Keeping employers informed
The NSW Government has announced its intention to introduce reforms that will change how psychological injury claims are defined and managed in the NSW Workers Compensation Scheme. If enacted, these changes will have a direct impact on employers and their workers in NSW.
As one of the longest serving providers of workers compensation services in NSW, with extensive experience in managing psychological injury claims; we are committed to keeping our customers informed about these proposed changes.
Afterall, at EML, workers compensation is not just one of the things we do, it’s the only thing we do.
Key highlights for employers
The case for reform
The Treasurer on Tuesday, 18 March 2025, outlined the following in the Ministerial Statement delivered in the NSW Legislative Council:
- Most experts agree that neither scheme (Treasury Managed Fund nor Nominal Insurer) has ever dealt well with psychological injury.
- Psychological claims now make up 12% of total workers compensation claims, but 38% of the total cost.
- The number of psychological injuries has doubled in six years. By comparison, all other injuries have grown by just 16% during that same period.
- 88% of workers who suffer from physical injuries on average have returned to work within 13 weeks.
- 40% of workers with psychological injuries are still languishing in the system after one year off work; still separated from their workplace, more likely to be socially isolated.
- An employer facing no claims against them, operating a psychologically safe workplace, can expect their premiums to rise by 36% over three years to 2027-28 if we do nothing, having already faced an 8% increase in premiums for three years running.
Further, the icare FY24 Annual Report states 70% of the psychological claims reported within the Nominal Insurer are caused by harassment and work pressure. While for the TMF, these injuries are increasingly driven by exposure to trauma, occup
What we know about the reforms so far
In March 2025 the NSW Treasurer announced proposed reforms to the scheme, specifically regarding psychological injury claims. The proposed changes were outlined in the Workers Compensation Ministerial Statement, published 18 March 2025.
The intention is to improve interventions in workplaces to prevent psychological injuries in the first place, to better protect workers. The Treasurer explained that this will be achieved through increased utilisation of workplace health and safety and industrial relations laws.
On Friday, 9 May 2025, the NSW Government released an exposure draft proposing reforms to the legislation which underpins workers compensation in NSW. You can find a copy on the NSW Parliament website here: Proposed changes to liability and entitlements for psychological injury in New South Wales.
The reforms are DRAFT and may well change. They have not yet been introduced to Parliament.
The key reforms proposed are:
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- New definitions of psychological injury.
- New definition of reasonable management action, as it relates to psychological injuries, meaning that:
- action taken by an employer in a reasonable way, and
- that is reasonable in all the circumstances, will be presumed to not give rise to a compensable injury.
- Psychological injuries resulting from sexual harassment, racial harassment or bullying are first required to have a finding of harassment or bullying made by a tribunal, commission or court.
- Psychological injuries resulting from work pressure will not be compensable but will be entitled to a special work pressure payment for the cost of medical or related treatment for up to 8 weeks from notification.
- Unless a psychological injury results in 31% whole person impairment or greater, weekly benefits will cease at 130 weeks.
- Unless a psychological injury results in 31% whole person impairment or greater, a worker will not be entitled to receive compensation for permanent impairment or commence a Work Injury Damages claim.
- The current ‘reasonably necessary’ test for medical, hospital and rehabilitation expenses will be replaced by the ‘reasonable and necessary’ test used in the NSW CTP Scheme.
- The approach to Whole Person Impairment generally will change, with a move to a joint medico-legal process.
- Indexation of pre-injury average weekly earnings (PIAWE) will only occur once a year.
- A prescribed excess amount on claims will be regulated, which could see an employer required to pay an excess on each claim.
Where to from here
The Government has said that they will consult with key stakeholders, including Business NSW and Unions NSW, and it will soon present a bill to Parliament.
The Treasurer indicated at the NSW Legislative Council Budget Estimates hearing on 5 March 2025, an intention for these reforms to commence by 1 July, 2025.
The reforms have been referred to the Standing Committee on Law and Justice, who will hold a hearing on 16 May 2025.
While the timeline is short, at EML we are ready to respond to any legislative changes, so that we continue to implement the legislation fairly and accurately.
We will continue to provide updates as more information becomes available.
Recovery Pathways Pilot
In the meantime, we remain committed to supporting workers and employers navigate the complexities of psychological injury claims, especially where they are caused by interpersonal conflict in the workplace.
Our industry first Recovery Pathways team focus on delivering mediation to resolve conflict so that workers feel safe and supported to return to the workplace earlier.
Our Recovery Pathways team are experts in conflict resolution and mediation and deliver support via face-to-face meetings, video conferencing or through phone calls.
Since launching in July 2024, the Recovery Pathways team have supported over 200 employers and their workers, resulting in workers accessing treatment sooner and improvements in return to work rates.
For more information visit the Pathways program page.
Links to articles
In 2022, the NSW Legislative Council’s Standing Committee on Law and Justice held two public hearings, as part of the Review of the Workers Compensation Scheme, with a particular focus on the risk in psychological injury claims. The hearing presented evidence from many various stakeholders across unions, industry associations, and regulators regarding the challenges in injury prevention and treatment.
The insights gathered here were intended to inform future reforms aimed at enhancing the system’s efficiency and effectiveness in supporting workers suffering a psychological injury.
2025
11 Feb NSW Parliament Legislative Council Hansard
5 March AFR article
5 March Treasurer at NSW Legislative Council Budget Estimates Hearing
18 March Ministerial Statement
18 March NSW Parliament Legislative Council Hansard (incl Opposition response)
18 March Unions NSW response
18 March Business NSW response
19 March NSW Parliament Legislative Assembly Question Time
19 March NSW Parliament Legislative Council – Abigail Boyd, Private Member Statement
20 March ABC Radio Breakfast – Treasurer
9 May Ministerial media release regarding workers compensation exposure draft
9 May Media release by Legislative Council
9 May Explanatory note and exposure draft released by Parliament of NSW
