How Large Format Retailers may be impacted by new psychosocial regulations

All Australian jurisdictions have introduced strengthened work health and safety (WHS) regulations requiring employers to proactively manage psychosocial hazards. For retailers, this is particularly significant as the retail environment exposes employees to a wide range of psychosocial risks on a daily basis.

The reforms clarify that psychological health must be managed using the same risk management approach as physical hazards. Retailers must identify psychosocial hazards, assess associated risks, implement control measures, and regularly review their effectiveness.

Psychosocial hazards in the retail environment

Retail workers face a distinctive set of psychosocial hazards that are now squarely within scope of the regulations and could include:

• Customer-facing aggression and abuse
• High workload and understaffing
• Fatigue
• Poor role clarity
• Workplace bullying and harassment
• Sexual harassment
• Solo work
• Exposure to distressing events

Business risk implications

The regulations have direct implications across several core risk categories for retail businesses:

• Legal and regulatory risk: Failure to identify and control psychosocial hazards can lead to regulatory investigations, improvement or prohibition notices, enforceable undertakings, prosecutions, and significant fines.
• Employment risk: Poorly managed psychosocial hazards increase claims of bullying, harassment, discrimination, unfair dismissal, and breaches of the employer’s duty of care, which can escalate into formal disputes or litigation.
• Financial and operational risk: Psychological injuries are typically long-tail in nature and more costly than physical injuries. They can result in higher insurance premiums, prolonged absences, decreased productivity, and legal action.
• Reputational and ESG risk: Psychosocial harm, particularly harassment, burnout, or unsafe cultures, can attract regulator attention, media scrutiny, union action, and brand damage.
• Governance and leadership risk: Boards and senior management are now expected to demonstrate active oversight of psychosocial risk, with failures increasingly framed as systemic governance weaknesses that they can be held accountable for.

Impact on your insurance program

Depending on how a claim or regulatory action is framed, several policies in a typical retail insurance program may respond. These are outlined in the table below.

Policy Type	Impact
Workers Compensation	Psychological injury claims increase frequency, duration, and premium costs. SafeWork Australia reports psychosocial injury claims have risen 160% over the past decade and accounted for 12% of serious workers compensation claims in 2024. Median cost is 4x higher and time off work 5x longer than physical injuries.
Employment Practices Liability	Bullying, harassment, discrimination and unfair dismissal claims trigger EPL policies. Claims have increased substantially over the past two years. It is anticipated that psychosocial hazards in the workplace will lead to an increase in EPL claims which are becoming more costly to defend.
Directors and Officers / Management Liability	Regulatory investigations or claims alleging failure of oversight can be directed at individual directors or the company.
Statutory Liability	Regulatory investigations and prosecutions against the company may trigger Statutory Liability policies. Whilst defence costs are likely to be covered it is important to note that fines and penalties under WHS legislation are not insurable and must be borne by the Company.

 

These regulations require active, ongoing and documented management. Insurers will increasingly expect businesses to provide evidence of proactive psychosocial risk governance, from board oversight through to operational controls and regular training embedded across the workforce.

If you would like to discuss the new regulations and any impact they may have on your insurance program, please reach out to your Edgewise broker.

Vanessa Collins is Head of Affinity with Edgewise Insurance Brokers