Mental injury claims and psychosocial hazards for NSW self-insurers

It is crucial that self-insurers learn to identify and manage psychosocial hazards. Workers’ compensation claims for mental injury can have a significant impact on the financial health of self-insurers, noting that changes to Work Health and Safety regulations have increased the level of responsibility for employers.

Mental injury claims

As reported by the State Insurance Regulatory Authority (SIRA) and Safe Work Australia, the number of claims for mental injury in NSW has increased materially since 2015/16. The graph below shows the number of major claims (where at least one week of weekly benefits have been paid) across NSW, as well as the proportion that are due to mental injury.

NSW Workers’ Compensation | Major claims

The proportion of major claims relating to mental injury is lower for self-insurers than for NSW employers overall (both insured and self-insured), but shows similar upwards trends. For all employers, the mental injury proportion grew from around 7% of major claims in 2015/16 to 12% in 2020/21. In the last two years the proportion has been volatile, and this may be linked to interactions with COVID-19 and the availability of other leave types.

Mental injury claims can have a significant financial impact for self-insurers, noting that SIRA reports for self-insurers:

• The average number of days weekly benefits are paid in the first six months of injury is around 25 days across all major claims, but around 50 days for mental injury major claims

• The average weekly benefit cost of mental injury claims is almost three times that of other injury types, with average costs of around $32k compared to $12k for all claims receiving weekly benefits.

What are psychosocial hazards?

Psychosocial hazards in a workplace are aspects of work and situations that may cause a stress response which in turn can lead to a psychological harm. These may stem from:

• The way tasks or a job are designed, organised, managed and supervised

• Tasks or jobs where there are inherent psychosocial hazards and risks

• The equipment, working environment or requirements to undertake duties in physically hazardous environments

• Social factors at work, workplace relationships and social interactions.

Common hazards which may contribute to psychological harm include:

Regulatory change

Under the Work Health and Safety Act , employers have a primary duty to ensure, so far as is reasonably practicable, the health and safety (including psychological health and safety) of workers while working.

Recent changes to the Model WHS Regulations clarify the obligations on employers to identify, manage and monitor psychosocial risks, and a detailed Code of Practice outlines how this can be achieved. The regulations came into effect in NSW in October 2022 and have now been adopted in almost all states and territories. The October 2022 amendment introduces a new Division specifically defining psychosocial hazards and risks. It also introduces a positive duty to introduce control measures to eliminate (or if this is not possible, to minimise) psychosocial risks, as far as is reasonably practical.

Psychosocial hazard assessment – a practical lens

If all of this sounds complicated, don’t panic! Most workplaces will inevitably have psychosocial hazards, and many employers will already have measures in place to minimise the impact of the most obvious psychosocial risks.

The Code of Practice outlines the following risk management steps:

The importance of consultation with employees cannot be overstated – there may be hazards and risks that management are unaware of, and employees who are experiencing them are likely to have ideas about how they can be mitigated. Embarking on a psychosocial risk assessment should be regarded as an opportunity to better understand and build trust with employees.

There are many approaches to consultation, but anyone likely to be impacted by a psychosocial hazard should be included, and the Code of Practice prescribes that WHS representatives be included. Approaches include:

• Surveys: there are excellent survey tools that not only identify risks but also evaluate them in terms of the severity, frequency and duration of exposure

• Discussions: depending on the size and nature of the business, discussion groups and consultative forums can be useful ways to understand risks.

It is important to document all of the identified risks and prioritise them in terms of the extent of the harm caused, by considering:

Managing psychosocial hazards

Following risk assessment, employers need to be prepared to develop an action plan. Not all risks can be eliminated, and effective minimisation can take time and may involve some changes to the way jobs are designed or the way work is allocated. This is a long-term commitment and it is critical to be transparent with employees.

The most effective mitigation strategy is often to ensure that there is a ‘safe system of work’ which ensures that employees and supervisors are educated in risk recognition; it also includes having clear pathways for reporting concerns, as well as agreed behaviour standards. Training of front-line supervisors is critical to ensure appropriate responses and to assist the business to minimise risks.

The Code of Practice provides a number of examples of common risks and strategies to mitigate them.

It is important for employees to know that they can voice their concerns and be heard, and that management is keen to minimise psychosocial risks. When this is the case, workers who may have otherwise lodged a workers’ compensation claim may instead take action and receive support before they become unwell.

How can we help?

Finity has significant experience and expertise in:

• Providing data analytics and actuarial advice to satisfy regulatory requirements and to help understand the key drivers of claim costs, including analysis of mental injury claims and their impact on a self-insurer’s total cost of claims.

• Facilitating workshops and providing support for boards and senior management to identify, understand and manage key mental health risks.

Learn more about our Self-Insurance practices.