The NSW workers compensation system has been under significant financial strain, with businesses, even those with no claims history, facing the prospect of steep premium increases.
NSW businesses can breathe a sigh of relief following the announcement of landmark workers compensation reforms. The agreement, reached between the NSW Government and Opposition, introduces measures to reduce financial pressures on employers, and improve support for injured workers. These changes are set to reshape the workers compensation landscape, providing much-needed certainty for businesses across the state.
Key changes
The reforms include several critical measures designed to address the concerns of NSW businesses:
- 18-month premium freeze: A legislated freeze on average workers compensation premium increases for 18 months, protecting businesses from a projected 36% rise over three years.
- Return-to-work support: An additional year of medical benefits and income replacement for seriously injured workers, helping them recover and return to the workforce.
- Whole Person Impairment (WPI) thresholds: Gradual increases to the WPI threshold for psychological injuries, rising from 25% in July 2026 to 28% by July 2029. This change aims to ensure that only the most serious cases qualify for long-term benefits, reducing costs for the scheme.
- New tool for psychological injuries: The Chief Psychiatrist will develop a new tool to measure impairment for psychological injuries, ensuring fair and consistent evaluations.
- Reasonable management action defence: Adjustments to the threshold for this defence, lowering it from being the “predominant” cause of an injury to a “significant” cause. This change allows employers greater confidence in managing underperformance while maintaining protections for genuinely injured workers.
- Business support: A commitment to develop a successor to the Business Connect program, ensuring continued support for small businesses with comparable funding.
What’s next?
The reforms will be legislated when parliament resumes in February 2026, with implementation to follow. Key changes, such as the premium freeze and return-to-work programs, will provide immediate benefits for businesses, while other measures, like the development of a new Business Connect program, will roll out over time.
Stay tuned for further updates as the legislation progresses and the reforms take shape in 2026.
If you have any concerns or questions, the team at Emplawyer are ready to help.
