NSW workers’ compensation gets 18-month premium freeze

Last week, a new bipartisan agreement was made, which will introduce various changes to NSW workers’ compensation, including an 18-month freeze on premiums.

The agreement adds a $344 million investment in workplace mental health and introduces a definition for workplace psychological injury. Additionally, it will retain the whole-person impairment (WPI) thresholds, which were moved by lower house cross-benchers, while giving the Treasurer powers to lower the WPI threshold at the discretion of public interest.

Certainty and a safety net

Treasurer Daniel Mookhey (pictured) said the agreement allows the workers’ compensation scheme to return to a “secure footing”. Furthermore, early support for injured workers, a path to recovery, and a return to work will arise from these reforms, said Minister for Industrial Relations Sophie Cotsis.

Minister for Customer Service and Digital Government Jihad Dib said the agreement provides certainty and a safety net, knowing that they have the cover that they need.

Dib said: “It’s important that we continue to support injured workers and help them recover. To achieve this goal, we are delivering a sustainable workers’ compensation scheme, and we will continue to work with all stakeholders to deliver exactly that.”

Counter-intuitive

Unions NSW supported that a whole-person impairment (WPI) of 21 per cent qualifies a worker as incapacitated to work; despite this, it noted government plans to raise the threshold for income support to 25 per cent, before raising it to 28 per cent by 2029.

As part of these changes, the chief psychiatrist will develop a “better system for psychiatric assessment in workers’ compensation claims”, the government said.

Thomas Costa, acting secretary of Unions NSW, said: “It is counter-intuitive to cut support while at the same time developing a new tool to diagnose the severity of injuries.”

Much-needed step

Despite the backlash, the Business Council of Australia (BCA) said the agreement was a “much‐needed step towards restoring sustainability in the state’s insurance scheme”.

Bran Black, BCA chief executive, said these changes show the potential for a state’s workers’ compensation system to be reformed to balance fairness for injured workers and viability for employers.

“By locking in a premium freeze and improving clarity around psychological-injury provisions, the government and opposition have provided businesses – especially small and medium enterprises – with certainty at a time when cost pressures are acute,” Black said.

The new bipartisan agreement will allow the Workers Compensation Legislation Amendment (Reform and Modernisation) Bill 2025 to pass the upper house in February 2026.