Significant NSW workers compensation scheme changes came into effect in 2025, reshaping how workplace injuries are managed for both employers and injured workers. These reforms aim to improve sustainability, encourage safer return-to-work outcomes, and clarify entitlements across the life of a claim. For businesses and workers alike, understanding what’s changed and what it means in practice is critical to navigating claims with confidence.

In the context of our recent article, Significant NSW Workers Compensation Reforms, after months of negotiation, the NSW Government has reached a landmark agreement on workers’ compensation reforms, balancing protections for employees with sustainability for businesses. ABILITY GROUP highlights what this means for employers, insurers, and workers.

Background to the Agreement

On 11 December 2025, the NSW Government announced that a breakthrough compromise had been reached on workers compensation reforms. The deal was forged after extensive debate in Parliament and input from crossbench members, ensuring that both workers and businesses benefit from a fairer, more sustainable system.

The reforms build on earlier legislative changes passed in November 2025, which introduced new measures to strengthen the scheme, particularly around psychological injury claims and workplace harassment.

Key Elements of the Reform Agreement

The compromise agreement includes several important measures:

• Premium Stability - a legislated 18-month restriction on average premium increases, sparing businesses from further premium cost hikes
• Whole Person Impairment (WPI) Thresholds - retention of the WPI thresholds moved by crossbenchers, ensuring fairer assessments for injured workers
• Return to Work Program: A new intensive program offering an additional year of medical benefits and income replacement, designed to improve recovery outcomes
• Psychological Injury Focus - stronger eligibility criteria and prevention measures for psychological injury claims, addressing rising costs and complexities
• Dedicated Jurisdiction - establishment of a specific jurisdiction within the NSW Industrial Relations Commission to handle bullying and harassment claims

What This Means for Employers

ABILITY GROUP stresses that these reforms are critical for employers:

• Cost Control - the cap on premium increases provides financial certainty, helping businesses plan ahead
• Compliance Pressure - employers must ensure accurate reporting and proactive injury management to avoid penalties
• Workplace Culture - the focus on psychological injury and harassment means businesses need stronger mental health and anti-bullying policies
• Return to Work Support - extended benefits encourage collaboration between employers and insurers to reintegrate injured workers effectively

Benefits for Workers

For employees, the reforms deliver greater protections and support:

• Extended Benefits - injured workers gain longer access to medical and income support
• Fairer Assessments - retained WPI thresholds ensure consistent judgment of claims
• Mental Health Recognition - stronger focus on psychological injury acknowledges the modern workplace challenges employees face

ABILITY GROUP’s Perspective

ABILITY GROUP welcomes the reforms as a balanced outcome that protects workers while safeguarding business sustainability. We recommend employers:

• Review insurance coverage and wage reporting practices
• Strengthen workplace safety and mental health programs
• Engage with SIRA Inspectors and regulators to ensure compliance
• Prepare for cultural shifts as psychological injury prevention becomes a priority

Need Help?

The agreement on workers’ compensation reforms marks a turning point for NSW’s compensation system. By stabilising premiums, extending benefits, and addressing psychological injury, the reforms create a fairer, more resilient framework. For ABILITY GROUP, this is an opportunity for employers to embrace compliance, foster safer workplaces, and support genuine recovery for injured workers.

Need help navigating these changes and other workers' compensation, people, health and safety aspects in your business? Contact us!

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Further Information

Source: NSW Government

Title: Agreement reached on workers compensation reforms

Read Time: 10 minutes

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Source: icare

Title: NSW Workers Compensation Reform

Read Time: 10 minutes