The business case for psychological safety.


Double your investment.

In the dynamic landscape of the Australian business environment, the importance of prioritising psychological safety and addressing psychosocial hazards is paramount. A thriving business is not just about financial success but also hinges on the well-being and productivity of its workforce. This business case outlines the compelling statistical evidence supporting the implementation of strategies that foster psychological safety, emphasising how such initiatives can catalyze business growth.

“The best investment you can make is in the well-being of your people. A psychologically safe workplace isn’t just an ethical choice; it’s a strategic one with substantial returns on investment.” – Unknown

“The true wealth of a company lies not just in its balance sheet but in the psychological safety of its employees. A workplace that prioritises psychological safety reaps the dividends of resilient, engaged, and high-performing teams.”  

The Financial Returns

  1. Productivity Gains: Studies conducted by Safe Work Australia reveal that businesses promoting psychological safety experience a 22% increase in productivity. Employees who are disengaged are 53% more likely to take sick days. Employees who feel secure in their work environment are more engaged, creative, and collaborative, contributing to enhanced overall performance.

  2. Absenteeism Reduction: According to the Australian Bureau of Statistics (ABS), the economic impact of absenteeism due to mental health issues costs the Australian economy approximately $4.7 billion annually. By prioritising psychosocial hazard management, businesses can significantly reduce absenteeism, thereby safeguarding productivity and bottom-line results.


3. Talent Retention: The turnover costs associated with employee churn due to burnout and dissatisfaction are substantial. A study by Beyond Blue indicates that companies focusing on mental health and psychological safety experience a 12% higher employee retention rate, saving considerable recruitment and training expenses. Conversely, disengaged employees are 3xmore likely to leave an organisation resulting in an increase in recruitment, onboarding and training costs. 

4. Innovation and Creativity: A mentally healthy workplace fosters innovation. The University of New South Wales found that organisations promoting psychological safety witness a 47% increase in employees’ innovative ideas. This is crucial in staying competitive and adapting to the ever-evolving business landscape.

5. Legal and Reputation Risk Mitigation: Workplaces that neglect psychosocial hazards may face legal repercussions and damage to their reputation. The Fair Work Commission reports a rising number of workplace mental health-related disputes. Proactive management not only safeguards against legal issues but also enhances the company’s standing in the eyes of clients, investors, and potential employees. An example of one health organisation identified that one leader was the root cause of over 100 complaints which cost the organisation over $206million in litigation costs.

6. Customer retention and advocacy: 25% of staff say that they take out their frustrations on consumers. People Plus Science researched the correlation between psychological safety of staff and likelihood to recommend and found a strong correlation ie those teams that are psychologically safe received higher recommendation scores from customers.

7. Costs of disengaged staff: Disengaged staff cost 34% of their annual salary  (per year that they are employed).

8. Reputational costs: With public scrutiny on the rise, the reputational costs of organisations being “named and shamed” are huge. From organisations who seek investors, to those who have government grants and contracts. The costs of reputational damage are difficult to calculate.

Economic Costs

The intensifying focus on psychosocial hazards in the workplace is driven by the escalating costs associated with mental health issues among employees. Research consistently demonstrates a direct correlation between poor mental health and increased costs for employers, ranging from reduced productivity and higher absenteeism to elevated healthcare expenses. According to recent studies, the global economic impact of mental health conditions is projected to exceed $6 trillion annually by 2030. In Australia alone, the cost of mental health-related productivity loss is estimated to be around $220 billion per year. Smart employers are recognising that addressing psychosocial hazards, such as workplace stress, harassment, and inadequate mental health support, is not only a moral imperative but also a strategic investment in the overall well-being of their workforce. By proactively tackling these issues, organisations can mitigate the financial burden associated with mental health challenges and create environments that foster employee resilience and productivity.


Psychosocial hazards encompass a broad range of factors in the workplace that can adversely affect the mental health and well-being of employees and customers. These hazards include but are not limited to excessive workload and unrealistic job demands, which can lead to chronic stress and burnout.

Workplace bullying and harassment, whether verbal, physical, or online, are also significant psychosocial hazards that can create a hostile and emotionally harmful environment.

Poorly managed organisational change, such as restructuring or downsizing, can contribute to uncertainty and job insecurity, amplifying stress levels. Insufficient support from management, inadequate communication, and a lack of clear organisational policies on mental health can further exacerbate psychosocial hazards.

Additionally, the absence of work-life balance, discrimination, and stigma surrounding mental health issues contribute to a challenging and potentially harmful workplace atmosphere. Recognising and addressing these diverse psychosocial hazards is crucial for creating a supportive and mentally healthy work environment.

What do you need to do as an employer?

 To prevent work-related mental health injuries, employers shoul
  • Promote a positive workplace culture that encourages trust, respectful behaviours and quality communication.
  • Consult with employees, customers, suppliers, contractors when identifying and assessing any risks to their psychological health and determining the appropriate control measures.
  • Implement policies and procedures for reporting and responding to psychosocial hazards such as workplace trauma, bullying, interpersonal conflict, violence and aggression; and reviewing and updating risk controls following any incidents.
  • Regularly ask employees how they are, encourage them to discuss any work-related concerns and, where required, implement suitable support and controls.
  • Have systems in place for workforce planning and workload management to ensure that employees have sufficient resources and a realistic workload.
  • Develop skills for leaders through coaching, mentoring and training to improve the support of employees.
  • Seek and act on feedback from employees during any organisational change process.
  • Inform workers about their entitlements if they become unwell or unfit for work.
  • Provide appropriate and confidential channels to support workplace mental health and wellbeing, such as Employee Assistance Programs.
  •  Evaluate the success of programs implemented to see if they have any impact.

What do we do as a board, oversight committee?

If you are a board, an oversight committee, an advisory board then you have a large responsibility. 

1. Accept accountability – how many boards have done a psychosocial hazard assessment. How many have viewed that of their organisation. How many can identify high risk teams? Or identify the high risk, high frequency hazards? How many can say that their employees (at all levels) feel safe to report bad news?

2. Understand the legal and regulatory frameworks.

3. Get independent reviews of the psychological safety and psychosocial hazards within the organisation.

4. Look at ensuring that you are looking “lead” indicators within your organisation and not lagging indicators.

5. Focus on lead indicators not lag indicators. Culture is not a lead indicator – it is a lag indicator. Engagement is not a lead indicator it is a lag indicator.

6. Assess the psychosocial risks of your customers and your employees. What psychosocial risks are your customers exposed to as a result of your employee’s behaviour? Your inadequate processes and systems? Your lack of training.

7. Train staff. What “essential” skills training have your leadership team being exposed to in the last 12months? What essential skills have you identified as being critical.

8. Ensure your policies and procedures work in practice. Combine other organisational knowledge. For example – having the right policies and procedures will not help you if your team leaders and organisations have low levels of trust. It is a tick box exercise with no foundations. Have you tried and tested the processes and policies you say will “stand up”?

The good news is that if you can get the “people stuff” right, your reliance on governance, risk management and policies and procedures reduce. 

If as a board you think that cyber security, environment, financial risk, fraud, physical safety or innovation is the biggest concern – think again – all of these risks are driven by people. Performance is reliant on your people. Start there.

” There is a real opportunity for organisations who embrace this new law. Whilst looking from a compliance view it can be hard to find the silver lining. If you take a “people first approach to performance – the rewards are great – business growth is accelerated whilst risk is reduced. Even the numbers support a change”.  Carolyn Grant

Interested in Learning More?

Book a briefing on psychological safety today. Mitigate your greatest risk and drive high performing, thriving teams.