Changes to the NSW Workers Compensation scheme
NSW Workers Compensation Changes: What Employers Need to Know
On 18 November 2025, the NSW Government passed amendments to the Workers Compensation legislation, introducing significant changes that will impact how businesses manage workplace injuries and insurance costs.
While these reforms aim to clarify processes and improve scheme sustainability, the NSW Government has flagged that the blocking of some parts of the amendments will signal steep premium increases for employers.
Key Legislative Changes in Detail
1. Psychological Injury Claims
Introduces separate definitions for primary psychological injury and secondary psychological injury.
Employment must be a significant contributing factor for compensation eligibility.
Compensation applies only if linked to a defined ‘relevant event’.
Expanded definition of reasonable management action.
Insurers must accept or dispute psychological injury claims within 42 days, with interim payments during this period.
Disputes can be referred to the Industrial Relations Commission before the Personal Injury Commission.
2. Weekly Payments & Permanent Impairment
Weekly payments for psychological injuries capped at 130 weeks, unless impairment reaches 21% Whole Person Impairment (WPI). Workers assessed at ≥21% WPI can continue receiving weekly payments beyond 130 weeks.
Threshold Proposal Dropped: The controversial increase from 15% to 31% WPI was not passed; threshold remains at 15% WPI.
3. Medical & Treatment Expenses
Test changed from “reasonably necessary” to “reasonable and necessary”, raising the bar for approval.
Medical expenses for psychological injuries limited unless impairment threshold met.
4. Assessment Process
Only one principal WPI assessment by an approved medical assessor allowed.
A second assessment permitted only if impairment likely increased by 10% or more.
5. Procedural & Compliance Changes
Stricter timelines for insurers and clearer dispute resolution pathways.
Increased penalties for non-compliance.
The NSW Government now needs to determine the start dates for the changes. The changes will also require SIRA to develop and enact regulations to ensure the changes are operational.
Impact on Employers
Businesses should continue to prepare for premium increases of up to 8% annually for the next three years, as the scheme faces ongoing financial pressure. Employers will also need to navigate more complex compliance requirements, particularly around psychological injury claims and workplace adjustments.
Recommended Actions
Plan for Rising Premiums: Adjust budgets to accommodate annual increases.
Strengthen Injury Management: Implement proactive return-to-work programs to reduce claim costs.
Engage Expertise: Consider appointing an Injury Management Advisor to manage complex cases and compliance.
Educate Managers: Ensure leaders understand new definitions and obligations to prevent disputes.
Communicate with Insurers: Explore hardship provisions and premium adjustment options.
Act Now to Protect Your Business
Premium increases are coming—and preparation is key. Start by reviewing your injury management processes and training your team on the new legislative requirements to mimimise the impact.
