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When Performance Management Becomes a Psychosocial Hazard or Risk

Performance Management as a Psychosocial Hazard: WHS Obligations for Employers

Performance management has always been treated as a core HR function.

Set expectations.
Address underperformance.
Improve outcomes.

But that traditional view is now incomplete.

In today’s regulatory environment, performance management is not just an HR process.
It is a work health and safety obligation.

And if it is handled poorly, it can expose organisations to serious psychosocial risk.

The Shift: From HR Process to WHS Risk

Across Australia, employers now have a positive duty to eliminate or minimise psychosocial risks so far as reasonably practicable.

These risks include:

  • Work-related stress
  • Bullying and harassment
  • Exposure to unreasonable management action
  • Poorly managed workplace conflict

Performance management sits right in the middle of all of this.

Done well, it provides clarity and support.
Done poorly, it can become one of the most significant sources of psychological harm in the workplace.

Where Performance Management Goes Wrong

From what we are seeing across complaints, disputes, and litigation, the same patterns continue to emerge.

  1. Lack of clarity

Employees are told they are “underperforming” without:

  • Clear expectations
  • Measurable benchmarks
  • Specific examples

This creates uncertainty and anxiety rather than improvement.

  1. Inconsistent application

One employee is performance managed aggressively.
Another is not addressed at all.

That inconsistency can:

  • Undermine trust
  • Trigger perceptions of bias
  • Escalate into bullying complaints
  1. Escalation without support

Performance concerns move quickly to:

  • Formal warnings
  • Performance improvement plans
  • Disciplinary processes

Without genuine support, coaching, or opportunity to improve.

The lack of procedural fairness can be quite legally fatal.

At that point, the process starts to feel punitive rather than developmental.

  1. Ignoring warning signs

This is where the WHS lens becomes critical.

Employees subject to performance management may show:

  • Signs of distress
  • Increased absenteeism
  • Withdrawal or disengagement

If those signs are ignored, the risk is no longer just HR-related.
It becomes a health and safety issue.

  1. Lack of Management Training

Many managers are expected to run performance processes without:

  • Training
  • Guidance
  • Understanding or detailed knowledge of current policies and procedures in place
  • Good understanding of what is reasonable management action
  • Understanding of psychosocial risk

This is where well intentioned action can quickly become harmful.

The Emerging Risk Area

We are now seeing increasing scrutiny on:

  • How performance management processes are designed
  • Whether managers are trained to deliver them
  • Whether psychosocial risks are actively identified and managed

This is not theoretical.

Regulators are making it clear that:

  • Psychological health is workplace health
  • Systems of work must account for it
  • And that includes performance management systems

What Good Looks Like

If performance management is going to sit safely within a WHS framework, it needs to be structured properly.

That means:

✅ Clear expectations

Employees understand what success looks like.

✅ Evidence-based concerns

Issues are documented and specific.

✅ Procedural fairness

Employees have a genuine opportunity to respond.

✅ Support mechanisms

Training, coaching, and resources are provided and understood.

✅ Manager capability

Leaders are trained not just in process, but in:

  • Communication
  • Risk identification
  • Escalation pathways
  • Their own personal legal liability

✅ Psychosocial risk awareness

Performance processes are monitored for impact, not just outcome.

The Bottom Line

Performance management is not going away.

But the way it is approached must evolve.

Because:

  • The risk is no longer just getting the process wrong.
  • The risk is causing harm while doing it.

Final Thought

If a regulator or tribunal looked at your performance management processes tomorrow:

  • Would they see a structured, fair system?
  • Or a source of unmanaged psychosocial risk?

What Now?

If you are not sure where your organisation sits, now is the time to find out.

Our Employment Law Health Check includes a targeted review of:

  • Performance management frameworks
  • Manager capability
  • Psychosocial risk exposure

Check out the Employment Law Health Check which can help understand your risks.

Also feel free to reach out on 07 4936 9100 or via email to Jonathan Mamaril, Director at jmamaril@southgeldard.com.au.  All Employers receive an obligation free consultation.