Proposed changes to NSW Workers Compensation
The NSW Government is looking to introduce major reforms to the Workers Compensation scheme.
The NSW Government’s proposed Workers Compensation Legislation Amendment Bill 2025, has passed the lower house of parliament and continued to be examined via a second parliamentary inquiry on 29 July 2025. If passed, the changes will have wide ranging implications for stakeholders in the workers compensation scheme.
The Government reports to be introducing the measures to ‘improve mental health outcomes for workers and create a more sustainable workers compensation system’ by focussing on ‘prevention, faster recovery and better support’ to combat the rise in psychological injuries and increases to workers compensation premiums. The final bill includes several updates from the original bill, including:
‘Excessive work demands’ added as a new cause for psychological injury claims
Faster claims processing for bullying and harassment cases — no need for prior findings from the Industrial Relations Commission (IRC) or Fair Work Commission
Lump sum payments available for workers with psychological injuries and a Whole Person Impairment (WPI) of 30% or less
Gradual increase in WPI thresholds for lifetime weekly payments—25% from October 2025, rising above 30% by July 2026
Clearer definitions around compensable events like vicarious trauma
Expanded powers for the IRC to support prevention efforts
Lower legal costs, with new rules ensuring lawyers funded by the scheme act in workers’ best interests
Why the need for reform?
Currently, only half of workers with psychological injury claims return to work within a year.
The average cost of these claims has surged by $100,000 over five years, and is now nearing $300,000 per claim.
Businesses are facing signficant increases in workers compensation premiums.
The NSW Government has also proposed a new Workplace Mental Health package to help workers and employers better manage psychological risks, including:
Over 50 new SafeWork inspectors trained specifically in psychological injury prevention
Comprehensive support services to guide workers through the claims process
Stronger enforcement of WH&S laws to address psychosocial hazards
Immediate financial and vocational support, including eight weeks of income and medical assistance
Get in touch
The proposed changes are certain to have a significant impact on both injured workers and their employers. At Caliso, we can support your team to navigate the current workers’ compensation system and any changes that eventuate to minimise the impact of claims on your business.
Call us or email for more information
