Workers compensation reforms deliver relief for small business and stronger protections for workers

The reforms include an 18-month freeze to base workers compensation insurance premiums, saving the average small business $12,000 in premium increases over four years.

Around 340,000 NSW businesses pay workers compensation premiums covering approximately four million workers. By comparison, approximately 40,000 businesses are subject to payroll tax, however the Liberal-Nationals opposed and then delayed reform to the workers compensation system.

Without the reform, employers were facing average premium increases of 36 per cent over the next three years.

The reforms are a key part of the Minns Labor Government’s attempt to align the state’s workers compensation, industrial relations and workplace health and safety systems to achieve better outcomes for the workers and employers of New South Wales.

The reforms will put the workers compensation scheme on a more sustainable footing so that it can continue to provide support to injured workers in the future, while protecting businesses from significant premium increases.

The reforms strengthen coordination across government agencies and include earlier intervention, clearer pathway for psychological injury claims, streamlined assessment processes and wraparound support services for injured workers who make a claim.

The reforms will:

• Establish for the first time a clear definition of psychological injury and when such an injury is compensable. This will avoid costly litigation over whether an injury occurred.
• Provide clear guidance on what constitutes the reasonable management action defence against a claim.
• Introduces an employer excess of 2 weeks to be charged on claims and higher penalties for failing to have appropriate insurance.
• Provides up to three and a half years of medical supports even where claimants do not meet the whole-person impairment threshold.
• Establish a merit test for legal grants, and a regulation-making power to set legal fees for the Independent Legal Assistance and Review Service.

The reforms are backed by a record $344 million workplace mental health package focused on preventing injuries before they become claims, which includes funding to support:

• A new Return to Work intensive program providing an additional year of medical treatment and income support for eligible workers.
• Strengthening the Industrial Relations Commission’s powers to resolve industrial disputes and facilitate return to work for injured public sector employees and new powers stop workplace bullying and sexual harassment in the public sector.
• The establishment of SafeWork NSW as a standalone regulator with 51 additional SafeWork inspectors, including 20 psychosocial inspectors and five psychosocial investigators.
• Wraparound psychological support services to help injured workers recover sooner.
• A new advisory service providing free guidance for workers and employers navigating the workers compensation system.

The Government will continue to closely monitor the impact of the reforms, including through a special statutory review of the workers compensation scheme. The review will be conducted by an expert panel composed of business representatives, union representatives and independent experts and is expected to commence in 2028.

Minister for Industrial Relations and Work Health and Safety Sophie Cotsis said:

“These reforms put the workers compensation scheme on the path to long-term sustainability so it can continue supporting injured workers while remaining affordable for the businesses that fund it.

“Doing nothing was not an option. The scheme had become unsustainable and was failing injured workers, employers, the community sector and taxpayers alike.

“For almost a decade, the opposition ignored the warning signs, leaving icare underfunded as the scheme went further into deficit.

“The coalition says they’re pro-business but spent 12 months blocking these reforms while the scheme became more unstable with each day that passed.

“They had years to act and did nothing. We acted to protect injured workers and secure the future of the scheme.”

“Helping businesses create safer workplaces isn’t just good for workers, it reduces injuries, lowers costs and strengthens the economy.”

Minister for Customer Service and Digital Government Jihad Dib said:

“We’re bringing common sense and certainty to the workers compensation scheme. By focusing more on prevention, early support and recovery, we are ensuring the scheme is fit for the future so workers can continue to be supported in the years ahead.

“The best outcome is preventing psychological injury before it happens. But when someone does need support, these reforms make it clear for workers what their options are and how to access assistance when they need it.”

Business NSW CEO Dan Hunter said:

“Our members have long called for workers compensation reform and these changes are a win for the 320,000-plus businesses that pay premiums.

“A do-nothing scenario would have seen premiums increase by 36% over three years – potentially shuttering one in five businesses. “NSW businesses are facing significant pressure from stubborn interest rates, softening consumer demand and ever-increasing costs. “An 18-month freeze in premiums is welcome relief. These reforms restore more balance to the system and give businesses a better chance to thrive and serve their communities.”