Workplace conflict is now formally classed as a psychosocial hazard under Australian work health and safety law. As of 1 December 2025, every state and territory has an enforceable framework that names poor workplace relationships and conflict alongside bullying, harassment and unmanaged workload. From 1 July 2026, New South Wales went further, turning its Code of Practice: Managing Psychosocial Hazards at Work into an enforceable legal benchmark rather than guidance.
If your business has no defined process for identifying and resolving conflict, that is a gap in your WHS obligations, regardless of your size.
What’s considered unresolved conflict?
Psychosocial hazards are workplace factors that can cause psychological or physical harm. They sit alongside physical hazards like faulty equipment or unsafe manual handling, but they are about how work is organised, managed and experienced rather than physical conditions.
The national model Code of Practice lists poor workplace relationships and conflict as a recognised psychosocial hazard, in the same category as bullying, harassment, high job demands and exposure to workplace violence.
This framework was not built overnight. Queensland and Western Australia adopted psychosocial hazard regulations first. New South Wales rebuilt its WHS Regulation around psychosocial risk in August 2025. Victoria brought its own Occupational Health and Safety (Psychological Health) Regulations into force on 1 December 2025, closing the last gap. Every Australian employer now carries the same underlying duty, whichever state they operate in.
The health and safety risk
Once conflict is classed as a hazard, it triggers the same legal duty as any other WHS risk: identify it, assess it, control it, and review those controls over time.
That changes what “we’ll sort it out ourselves” actually means. A disagreement between two staff members that runs unmanaged for months is not just an awkward office dynamic. It’s an unassessed hazard sitting inside a business that has a legal duty to assess it.
Regulators are treating this as a genuine safety issue rather than a soft HR concern. Under the hierarchy of controls that applies to psychosocial hazards, the first response has to look at how work is designed and managed, not jump straight to training or an employee assistance program referral. A wellbeing webinar does not fix a manager with no process for handling conflict between direct reports.
In Western Australia, the code specifically flags aggressive or unreasonable client behaviour as a hazard too, which matters for any service-based small business dealing directly with the public.
The impact of unresolved conflict
The financial and operational cost of unmanaged conflict shows up in ways most small business owners don’t budget for.
Safe Work Australia data shows mental health conditions made up 12 percent of serious workers’ compensation claims in 2023–24. Bullying and harassment, work pressure and exposure to violence are the leading causes behind those claims. They also take roughly five times longer to resolve than physical injury claims, which means the cost to a small business isn’t a single payout. It’s an extended, compounding disruption to the whole team.
There’s also an awareness gap working against small business owners specifically. A QUT study found more than one in five small business owners didn’t know they carry legal responsibility for non-physical hazards at all. Regulators are actively closing that gap, not waiting for businesses to catch up on their own.
The strategy for conflict resolution
Meeting this obligation doesn’t require a large HR function. It requires a defined, repeatable process, and evidence that you took it seriously. That process has five parts:
Identify. Talk to your team directly. What causes friction? What comes up when people resign? Where does tension show before it turns into a formal complaint?
Assess. How serious is the risk, and how often does it happen? A one-off disagreement is a different risk profile to a pattern nobody has addressed.
Control. Start with how work is designed and managed, not with training as a first resort. Clear escalation paths, defined roles, and manager capability to handle a hard conversation are controls. A wellbeing session on its own is not.
Consult. Workers need to be genuinely involved in identifying and controlling hazards. A policy nobody was asked about doesn’t meet this requirement.
Review. This isn’t a one-off project. Controls need to be revisited as the business, the team and the risks change.
That’s the standard regulators are applying: not a perfect workplace, but evidence that you took the risk seriously and did something concrete about it. If you don’t have that process yet, or it exists only as a document nobody follows, that’s the gap worth closing first.
Frequently asked questions
Is workplace conflict actually classed as a WHS hazard in Australia? Yes. Poor workplace relationships and conflict are listed as psychosocial hazards under the national model WHS Code of Practice and under every state and territory framework built on it, including Victoria’s standalone regulations.
Does this apply to small businesses, or only large employers? It applies to every business regardless of size. The obligation sits with any person conducting a business or undertaking (PCBU). Legal commentators including LegalVision have noted that many small business owners are unaware they carry the same psychosocial safety duties as large employers.
What changed on 1 July 2026? In New South Wales, the Code of Practice: Managing Psychosocial Hazards at Work changed from guidance to an enforceable legal benchmark under section 26A of the WHS Act. The underlying duty to manage psychosocial hazards, including conflict, already applied before this date.
What counts as “reasonable steps” for a small business? A structured process that identifies hazards, assesses risk, applies controls based on how work is designed and managed, involves workers in genuine consultation, and is reviewed over time. Training and an EAP alone are not considered sufficient controls on their own.
Contact our team to discuss how we can help resolve current conflict hazards in your workplace, or set up the protocols to prevent future escalations and risk.