Business NSW pushes for reform of compensation scheme

THE NSW workers’ compensation scheme is under pressure as psychological injury claims continue to rise, prompting debate over whether the system is being misused or simply recognising the toll of modern workplaces.

The scheme recorded a $1.8 billion deficit last financial year, with psychological claims now exceeding 11,000 annually — a 65 per cent increase since 2021–22, according to the State Insurance Regulatory Authority.

Business NSW has backed the State Government’s push for reform, warning the system is being used to escalate workplace disputes and is failing both employers and workers.

Business NSW regional director Jane Laverty said the scheme was “tipping too far” and needed urgent change to maintain its integrity.

“These stories are becoming all too common,” she said.

“The rules changed to allow provisional payments even when the injury stems from performance management.

“That’s tipped the balance too far.”

The debate has exposed deep divisions over how to manage rising psychological claims while keeping the scheme financially viable.

The NSW Government is considering changes to the scheme as part of a broader financial overhaul, but unions warn the reforms go too far.

Workers’ rights groups argue that the rise in psychological injury claims reflects deeper problems in workplace culture, including poor management, unrealistic workloads and inadequate mental health support.

Unions NSW claims the new threshold would block up to 95 per cent of psychological injury claims, forcing already traumatised workers to prove their suffering in court.

Secretary Mark Morey said the plan would deny essential workers the support they need when workplace trauma catches up with them.

“Essential workers in our hospitals, schools and railways deal with trauma, harassment and assault regularly,” Morey said.

“They risk their mental health for the rest of us. We should support them — not cut them off.”

Unions NSW has proposed a five-point alternative plan that includes stronger prevention measures, better return-to-work outcomes, and reduced scheme waste.

“There are better ways to fix the system than cutting support for injured workers — like cutting waste,” Morey said.

Business NSW said it would continue to advocate for a system that distinguishes between genuine injuries and workplace disputes.

“We must restore integrity and fairness to the system before it collapses under its own weight,” Laverty said.

“This isn’t about taking rights away – it’s about making sure the system works.”