Protecting workers compensation for future generations

The reforms will address the lack of focus on preventing psychological injury, the low rate of recovery and return to work for psychological injuries, and arrest the sharp rise in premiums.

As well as changes within the system, a Workplace Mental Health package with $344 million in new funding will provide additional measures to support mental health in the workplace, including:

• SafeWork funding for injury prevention, with more than 50 new inspectors specialising in psychological injury
• wraparound psychological support services for people navigating the claims process
• WH&S compliance and enforcement to strengthen psychosocial hazard prevention
• eight weeks’ income and medical/vocational support to access immediate support.

The Workers Compensation Legislation Amendment Bill 2025 has been informed by consultation within unions and experts, including the release of an exposure draft and a parliamentary inquiry.

The final bill to Parliament includes a range of refinements to proposals that were contained in the exposure draft, including:

• adding 'excessive work demands' as a new compensable cause of psychological injury

• an expedited 8-week claims assessment process for psychological injuries caused by bullying or harassment

  o this is instead of a requirement to have a finding in the IRC or FWC

  o workers will still have the right to seek IRC intervention for bullying and harassment, whether they are injured or not

• introducing commutations to allow psychologically injured workers with a Whole Person Impairment (WPI) of 30 per cent or below to access a lump sum before their weekly payments cease
• a gradual increase to the WPI measure to determine weekly payments for life, rising to 25 per cent from October 2025 and greater than 30 per cent from 1 July 2026
• clarifying language around 'vicarious trauma' as a compensable event
• supporting prevention by including stronger workplace health and safety powers in the jurisdiction of the IRC
• reducing legal costs with new requirements that any scheme-funded lawyers must be acting in the interests of workers and be judged to have a reasonable prospect of success.

This reform will enable the Minns Labor Government to protect the workers compensation system for future generations of workers across NSW.

Combined with the new Workplace Mental Health funding package, the reform creates a modernised scheme that can better protect workers from psychological injury and more effectively support them when injury does occur.

Currently, half of workers with psychological injury claims return to work within the first year. The average cost of these claims has jumped $100,000 in five years to almost $300,000, and businesses are facing a 36 per cent increase to workers compensation premiums.

Treasurer Daniel Mookhey said:

“We are creating a modern system that will better protect workers from psychological injury and provide better help when they need it.

“I want to ensure that future generations of workers across NSW have a workers compensation system they can rely on.

“As the workplace evolves, our capacity to support people in it must adapt accordingly.”

Industrial Relations Minister Sophie Cotsis said:

“The Minns Labor Government is committed to strengthening a culture of prevention, early intervention, recovery and effective return to work through a series of reforms. 

“These include major reforms to SafeWork NSW, including investing in more inspectors to focus on psychosocial harm prevention and industrial relations reforms that establish a 'stop bullying' jurisdiction.

“Additionally, we have amended the iCare Act to include a principal objective focused on promoting early and appropriate treatment and care for injury and illness. This aims to optimise recovery, support return to work and daily activities, and ensure a sustainable compensation system.

“Thank you to all who contributed submissions to the consultative process for their practical and considered responses. We particularly acknowledge the trade union movement, as we work together to reach our shared goal of a better, more sustainable system for injured workers.”

Minister for Customer Service Jihad Dib said:

“These changes are aimed at sustaining our workers compensation scheme for the long term as we scale up prevention efforts and wraparound support services for people navigating the claims process.

“We need a system that continues to support injured workers and helps them recover as quickly as possible so they can return to their lives.”