Update on Proposed Changes to Workers Compensation
On 3/11/2025, the NSW Legislative Council’s Public Accountability and Works Committee tabled its long-awaited report on the Workers Compensation Legislation Amendment Bill 2025/Reform and Modernisation Bill. The inquiry was tasked with examining the impact of the proposed changes on injured workers, businesses, and the broader economy.
Key Findings
Permanent Impairment Thresholds: The Committee recommended withdrawing the proposal for lifting the Whole Person Impairment (WPI) threshold for psychological injuries from 15% to 31%, which would significantly reduce access to ongoing weekly payments and medical support after 130 weeks.
Psychological Injury Claims: The report strongly criticized limiting claims caused by “reasonable management action,” warning this could exclude legitimate cases of bullying or harassment.
Human Impact: The Committee highlighted the risk of self-harm and suicide if supports for seriously injured workers are removed.
Financial Modelling Gaps: The inquiry found the government failed to provide adequate modelling on the social and economic impact of these changes.
The Committee recommended:
A full review of claims management practices.
Premium settings that reward employer safety performance while discouraging under-reporting.
KPIs for insurers to ensure timely psychological treatment.
Impact on Employers
The Committee’s report signals strong parliamentary resistance to the most controversial elements of the proposed reform. Here’s what employers need to know:
1. Premium Pressures
The government argues reforms are necessary to prevent premiums from further significant increases, costing businesses over $1 billion annually. Without legislative changes, employers should prepare for potential premium hikes driven by the scheme’s financial instability.
2. Compliance and Risk Management
Even if the impairment threshold changes are scrapped, the focus on psychological injury claims remains. Employers will need:
Mental health strategies and management of psychosocial hazards to reduce injury and claim incidence.
Clear documentation of management actions to avoid disputes under the proposed “objective test” for psychological injuries.
3. Claims Handling
The proposed bills include tighter timelines for insurers and potential capped investigation costs. Employers can expect greater scrutiny of workplace practices.
4. Future Uncertainty
The Committee recommended sending the bill back for further debate, meaning employers face an extended period of uncertainty. Strategic planning for workforce wellbeing and cost control is essential.
The Committee’s report is a clear rebuke of the government’s approach, prioritising worker protections over cost-cutting measures. However, the financial sustainability of the scheme remains a pressing issue, meaning Employers should prepare for ongoing debate and possible compromise legislation that balances affordability with fairness.
Let’s Talk
If any of these issues gave you pause, you’re not alone. Many NSW employers are facing the same challenges. The good news? With the right support, you can protect your business whilst support your people.
Need help navigating workers compensation? Let’s start a conversation.
