Workers’ comp in NSW – where to in 2026?

The NSW workers’ compensation scheme will look very different in 2026, but exactly how remains unclear, writes Danny Khoshaba.

The NSW workers’ compensation market in 2026

The NSW workers’ compensation system is set for a major shake-up in 2026, with a raft of changes that will impact employees, employers, and the lawyers who advise them.

Uncertainty around the exact impact of those changes remains, with much depending on what entitlements would be on offer for injured workers and what premiums an employer will be asked to pay to retain workers’ compensation insurance.

Given the range of changes, we have focused on two, given their broad implications.

1. Psychiatric injury impairments threshold: These are said to potentially go from 15 per cent WPI to 30 per cent WPI as the minimum threshold before a claim for work injury damages (WID) can be made. The increase in threshold is expected to be in line with the laws in both Queensland and South Australia.

2. Bullying and harassment matters: In a significant change, the initial jurisdiction moving forward to deal with any allegations of bullying and harassment will be the NSW Industrial Relations Commission (IRC) before those matters can be considered as workers’ compensation claims.

It’s no secret that a key driver for these changes is the huge rise in claims and associated costs.

For employers, the recent icare announcement on 28 May 2024 noted an 8 per cent average workers’ compensation premium rate increase for 2024-2025 and this is expected to increase at a further 8 per cent per annum in the following year, consistent with the three-year policy period.

What are the implications for lawyers in this space?

There are many implications for lawyers, but it is the very nature of our profession to look at the legislation as opposed to any speculation. And right now, nothing is set in stone.

Nevertheless, any increase in impairment thresholds will result in a significantly lower number of workers accessing work injury damages for psychiatric injuries in the workplace, although granted, it may not impact all employers (for instance, emergency services).

It also remains to be seen if there would be alternative ways of resolution to allow workers captured by such proposed changes to exit the scheme, but no doubt, this will be front and centre for lawyers involved in this space.

In any case, if the above changes do occur, lawyers may need to adjust their focus on what claims they can assist with outside any claim that would be the subject of these proposed changes.

The headline challenges and opportunities for employers

The last significant change in this space came in on 19 June 2012 – 13 years ago. So, a key challenge will be the change itself as it is safe to say that all industry professionals have become quite accustomed to the current law.

For example, bullying and harassment now being considered to go through to the IRC to begin with will require a significant shift in mindset as to process and pathway for workers to access entitlements, both from an industrial relations perspective and ultimately a workers’ compensation perspective.

In this regard, there could be examples of psychiatric claims not captured by bullying and harassment and if so, is the intention for those matters to proceed to the Personal Injury Commission or is it the intention of the legislation to encourage more claims go down the path of the IRC altogether before being able to proceed to the PIC?

In any case, with this example, there may be benefits for employers that could gain finality from one jurisdiction as opposed to two, at least from the outset. The IRC would almost be seen as a qualifier to access entitlements under NSW workers’ compensation.

And if the work injury damages claims for psychiatric injuries reduce owing to the proposed changes from the threshold being lifted from 15 per cent WPI to 30 per cent WPI, both workers and employers may be able to devote more attention to a successful return to work, either at that employer or elsewhere.

Conclusion

The NSW workers’ compensation scheme will look very different in 2026, but exactly how remains unclear.

Employers especially need to keep a close eye on developments in the coming months, given the significant implications as to when and how claims can be made.

And those lawyers representing compensation claims on both sides of the fence are set to see the end of a decade of clarity and certainty as the new laws bed down.

Danny Khoshaba is a partner at BigLaw firm Bartier Perry.