An Employer’s Guide to Managing Psychological Claims

Psychological claims are becoming increasingly common in Australian workplaces. In 2023–2024 alone, mental health conditions accounted for 17,600 serious workers’ compensation claims nationwide, representing 12% of all serious claims. When managing psychological claims, the way an employer responds from the first conversation can influence the worker’s trust, engagement with the workplace and eventual return-to-work outcome. This is particularly important as psychological claims often involve sensitive information that may include workplace conflict, allegations, uncertainty or concerns about returning to the same work environment.

As an employer, it is not your job to diagnose the condition or decide whether a claim should be accepted. Your role is to respond appropriately, meet the business’s legal and procedural obligations, address any workplace risks and help facilitate a safe return to work.

1. Set the Tone from the First Conversation

The way in which an employer responds initially can set the tone for how the worker experiences the entirety of the claim. Having a calm and respectful conversation with your employee can help to reduce uncertainty. On the other hand, approaching the conversation with disbelief, defensiveness or silence may increase feelings of distress and damage the working relationship.

Listen without Investigating

Rather than using the first meeting as a means of trying to informally investigate the employee, give the employee an opportunity to provide you with any additional information you may need to know. You should also avoid challenging the person’s account by asking them to prove how they feel or debate whether their work conditions could have caused their condition.

If allegations or workplace conduct concerns have been raised by the employee, you should note down the information accurately and explain how they will be handled. Any formal investigation that needs to be undertaken should be done so separately and conducted in a fair, impartial and psychologically safe manner.

Establish Immediate Safety and Support

It is important as an employer that you ask whether the worker feels safe and whether any immediate workplace arrangements need to be made. Depending on the circumstances, this could involve temporarily adjusting reporting lines, limiting contact with the other party, allowing flexibility to work from home or allowing the worker to leave the workplace safely.

If there is an immediate risk of harm, follow your business’s emergency procedures and arrange the appropriate professional assistance required. An Employee Assistance Program (EAP) can also provide useful short-term support. It is important to note that this shouldn’t replace any necessary care or the workers’ compensation process but instead be an additional offering of support for the employee.  

Explain What Happens Next

Uncertainty can create additional stress for the worker. To help reduce this you can tell the worker:

• Who will be their main workplace contact.
• What documentation or forms may be required.
• When the insurer or claims agent will be notified.
• What the employer can and cannot decide.
• How their information will be handled.
• When they can expect the next update.

Do not promise the worker that their claim will be accepted or suggest that it is unlikely to succeed. The relevant insurer or authority determines liability under the applicable workers’ compensation scheme.

2. Create Structure around the Claim

Managing psychological claims becomes much more difficult when responsibilities are unclear or the worker receives inconsistent communication. A coordinated, efficient process reduces unnecessary contact and allows everyone to focus on the person’s recovery and implementing practical next steps.

Choose the Right Workplace Contact

Nominate one person to coordinate communication with the worker, insurer and any relevant internal stakeholders. This may include a return-to-work coordinator, human resources representative or a suitably trained member of management. The worker’s direct manager, however, may not always be the most appropriate contact, particularly if they are involved in the events of the claim. If this is the case, appointing an alternative contact can help make the worker feel safe and reduce the potential for further conflict to occur.

Agree on the preferred communication method and frequency with the worker. Some workers may value regular telephone contact, while others may find written updates much easier to manage. The aim is to maintain contact and connection with the worker in an appropriate way that doesn’t overwhelm them or stop them from making contact altogether.

Protect Privacy while Keeping Work Moving

Information regarding a person’s injury should only be shared with people who genuinely require it to perform their role. For example, a manager may need to understand the worker’s capacity, agreed adjustments and what communication arrangements are put into place. They usually don’t need to have access to detailed clinical information involving the psychological injury.

If the employee’s colleagues ask questions, you should only provide operational information if it is required, for example, if a person’s duties have been temporarily reassigned. Do not discuss the worker’s diagnosis, treatment or claim circumstances unless the worker has authorised the disclosure and there is a legitimate reason to share it.

Keep all claim records secure and separate sensitive health information from general personnel records where required by your organisation’s systems and applicable privacy obligations.

Manage the Claim and Workplace Response in Tandem

An insurer’s decision and the employer’s duty to provide a safe workplace are separate matters. As an employer, you should not wait until a claim determination before considering whether a reported psychosocial hazard requires action.

Review the circumstances through an objective lens. Relevant factors may include:

• Excessive or conflicting job demands.
• Poor role clarity or inadequate support.
• Exposure to traumatic events or material.
• Bullying, harassment or interpersonal conflict.
• Organisational change that has been poorly managed.
• Remote or isolated work.
• Inappropriate behaviour from clients, customers or members of the public.

Interim controls may be appropriate while the organisation is gathering information. These may include altered duties, revised work priorities, extra supervision or a temporary change in reporting arrangements. These control measures should address the risk without isolating, penalising or prejudging the worker.

3. Turn Medical Capacity into a Workable Plan

Employers generally need information about what the worker can do safely, any relevant restrictions and the adjustments that may support their recovery. With the appropriate authority and consent, the employer, insurer and workplace rehabilitation provider may seek clarification from the treating practitioner. Questions asked should be functional and work-related, such as:

• Can the worker communicate with customers or manage conflict at present?
• Would reduced hours or additional breaks be appropriate?
• Are there particular duties or workplace interactions that should be avoided temporarily?
• What signs may indicate that the current plan needs to be reviewed?

Design Suitable Duties around Psychological Demands

Suitable duties for a psychological injury require more thought than simply reducing an employee’s hours. The plan should consider the demands of the work, the environment in which it is performed and any workplace factors connected with the injury.

Adjustments may include:

• A gradual increase in hours or days.
• Temporary changes to workload, deadlines or performance expectations.
• Predictable tasks and clearer priorities.
• Reduced exposure to distressing content, high-conflict interactions or triggering situations.
• A different work location or temporary reporting arrangement.
• Time off for treatment appointments.
• Scheduled check-ins with one nominated person.
• A staged reintroduction to the worker’s usual responsibilities.

Suitable duties should still be meaningful. Giving the worker no purposeful tasks, excluding them from normal communication or giving unclear expectations can undermine confidence and reinforce a sense of disconnect.

Review the Plan as Recovery Changes

Recovery from a psychological injury can fluctuate, so an arrangement that worked two weeks ago may no longer be suitable. Set regular review dates to check how the worker is progressing and adjust the plan as needed, rather than waiting until the arrangement stops working.

At each scheduled review, ask questions like:

• What is working well?
• Are there any tasks or interactions that are difficult?
• Has the worker’s certified capacity changed?
• Are the agreed workplace controls working as intended?
• Does the manager need further guidance?
• What is the next safe and realistic progression?

Document changes and ensure the relevant people involved understand them. A workplace rehabilitation provider can assist businesses when barriers are complex, communication has broken down, or the workplace needs help in translating medical restrictions into suitable duties.

Common Missteps That Can Make a Psychological Claim Harder to Manage

Even well-intentioned actions can create additional barriers for employees. As an employer, you should avoid:

• Asking the worker to repeat distressing information to multiple people.
• Allowing the person named in a complaint to manage all communication with the worker.
• Pressuring the worker to return before appropriate capacity and workplace risks have been considered.
• Cutting off contact completely because the employer is unsure what to say.
• Seeking more medical information than is reasonably required.
• Sharing claim details with colleagues who do not need to know.
• Assuming reduced hours alone will make the original work environment safe.
• Waiting for claim acceptance before addressing a reported workplace hazard.
• Applying one state’s claim procedure across an entire national workforce.

When managing psychological claims, clear communication, appropriate privacy and early risk management can reduce avoidable uncertainty and help maintain the worker’s connection with the organisation. Just as importantly, employers should recognise when specialist support is needed rather than allowing a complex claim to drift.

Recovery Partners works with employers, workers, insurers and treating practitioners to identify barriers, coordinate psychological rehabilitation and develop practical, sustainable return-to-work strategies.