys and a wellbeing committee. A conversation, a few sensible changes and a page of notes will do.

How owners are travelling

The recent research depicts the following:

• A survey by the Council of Small Business Organisations Australia and CommBank found 76% of owners reported stress or anxiety and 57% reported burnout. In the same survey, 64% said profits were down from the previous year.
• The Australian Chamber of Commerce and Industry found 34% of small business operators had been diagnosed with a mental health condition in the previous year, compared with 21.5% of Australian adults generally.
• Xero’s research found 26% of Australian owners feel stressed about managing employee mental health most or all of the time.

ACCI’s chief executive Andrew McKellar put it bluntly: “Small business owners are human beings, and when they get overwhelmed, they break.”

There is one encouraging number in the COSBOA survey. Despite everything, 63% of owners said they were satisfied with their decision to start a business. Most owners still want to be doing this. What wears them out is carrying all of it alone.

A simple suggestion that could help you prioritise:

Most owner burnout comes from doing three jobs and noticing only one of them. This exercise could take about 30 minutes and a sheet of paper.

1. List everything you did last week. Go by what actually happened, including the 9pm invoicing and the Sunday roster.
2. Mark each task with one of four letters. K means keep, because only you can do it. D means delegate. S means systemise, where a template, checklist, or software could handle most of it. X means stop.
3. Count the hours beside each letter. Owners are usually surprised by how small the K pile is.
4. Pick one D and one S to act on this week or month. A plan to fix eleven things at once tends to fix none of them.
5. Write down what you’ll do with the time you get back. If you don’t decide, it fills with more work.

Looking after a small team when you are the whole management layer

The hazard scan earlier in this guide works for a team of three as well as it does for thirty. A few habits matter even more when the business is small.

Talk about the things everyone has already noticed. In a small team people can tell when cash is tight or the owner is stressed, and silence gets filled with worse guesses than the truth.

Be consistent about hours. Since 26 August 2025, employees of small businesses have had a legal right to disconnect. They can refuse to monitor or respond to contact outside working hours unless refusing would be unreasonable, so agree with your team on what counts as urgent.

Try not to become the counsellor. When a staff member is struggling with something personal, listen, adjust the work where you can, and point them to their GP or a support service. You can care a great deal and still not be the right person to treat it.

Get your own support in place as well. That might be a peer group, a mentor, a business adviser or a coach. Owners with someone to talk to tend to make better decisions about their staff.

Where leadership and management training fits?

The Institute of Applied Psychology teaches leadership and business by looking at how people think, behave and respond under pressure. Our BSB50420 Diploma of Leadership and Management and business courses build the skills this guide leans on: emotional intelligence, difficult conversations, coaching, and leading a team through change.

A qualification won’t meet your legal duties for you; only the changes you make at work can. Study gives you the confidence, foundations, techniques and the skill to make those changes well.

You can call 1300 915 497 to discuss your options or click here to download the course information.

If you would like to start smaller read The Accidental Manager and Imposter Syndrome and What Makes a Good Manager.

Disclaimer: Please treat this as general information only. It isn’t legal advice, and the rules differ a little between states and territories, so check with your regulator or an adviser about your own situation.

Frequently asked questions

Where to get support

• Lifeline on 13 11 14, any time, for crisis support
• Beyond Blue on 1300 22 4636, which also runs the NewAccess for Small Business Owners coaching program
• Your GP, who is the starting point for a mental health care plan
• Your state or territory safety regulator, for free guidance, templates and the Code of Practice that applies to you