Amendments to NSW workers’ compensation reform ‘fall short’

The workers’ compensation scheme has overcome a key hurdle by passing the NSW Parliament’s lower house, yet employee advocates say “it’s still not enough”.

This article first appeared on HR Leader’s sister brand, Accounting Times.

The Workers Compensation Legislation Amendment Bill 2025 has been introduced to the NSW Parliament and is awaiting to be passed by the upper house following government and community support. The amended bill was first introduced to the NSW Parliament on 27 May and was passed by the legislative assembly on 3 June, despite the Coalition teaming up with the Greens to block it, before it was introduced to the legislative council on 4 June.

The NSW government said it was calling on Parliament to pass the legislation so workers’ compensation could be protected for future generations. Daniel Mookhey, NSW Treasurer, said the current system wasn’t working – it was unsustainable and it was failing injured workers, businesses, and the state.

“The government has been able to get the workers’ compensation bill through the legislative assembly. This is despite the Liberals teaming up with the Greens to block this important reform,” he said.

“This bill is about 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 have a workers’ compensation system they can rely on.”

The government introduced the reform to the bill at the end of May and was informed by consultation within unions and experts, with the final bill having included a range of refinements to proposals originally included in the exposure draft.

Some of the amendments made to the bill included the addition of “excessive work demands” as a new compensable cause of psychological injury; an expedited eight-week claims assessment process for psychological injuries caused by bullying or harassment; and reducing legal costs with new requirements that any scheme-funded lawyers must act in the interests of workers and be judged to have a reasonable prospect of success.

Though many recommendations were included within the final bill introduced to Parliament, Law Partners said it still viewed the revised Workers Compensation Legislation Bill with “continued concern”.

According to Law Partners, the bill still fell short of protecting the psychological safety of workers across the state and, while the government had made some improvements following feedback, “the reforms remain fundamentally flawed”.

Chantille Khoury, partner and practice group leader for workers’ compensation at Law Partners, said the firm was concerned about the continued reliance on a whole-person impairment (WPI) threshold of 31 per cent to access long-term support, as this was “an extremely high bar that very few injured workers will ever meet”.

The government did propose a temporary reduction to 25 per cent from October 2025, but Khoury noted this to be nothing but a token gesture that did little to address the core issue.

“These amendments are a step in the right direction, but they don’t go far enough. Workers will still be placed in difficult, often impossible positions when trying to access the support they need after suffering psychological harm at work,” she said.

“Lowering the threshold to 25 per cent for just a few months before raising it again to 31 per cent is not a meaningful reform, it’s a stopgap. Even 25 per cent is still a prohibitive barrier for most psychologically injured workers.

“It’s not enough to say you’re listening if the outcome still leaves people behind.”

In addition to the amended legislation, the NSW government offered a Workplace Mental Health Package with $344 million in funding that would provide measures to support mental health in the workplace.

Law Partners welcomed this $344 million investment yet said that “reform could not come at the cost of empathy”.

“This is not just about policy; it’s about people. Teachers, nurses, first responders, and countless others who show up every day for our communities deserve a system that shows up for them when they’re injured. Reform should help them heal, not make them fight harder for care,” Khoury said.

Khroy discusses the various reforms more in-depth throughout a recent HR Leader podcast:

Click here to listen on your device