Workers' compensation premiums to be frozen for 18 months under changes
Businesses in New South Wales have been saved from sharp increases in workers' compensation premiums after a new agreement between Labor and the Coalition.
The parties agreed on new reforms to the state's compensation scheme that are expected to freeze premiums for 18 months and prevent a 36% increase in premiums over three years.
The reforms seek to prioritise prevention and improve return to work for employees in the wake of surging psychological claims since 2018, with the average cost almost doubling since 2020.
"This agreement ensures early support to injured workers, a road to recovery and return to work," said Industrial Relations Minister Sophie Cotsis in a statement.
"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."
New impairment threshold
Under the reforms, the Whole Person Impairment (WPI) threshold will be raised from the current 15% to 25% starting in July 2026, before going up to 28% over the next three years.
This means employees who make psychological claims will need to prove that their level of permanent impairment is greater than or equal to 25% in order to be accepted.
Those who do not meet the threshold will only receive two years of support and an additional year to transition back to work.
The new threshold is much lower than the previously proposed 31%, according to reports.
"This compromise position allows us to stabilise the workers' compensation system and return it to a secure footing," said Treasurer Daniel Mookhey in a statement.
"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."
According to the state government, the agreement between Labor and the Coalition will allow the reforms to pass the Upper House in February.
Businesses welcome reforms
Employers in New South Wales welcomed the reforms as an "early Christmas present."
"These workers' compensation reforms are a major step towards the scheme achieving sustainability," said Business NSW CEO Daniel Hunter in a statement.
"These reforms, to be legislated in the new year, will save NSW businesses hundreds of millions of dollars. These savings will help businesses make crucial, productivity-driving investments in staff, equipment and innovation."
Hunter said one in five businesses would be forced to close if the 36% increase in premiums went through.
"These reforms are an early Christmas present for the hardworking business owners who are already enduring significant cost pressures," he said.
Unions, however, slammed Parliament for cutting psychologically injured workers from support payments under the reforms.
Unions NSW called out Parliament for raising the WPI threshold to 25% despite evidence that a WPI of more than 21% means a worker has no capacity to work.
"The parliament has failed to deliver meaningful reform. Instead, it has taken a sledgehammer to the entitlements of traumatised and vulnerable workers," said Thomas Costa, acting Secretary of Unions NSW, in a statement.
Costa stressed that the reforms mean prevention of psychological injury in workplaces must become an "overwhelming priority."
"With the parliament set to kick injured workers off support, it is absolutely vital we prevent them getting injured in the first place," the official added.
