Significant changes are reshaping NSW’s workers’ compensation landscape.
New proposed legislation aims to improve the management of workplace psychological injuries, while larger employers gain greater choice in selecting Claim Service Providers.
As the financial year ends, the industry looks forward to honouring its trailblazers through prestigious awards recognising excellence in rehabilitation, personal injury, and disability management.
This article highlights the key updates and their impact on businesses, workers, and the industry.
The NSW government has unveiled further details on its plan to improve the NSW workers’ compensation system’s handling of psychological injuries
There has been extensive media and industry attention paid to the proposed changes to the NSW Workers’ Compensation scheme, specifically in relation to psychological claims.
After initial ministerial hearings and debate, a modified bill was presented to the NSW Parliament on 5 June 2025.
The primary aim of the bill is to tackle issues related to the financial burden and unsatisfactory return to work results for workers suffering from psychological injuries at the workplace.
A separate Industrial Relations Bill also proposes to create new jurisdictions to allow the NSW Industrial Relations Commission (NSW IRC) to hear and make orders to prevent and remedy bullying at work and sexual harassment in connection with work for non-private sector workers.
Some key examples of what the proposed changes will impact (if legislated) are:
- Objective test: An objective test must be used when determining whether an act or omission constitutes bullying, excessive work demands or racial/sexual harassment, in that the worker’s perception of the relevant event will be relevant but only to the extent that perception is reasonable.
- Threshold for permanent impairment: The Workers’ Compensation (WC) Bill proposes a higher threshold for psychological injuries, requiring a degree of permanent impairment of at least 31% to pursue damages or have indefinite access to benefits, compared to 15% for physical injuries.
- Whole Person Impairment (WPI) related payments: The media release accompanying the WC Bill states that psychologically injured workers whose assessed workplace injury does not exceed 30% may elect to commute their entitlement, receiving a lump-sum payment in advance of their weekly benefits ending. The impairment threshold for lifetime weekly payments will also rise incrementally, first to 25% in October 2025, and over 30% from 1 July 2026. These entitlements are likely to be implemented through future regulations.
So, what can employers do in preparation for any changes to the Workers’ Compensation legislation in NSW, specific to psychological claims and the prevention/management of these?
- Audit current psychological safety controls against the proposed statutory definitions: Complete a gap analysis of existing bullying, harassment, excessive work demands and vicarious trauma controls against the WC Bill’s definitions and SafeWork NSW guidance, and update policies, risk assessments and incident-response protocols accordingly.
- Stress test the 42-day claims pathway: Engage with insurers to confirm readiness for the 42-day claims timetable and allocate clear internal ownership to ensure evidence can be gathered, lodged and reviewed within the statutory timeframe.
- Document ‘reasonable management action’: Review employment contracts, position descriptions, performance-management templates and rostering practices so that managerial decisions likely to be scrutinised under an objective test are recorded and likely to be considered reasonable.
- Upskill leaders and first responders: Deliver targeted training to executives, line managers, HR, WHS representatives and return to work coordinators on the new definitions, evidentiary requirements and NSW IRC stop-order jurisdiction.
- Refresh governance and reporting: Include psychosocial risk indicators and claim metrics in board WHS reports.
- Audit insurance coverage: Audit group entities for compulsory insurance compliance in light of the higher penalties for not having insurance.
- Leverage new mental health funding: Engage early with SafeWork NSW regarding the Workplace Mental Health initiative to access inspectorate support, eight-week early-intervention assistance and any industry-specific programs.
Increased choice for more employers regarding their Workers’ Compensation insurer in NSW
In NSW workers’ compensation, employers with an Average Performance Premium (APP) or Group Average Performance Premium (GAPP) of $100,000 or more are eligible to choose their Claim Service Provider starting 30 June 2025.
This is a reduced threshold from $200,000 that is currently in place.
This choice allows employers to select a Claims Service Provider that best suits their needs.
Previously, employers were assigned a Claim Service Provider by the insurer.
Now, larger employers (with an APP/GAPP above $100,000) will have the flexibility to choose their preferred Claim Service Provider.
- So, what are the potential benefits of this change:
- Employers can align their Claim Service Provider with their specific business needs and risk management priorities.
- This allows for greater control over the management of workers’ compensation claims.
Awards season is upon us
As we approach the new financial year, there are a range of industry bodies who will be celebrating the amazing work that our allied health professionals and businesses are delivering to the injured worker community.
The Australian Rehabilitation Providers Association have closed their submissions for the ARPA Excellence In Workplace Rehabilitation Awards categories, with finalists to be announced prior to the awards ceremony, and announcement of category winners, on 10 October 2025.
The Personal Injury Education Foundation (PIEF) are currently requesting nominations for their Excellence in Personal Injury and Disability Management Awards to be awarded in a ceremony on 27 October 2025.
Interact Injury Management have made submissions on behalf of multiple staff who have provided exceptional service to their clients throughout 2024/2025.
Once finalists are announced in coming months we will keep our network updated so we can continue to acknowledge the fantastic work our team and business are delivering in NSW!
