Psychological safety and risk management for leaders

Following the introduction of the Work Health and Safety Act 2020, the role of leaders in Australian workplaces has transcended traditional boundaries.

Their scope of responsibility has expanded, encompassing not only employees’ physical safety but also the crucial aspect of psychological health and wellbeing.

Francis Burt Chambers Barrister Cavaliere Maria Saraceni, along with Data Drives Insight Co-Founder and Counselling Psychologist Abby Hunt, put the spotlight on psychological safety in Australian workplaces, outlining the challenges and opportunities that lie ahead for leaders.

Distinguishing psychosocial risks from psychological safety

Ms Hunt, who is the Co-Creator of the Psychological Safety and Inclusivity (PSI) Indicator, said it was crucial to first understand the distinction between psychological safety and psychosocial hazards.

“Psychosocial hazards stem from the work design, organisation and management, as well as the economic and social contexts that may negatively affect employees’ mental health,” she said.

“In comparison, psychological safety relates to the comfort employees feel in taking interpersonal risks such as expressing new ideas or admitting mistakes.

“They are related because if someone doesn’t feel psychologically safe, it may grow into a psychosocial hazard.

“However, psychological safety extends beyond just hazards and risks – it’s the key ingredient for innovation and performance.”

A legal lens on psychological safety

Almost two years since the Work Health and Safety Act’s introduction, Cavaliere Saraceni shed light on the proactive obligations it imposed on employers and other persons conducting a business or undertaking (PCBU).

“It requires that risks to health and safety are eliminated and where this cannot occur, they must be minimised, insofar as is reasonably practicable,” she said.

Cavaliere Saraceni said corporate officers now had a positive legal obligation to ensure their organisations complied with health and safety laws.

This encompassed taking reasonable steps to stay informed about health and safety matters, understanding the business, hazards and associated risks, as well as managing risks effectively, including ensuring appropriate resources and processes are in place.

Failure to meet these obligations could not only result in harm to the physical and psychological health of workers and/or others but risk severe penalties for individuals and companies.

“Individuals may face fines from $55,000 to $680,000 and up to five years in jail, while a corporate entity or PCBU could be fined between $570,000 and $3.5 million.”

“In cases of industrial manslaughter, penalties increase significantly, with individuals potentially facing up to $5 million in fines and 20 years in jail, and companies up to $10 million," Cavaliere Saraceni said.

“Exemptions are very limited, mainly applying to volunteers and voluntary associations.”

A recent precedent in Victoria underscored these consequences, with a record fine imposed on Dennis Jones Engineering and its director Dennis Jones for reckless endangerment of life after an apprentice suffered horrific injuries at work.

The company was fined $2.1 million and Mr Jones received a $140,000 fine and a five-year community correction order, which includes 600 hours of unpaid community work.

Cavaliere Saraceni warned the legislation, the regulations and the codes of practice were designed to cover a broad range of scenarios without loopholes.

She said business agreements or contracts, which attempted to transfer legal responsibilities under the Act were invalid.

Further, insurance policies can no longer cover fines resulting from breaches of the Act but may cover legal defence costs.

Practical steps for leaders

Ms Hunt said psychological safety’s benefits and potential were untapped due to its invisibility.

“People’s ideas, beliefs, concerns and fears are invisible and remain when the environment isn’t perceived as highly psychologically safe,” she said.

“It’s essential to bring these to light, so we then get a chance to do something about them.”

To this end, Ms Hunt highlighted the effectiveness of data-driven approaches in enhancing psychological safety, urging the frequent measurement of workplace teams’ psychological safety and psychosocial risks.

“There are so many risks and hazards at work, it’s not reasonable to measure every single one, however, it’s not about eliminating them – it’s often about identifying which ones might be playing out and having an impact at that point of time,” she said.

“I would recommend measuring less but doing it more frequently to get ahead of any issues that might be overlooked in annual audits or staff surveys.

“For instance, in remote settings, you may want to focus on isolation and connection, but while in office environments, it may be important to assess the openness to new ideas and welcoming of learning from mistakes.”

She said the PSI Indicator provided real-time insights into team dynamics, including psychosocial risks such as workload and work-life balance, and empowered leaders and teams to identify and address issues affecting their psychological safety.

Pointing to an example, Ms Hunt said in one culturally diverse team, the PSI Indicator surprisingly revealed that 70 per cent of members felt unaccepted due to their differences.

“Open discussions about this issue led to transformative actions, improving the team’s overall satisfaction and respect,” she said.

Also providing advice for leaders to adopt a proactive approach, Cavaliere Saraceni said while the WA Work Health and Safety (General) Regulations 2022 Chapter 3, Division 11 provided the legal framework for managing psychosocial risks, WorkSafe WA had issued a Code of Practice providing practical guidance to best meet statutory obligations.

“The code sets out practical guidelines for managing psychosocial hazards in the workplace including developing and maintaining a positive workplace culture, demonstrating visible leadership commitment, implementing supportive work practices, and having leaders and managers model appropriate behaviours,” she said.

“Additionally regular training is essential, along with appropriately addressing individuals who create or maintain a toxic workplace culture.

“Safety professionals cannot do this without consulting with human resource practitioners whose remit in the workplace, insofar as psychosocial risks are concerned, is symbiotically entwined with theirs.”

The integration of psychological safety and risk management is not merely a legal requirement, it’s a fundamental aspect of fostering a thriving, innovative and inclusive workplace.

Leaders who adeptly navigate these waters, leveraging both legal knowledge and practical tools, can create environments where every employee’s wellbeing is valued and safeguarded.