Businesses and community sector providers will be spared significant increases to workers compensation premiums after agreement was reached on reforms to the state's workers compensation scheme.
The agreement builds on the breakthrough compromise put forward by crossbench members in the Lower House.
The compromise agreed to includes:
- A legislated 18-month restriction on average premium increases.
- Retaining the Whole Person Impairment (WPI) thresholds moved by Lower House crossbenchers.
- A new "Return to Work" intensive program that provides an additional year of medical benefits and income replacement.
- New powers enabling the Treasurer to lower the WPI threshold, if in the public interest.
- A replacement program to Business Connect.
- Changes to terminology surrounding the reasonable management action defence.
Without these reforms, premiums for employers facing no claims against them were expected to rise by at least 36 per cent over three years.
The most significant reform to workers compensation in a generation will prioritise prevention and improve return to work. This work over the past year includes:
- Giving essential public-sector workers the right to seek court orders and damages to stop workplace bullying and sexual harassment.
- Agreeing to a definition for psychological injury
- Establishing a $344 million workplace mental health package.
- Funding to appoint 50 new SafeWork inspectors, including 20 new psychosocial focused inspectors and five psychosocial investigators.
- Commissioning the Chief Psychiatrist to devise a better system for psychiatric assessment in workers compensation claims.
- Clarifying and strengthening the Industrial Relation Commission's powers to resolve industrial disputes and facilitate return to work for injured employees in the public sector.
- $15 million funding focused on delivering wraparound psychological services to provide earlier, more tailored support for injured workers to return injured workers back to work.
The announcement follows extensive consultation with business and unions, as well as the community and not-for-profit sector over the past year.
Charities, community organisations and business groups who have supported the reform include:
- The St Vincent de Paul Society
- The Mental Health Coordinating Council
- The NSW Council of Social Services
- National Disability Services
- Royal Australian College of GPs
- The Pharmacy Guild of Australia
- Business NSW and the Business Council of Australia
- Australian Hotels Association
- Clubs NSW
The agreement will allow the Workers Compensation Legislation Amendment (Reform and Modernisation) Bill 2025 to pass the Upper House in February.
Treasurer Daniel Mookhey said:
"This compromise position allows us to stabilise the workers compensation system and return it to a secure footing.
"The scheme has been in dire need of modernisation. It has been failing injured workers, employers, the non-profit sector and taxpayers for too long. Continuing to do nothing was not an option.
"I want to thank all those members of parliament who have worked collaboratively with the Government to help solve this diabolically complex problem. Especially Alex Greenwich and the other independent members of the Lower House crossbench.
"I also want to acknowledge Business NSW, and all of the state's major business organisations, as well as NCOSS and the state's leading charities and not-for profits for their strong and relentless advocacy.
"Finally, I acknowledge the massive role the Labor caucus has played in delivering this reform. As well as the state's union movement for its professionalism and engagement through many difficult conversations we had during 2025."
Minister for Industrial Relations Sophie Cotsis said:
"This agreement ensures early support to injured workers, a road to recovery and return to work.
"It puts the scheme on the path to sustainability so that it can continue to care for injured workers and be affordable for business to fund.
"The reforms will help small businesses and not for profits, especially in regional areas, retain staff and create jobs.
"They are supported by a $344 million investment in injury prevention and a more person-centred claims management process.
"The hard work of implementation has already begun, and we will work in collaboration with all stakeholders to ensure the reforms are delivered effectively for workers and businesses."
Minister for Customer Service and Digital Government Jihad Dib said:
"We are providing certainty to ensure workers have the cover they need and through this sensible reform they can now get on with the job knowing that a secure safety net is in place.
"We welcome support to enable us to protect the scheme for generations to come. We can now get on with reform, as we scale up prevention efforts and wraparound support services for people navigating the claims process.
"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."
