'Psychological claims now make up 12% of total workers compensation claims but 38% of the total cost'
The New South Wales government will introduce reforms to overhaul the state's workers compensation system, which has struggled to keep pace with the rising number of psychological injuries in the workplace.
Treasurer Daniel Mookhey told Parliament on Tuesday that the reforms will introduce the following changes:
"The legislation pending is the next step the government is taking to modernise NSW workplace health and safety, workers compensation, and industrial relations system," Mookhey said in his statement to Parliament.
The NSW treasurer announced the proposed reforms as he warned that the current workers' compensation system is not sustainable following the rise of psychological injuries at work.
"The state's workplace health and safety laws and workers' compensation scheme have not kept pace with the needs of the four million people working in NSW today — nor with the 338,000 businesses that employ them," he said.
According to Mookhey, the number of psychological injury claims has doubled in six years, much higher than the 16% growth rate of other injuries in the same period.
The average cost of a psychological injury claim has also surged, rising from $146,000 in 2019-20 to $288,542 in 2024-25.
"Psychological claims now make up 12% of total workers compensation claims but 38% of the total cost," he said. "If claims continue growing at recent rates, iCare expects an additional 80,000 people will be injured over the next five years."
The treasurer attributed the problem to a system that's not "returning workers to their health and then to work effectively."
"Our workers' compensation system was designed at a time when most people did physical labour — on farms and building sites, in mines or in factories," he said. "A system that approaches all psychological workplace hazards the same way as physical dangers needs to change."
Allowing the current system to remain as is will hurt both employees and employers alike, according to Mookhey.
He warned that without reforms, even employers that aren't facing claims against them might see their premiums rise by 36% over the three years to 2027-28.
"On top of that cost, the system severely disrupts their businesses. It sends staff they've recruited and trained home, and impairs their ability to manage interpersonal conflict and run productive workplaces," he added.
"The waste of precious time, talent, and money has wider implications for our State."
Mookhey said they will consult with Business NSW and Unions NSW to develop the reforms.
In a statement, Business NSW welcomed the initiative from the government as they noted that the current workers compensation system is putting "immense strain" on both employers and employees.
"Many employers with perfect safety records have been seeing huge increases in their workers compensation premiums," said Business NSW CEO Daniel Hunter.
"Without significant changes the weight of the scheme will crush businesses and leave workers needlessly suffering."
Hunter said they look forward to the formal consultation with the NSW government to ensure that the scheme is sustainable.
