NSW Workers Compensation Reform: Changes to Excess Payments

The NSW Workers Compensation Scheme is undergoing significant reform designed to improve the long-term sustainability of the scheme while encouraging stronger workplace injury prevention and earlier return-to-work outcomes. The changes come into effect 1 July 2026.

One key change is the introduction of a new employer excess payment model.

What is an Excess Payment?

An excess payment is the amount an employer is required to contribute towards a workers compensation claim before the insurer takes responsibility for ongoing claim costs. Under the new reforms, employers will be required to pay a fixed excess at the beginning of a claim.

What is Changing?

The NSW Government has introduced a fixed excess of up to two weeksof weekly income support payments for eligible workers compensation claims, both for physical and psychological claims. The exact amount is set by regulation and will apply to policies issued or renewed from 30 June 2026 onwards.

Employers could previously avoid what was equivalent to one week of weekly income support payments of excess by notifying iCare of the injury within 5 days of the injury. This is no longer the case, with all claims attracting the excess payment (provided there is an eligibility for wages paid/time lost).

This change means employers will have greater financial responsibility during the initial stages of a claim and a stronger incentive to support injured workers early in the recovery process.

The excess is not refundable even if the claim is later declined.

What Will This Mean for Employers?

For many businesses, the new excess arrangement may result in an increase in upfront claim costs. Organisations with frequent claims could see a noticeable financial impact over time.

As a result, employers should review:

• Injury management procedures.

• Return-to-work programs.

• Workplace safety systems.

• Early intervention processes.

• Supervisor and manager training in injury management.

Effective management of workplace injuries can help reduce claim durations, improve recovery outcomes, and minimise exposure to excess payments.

The introduction of the new excess model creates an opportunity for employers to strengthen their injury management practices by:

• Reviewing injury management and return-to-work systems.

• Review available suitable duties within the organisation and create suitable duties registry.

• Identifying opportunities to reduce claim costs.

• Training managers and supervisors.

• Supporting compliance with legislative requirements.

• Developing strategies that promote early, safe and durable return-to-work outcomes.

Looking Ahead

The excess payment reforms represent a significant shift in employer responsibilities within the NSW Workers Compensation Scheme. Employers who invest in proactive injury management, workplace safety and early return-to-work strategies will be best positioned to manage costs and achieve positive outcomes for injured workers.

Get in touch

Need support preparing for the NSW Workers Compensation reforms?

Our team can help your organisation understand the changes, minimise claim costs, and strengthen return-to-work outcomes.

Call us or email for more information