As a leader, you are not only responsible for guiding your team but also ensuring that your company complies with legal frameworks that safeguard your employees’ wellbeing. But what if you also wear the hat of a company director, or if you report to a board that expects you to manage risks effectively? How does your leadership role intersect with your responsibilities under the Code of Practice for Psychosocial Risk Management?
In this part of our series, we’ll explore the specific responsibilities and risks company directors face when it comes to compliance with this code. Whether you’re a business leader also acting as a director or part of a larger organisation with a board, understanding your legal obligations is crucial for protecting both your employees and your company from risks that could have far-reaching consequences.
Company directors have significant responsibilities and risks when it comes to complying with the Code of Practice for Psychosocial Risk Management in the workplace. Their duties extend beyond simple legal compliance to ensuring a safe, supportive, and productive environment for employees. Here’s an overview of these responsibilities and the associated risks:
Responsibilities of Company Directors:
- Duty of Care:
- Directors have a duty of care to ensure the health, safety, and wellbeing of all employees. This includes identifying and managing psychosocial risks (stress, bullying, harassment, etc.) to prevent workplace injury and harm.
- Under occupational health and safety (OHS) laws, they are legally obligated to eliminate or minimise risks to employees’ mental and physical health, including psychosocial hazards.
- Risk Management:
- Directors must establish processes to assess and control psychosocial risks in the workplace, in line with the Safe Work Australia Code of Practice for Psychosocial Risk Management.
- They should ensure that any risks identified are mitigated through proactive strategies, such as employee wellbeing programs, management training, and adequate support systems.
- Employee Engagement:
- Directors are responsible for fostering a positive workplace culture where employees feel valued, supported, and heard. This includes addressing issues such as workplace bullying, harassment, and poor leadership, which contribute to psychosocial risks.
- Directors should ensure that there are systems in place for employees to raise concerns confidentially and be confident they will be addressed.
- Compliance with Legislation:
- Directors must ensure that their organisation complies with the Code of Practice and relevant legislation, such as the Work Health and Safety (WHS) Act. Non-compliance can lead to significant legal consequences, including fines, penalties, and reputational damage.
- Regular Review and Monitoring:
- Directors are responsible for ensuring the organisation regularly reviews its psychosocial risk management practices. They must monitor progress, address emerging risks, and update policies and training as necessary.
- It is also essential to report to regulators and stakeholders on the effectiveness of psychosocial risk management strategies.
- Providing Training and Resources:
- Directors should ensure that employees, especially managers, receive proper training in psychosocial risk management, leadership, and conflict resolution.
- Providing the necessary tools and resources to effectively manage psychosocial risks is also a key responsibility.
Risks for Company Directors:
- Legal Liability:
- If the company fails to comply with the Code of Practice, directors could be held personally liable for breaches of their duty of care, especially if non-compliance leads to mental injury, employee complaints, or legal action.
- Under OHS laws, directors may face fines, penalties, or criminal charges for failing to provide a safe workplace. In serious cases, directors could be prosecuted if they are found negligent in managing psychosocial risks.
- Financial Risk:
- Failing to address psychosocial risks can result in financial consequences, including fines, compensation claims from employees for stress-related injuries, legal fees, and loss of productivity due to poor employee engagement and high turnover.
- Psychosocial risk factors, such as high levels of stress, bullying, and harassment, can lead to burnout and absenteeism, directly affecting the company’s bottom line.
- Reputational Damage:
- Non-compliance with the Code of Practice and failure to adequately address psychosocial risks can harm the company’s reputation. This can negatively affect employee morale, retention, and attract criticism from the public, customers, or regulators.
- A poor reputation around employee wellbeing and mental health could lead to difficulty in attracting top talent and may damage customer trust.
- Decreased Productivity:
- Unaddressed psychosocial risks can lead to disengagement, reduced performance, and lower morale. Employees who are stressed, bullied, or unsupported may be less productive and more likely to leave, which in turn affects overall organisational performance.
- Managers, when not supported in managing psychosocial risks, may experience burnout or conflict, leading to further disruption.
- Litigation Risk:
- Employees who suffer from psychosocial hazards like bullying, harassment, or chronic stress may file complaints or legal claims against the organisation, which can lead to significant legal costs and compensation.
- Failure to comply with the Code of Practice could make it more difficult to defend such claims in court.
How to Mitigate Risks:
- Establish clear policies and practices that align with the Code of Practice, ensuring psychosocial risks are identified, assessed, and mitigated.
- Engage employees in wellbeing initiatives, offer training, and create a transparent communication channel for raising concerns.
- Regularly review policies to ensure they are up to date and effective in reducing psychosocial risks.
- Promote a supportive work culture that encourages managers to take proactive steps in managing stress, conflict, and wellbeing.
- Implement a strong reporting and feedback system that helps identify psychosocial hazards early.
By actively addressing psychosocial risks, company directors not only ensure compliance with the Code of Practice but also foster a healthier, more engaged, and productive workforce, thereby reducing the risk of legal and financial consequences.
As you reflect on how these concepts can apply to your organisation, I encourage you to take action – start implementing the 3 Vital Questions: Transforming Workplace Drama strategies today to see immediate improvements in leadership, team dynamics, and overall productivity.
Are you ready to make a shift in how your team operates? Begin with small steps: engage in a 5-Step Action Planning Consult with me, encourage open dialogue, and embrace the empowering roles of Creator, Coach, and Challenger in your daily work. Lead the way for your team by becoming a role model for change.
To dive deeper into these concepts and start integrating TED*® and 3VQ® into your organisation, reach out to me for personalised coaching, workshops, and resources that will help you create the thriving culture your team deserves.
Ready to get started? Contact me today, and let’s discuss how we can build a better, more empowered organisation together!
Next: Part 3 – How Can Business Leaders Balance Compliance With Engagement?
Balancing compliance with engagement can be a challenge for leaders, especially when legal frameworks, such as the Code of Practice for Psychosocial Risk Management, require strict adherence to policies and procedures. However, it is possible to create a work environment that is both compliant with regulations and actively fosters high employee engagement.