The reforms will recognise that our workplace health and safety and workers' compensation laws are failing to both prevent psychological injuries — and failing to treat those with psychological injuries quickly.
This failure hurts workers; punishes large and small businesses; and wastes billions of dollars of public resources.
Simply put –
The state’s workplace health and safety laws and workers' compensation scheme have not kept pace with the needs of the 4 million people working in NSW today—nor with the 338 000 businesses that employ them.
Today, I can shed more light on the rise of workplace psychological injury in our workplaces. And I will outline to the House the principles guiding the government’s reforms.
Let me begin by first explaining important elements of our workplace health and safety and workers’ compensation systems.
Workers compensation insurance has been compulsory in NSW since 1924.
Today two separate insurers cover close to 4 million employees. There is the Nominal Insurer. It protects about 3.5 million private sector workers. It is funded from premiums collected from nearly 340,000 mostly small businesses.
And there is the Treasury Managed Fund. It covers more than 400,000 public sector workers. The taxpayer funds the TMF.
iCare administers both schemes.
Most experts agree that neither scheme has ever dealt very well with psychological injury.
Historically, the small number of complaints has kept this hidden. But a recent and dramatic rise in cases - coinciding with social and technological changes and growing awareness of mental health - is exposing the system’s inability to prevent and treat this type of injury.
Here is a how to appreciate the scale at which the problem is growing:
The number of psychological injury claims has doubled in six years. By comparison, all other injuries have grown by just 16% during that same period.
Here is how different the outcomes are for people with psychological injuries compared to physical injuries:
88% of workers who suffer from physical injuries on average have returned to work within 13 weeks.
But 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.
Predictably, a system which fails to prevent and fails to heal is becoming increasingly expensive.
Psychological claims now make up 12% of total workers compensation claims but 38% of the total cost.
The average cost of a psychological injury claim has increased from $146,000 in 2019-20 to $288, 542 in 2024-25.
Why?
Because the system is not returning workers to their health and then to work effectively.
In fact, it is likely that treating workplace conflict like a physical hazard is exacerbating the problem.
As claim numbers rise, and claim durations increase - so do premiums.
Businesses have faced an 8 per cent increase in premiums for three years running.
Much of those increases followed the scandals this House exposed in the last Parliament.
But even with those increases, the assets held by the nominal insurer do not equal its liabilities.
For every $1 needed to care for injured workers, the nominal insurer currently holds only 85 cents in assets.
I can advise the House that if claims continue growing at recent rates, iCare expects an additional 80 000 people will be injured over the next five years.
I can further advise the House that the cost of the system is expected to rise too.
An employer facing no claims against them, operating a psychologically safe workplace, can expect their premiums to rise by 36% over three years to 2027-208 if we do nothing.
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.
The waste of precious time, talent and money has wider implications for our State.
Billions of dollars could be better used to invest in capital and people. This is crucial for driving NSW’s economic growth.
Allowing the system to stay on autopilot will only trap more employees, employers, and the state of New South Wales to a fate we can avoid.
That is why the system - as it currently stands - is not sustainable.
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.
A system that approaches all psychological workplace hazards the same way as physical dangers, needs to change.
NSW should have workplace health and safety laws, as well as a workers compensation system, that places prevention ahead of compensation to responding to psychological safety.
Hence - the legislation the government is developing is guided by these key principles.
First, give workers the right to call out a psychological hazard before an injury takes place.
In practice - that means the Government will look to expand the NSW Industrial Relations Commission.
Establishing a bullying & harassment jurisdiction modelled on federal law. Requiring a bullying & harassment claim to be heard there first before a claim can be made through the workers compensation system.
Second - let employees and employers know where they stand. NSW defines neither psychological injury nor reasonable management action in law. So we will seek to provide both workers and business with certainty. And unlike other states - we prefer an inclusive definition of psychological injury. Not an exclusive definition.
Third - learn from states like South Australia and Queensland, who are ahead of us in the reform task. Especially in setting the whole-person impairment threshold. We will look to adopt some of their reforms. We will also look to adopt some of the anti-fraud measures recently adopted by the Commonwealth to protect the National Disability Insurance Scheme.
Finally, administer the workers compensation scheme better. We will look to implement many of the recommendations Robert McDougall made in his independent review of Safe Work NSW. As well as recommendations the State Insurance Regulatory Authority and our own Law and Justice Committee have made too.
The legislation pending is the next step the Government is taking to modernise NSW workplace health and safety, workers compensation and industrial relations system.
Since our election two years ago we have restored the independence of the Industrial Relations Commission.
We have established Safe Work NSW as a standalone regulator.
We led the nation in combating the return of silicosis as an occupational disease by standing up to big engineered stone multinationals.
We have overhauled iCare’s governance. And we have taken steps to rein in their spending.
Just this week the government will ask this Parliament to lead the world in responding to the gig economy.
So the changes we intend to introduce are part of our comprehensive strategy to ensure that the workers’ compensation system, the workplace health and safety system, and the industrial relations system all work together.
And all remain fit for purpose.
Mr President,
Shortly the government will commence deeper consultation with Business NSW and Unions NSW.
I thank both those organisations for the work we have done so far.
But I say the government also intends to work with all parties in this place, and in the other place, who recognise the need for reform.
This House excels when it grapples with complex reforms that are sorely needed.
Undoubtedly, in recent years, the NSW Legislative Council has acquired vast expertise in WHS law and workers compensation.
Soon it will get the opportunity to use it for the sake of the state’s workers as well as its businesses.
