After months of deadlock over workers' compensation reforms, Premier Chris Minns’ NSW government is considering a compromise plan presented by independents. Rather than the Labor government’s planned 31% jump, MP Alex Greenwich’s proposal would more slowly raise the bar for psychological injury claims. The plan would also make insurers go through more steps before they can dispute a claim and calls on the chief psychiatrist to develop a new tool for measuring permanent impairment for psychological injuries.
Brokers say a more effective approach to easing the state’s ballooning workers’ comp costs and improving the way it helps claimants could involve prioritising compliance, education and comprehensive training to reduce psychological injuries.
“The NSW workers’ compensation scheme stands at a critical crossroads and requires careful consideration to ensure its long-term sustainability,” said Gary McMullen (main picture), Aon’s director of workplace risk.
In April 2023, the Workplace Health and Safety Minister introduced a statutory direction capping the average rate of premium increases at 8% per annum over three consecutive years (2023–24 to 2025–26). Despite this measure, financial pressures on the scheme remain significant and, without further reform, premiums are projected to rise by an additional 36% over the next three years.
Industry stakeholders and the NSW opposition were concerned that the government’s original proposal to manage costs by raising the threshold for Whole Person Impairment (WPI) compensation for psychological injuries from 15% to 31% by 2026 would not fully address the underlying drivers of psychological injury claims.
The proposal by independents has a similar focus on WPI but would raise it to the lower percentage of 28% by 2029.
“There is a risk that such changes could shift costs outside the workers’ compensation system rather than tackling the root causes,” said McMullen.
The Aon expert said he found this “particularly concerning” because employers are legally required to maintain psychologically safe workplaces and reforms should align with that principle.
Brokers in the workers' compensation space say a more effective and sustainable approach would need to prioritise compliance, education and comprehensive training to reduce psychological injuries.
“These measures would address the root causes and create a sustainable solution that benefits both employers and employees,” said McMullen.
He also said this focus on prevention would be more likely to foster support from all stakeholders.
