NSW workers’ compensation needs ‘significant changes’

The NSW government plans to introduce new workers’ compensation reform to tackle psychological injuries, implementing a system “that reflects modern workplaces”.

NSW Treasurer Daniel Mookhey recently warned Parliament about the state’s workers’ compensation system, labelling it as “unsustainable” without reform that addresses workplace psychological injury.

According to the ministerial statement introduced by Mookhey, if claims continue growing at recent rates, the state insurer expects an additional 80,000 people will make psychological injury claims over the next five years.

For businesses especially, without the needed reform, premiums for businesses facing no claims against them are forecast to rise by 36 per cent over the three years to 2027–28.

Mookhey explained that the reforms will introduce the following changes:

• Give the NSW Industrial Relation Commission a bullying and harassment jurisdiction ahead of requiring those claims to be heard there first before a claim can be pursued for compensation. This will allow the commission to address psychological hazards, fostering a culture of prevention.
• Define psychological injury, as well as “reasonable management action”, to provide workers and businesses with certainty – rather than let the definitions remain the subject of litigation.
• Align whole-person-impairment thresholds to standards established in South Australia and Queensland.
• Adopt some of the anti-fraud measures recently enacted by the Commonwealth to protect the National Disability Insurance Scheme.
• Respond further to the recommendations retired Supreme Court justice Robert McDougall made in his independent review of Safe Work NSW.

Touching on the need for “urgent action” to reform the contemporary NSW workers’ compensation system, Business NSW chief executive Daniel Hunter expressed the need for significant changes that don’t place immense strain on both employers and employees.

“Many employers with perfect safety records have been seeing huge increases in their workers’ compensation premiums. Without significant changes, the weight of the scheme will crush businesses and leave workers needlessly suffering,” Hunter said.

“[A number of] employers have shared stories of immense frustration, with injured workers left waiting for months without resolution and businesses facing skyrocketing premiums as a result of systemic inefficiencies.”

“These real-world stories not only illustrate the deep flaws within the scheme but also highlight the urgent need for reform to protect both businesses and their employees.”

According to Business NSW, claims involving psychological issues often result in 20 weeks off work for the employee compared to six weeks off for non-psychological claims.

“Member businesses have told us more than half of all workers with psychological injuries never return to their employer,” said Hunter.

Overall, Mookhey believes the system can no longer remain to operate on “autopilot” as it will only hinder both employees and employers moving forward if it fails to be addressed.

“Our workers’ compensation system was designed at a time when most people did physical labour – on farms and building sites, in mines or in factories. A system that approaches all psychological workplace hazards the same way as physical dangers, needs to change,” Mookhey said.

“Allowing the system to stay on autopilot will only trap more employees, employers, and the state of NSW to a fate we can avoid. We must build a system that is fit for purpose – one that reflects modern workplaces and modern ways of working.”