The Workers Compensation Legislation Amendment (Reform and Modernisation) Bill 2025, passed in February 2026, significantly overhauls the NSW system to address rising costs and psychological injury claims.

Key Changes for Workers (Starting July 2026)

Higher WPI Thresholds: The Whole Person Impairment (WPI) threshold for weekly payments beyond 130 weeks rises to 25% on 1 July 2026, increasing further to 28% by 2029.

Restricted Claim Definitions

Compensation for psychological injuries now requires a “relevant event” (e.g., bullying, harassment, or excessive work demands) where employment is the “main contributing factor”.

Enhanced Support Programs: A new Return to Work Intensive program provides eligible workers with an additional 52 weeks of medical benefits and income support.

Medical/Assessment Changes: The standard for care shifts to “reasonable and necessary,” with a move to a single principal WPI assessment.

Simplified Assessments: Workers are generally limited to one principal WPI assessment to determine permanent impairment.

Key Changes for Employers and what this means

New Excess: A fixed excess equal to two weeks of income support applies to claims from 30 June 2026.

Management Defence & Disputes:

The “reasonable management action” defence is strengthened, and disputed bullying claims are now referred to the NSW Industrial Relations Commission (IRC).

18-Month Premium Freeze:

Average premium rates for the Nominal Insurer are frozen until 30 June 2028 to protect businesses from forecasted 36% increases. The freeze applies to overall scheme target rates costs still may change due to claims experience, industry classification or wage changes

New Employer Excess:

For policies issued or renewed after 4:00 PM on 30 June 2026, employers must pay a fixed excess equal to the first two weeks of a claim.

Strengthened Management Defence:

Employers can rely on the “reasonable management action” defence if it was a “significant cause” of the injury, rather than the “predominant” one.

Dispute Resolution:

Disputed bullying or harassment claims are now referred to the NSW Industrial Relations Commission (IRC) to determine if the conduct actually occurred before moving to the Personal Injury Commission. The IRC’s sole task is to determine whether the “relevant conduct” (the event) actually happened. A worker is legally prohibited from applying to the Personal Injury Commission (PIC) for compensation until the IRC has made this determination.

Finality:

IRC decisions on whether the conduct occurred are final and cannot be referred to the PIC.

Next Steps:

If the IRC confirms the conduct occurred, the insurer has 7 days to accept the claim or continue disputing it on other grounds (e.g., medical or liability) through the standard PIC process.

Decision Timelines:

Insurers have 42 days to determine liability for psychological claims; failure to do so may result in “deemed acceptance”.

Indexation:

Entitlements will now be indexed annually on 1 April rather than twice a year.

Legal Merit Test: A new merit test applies to legal funding, requiring lawyers to certify that a case has reasonable prospects of success.

How Lenehan White Can Assist

For organisations operating under the updated NSW legislative framework, the complexity of workers compensation management has increased significantly. Changes to psychological injury thresholds, dispute pathways and employer obligations mean that passive oversight is no longer sufficient.

Employers are now expected to understand how insurer decisions, return-to-work strategies and internal workplace management practices interact to influence claim outcomes and premium calculations.

These changes will place greater responsibility on employers to actively manage claims, workplace risks and return-to-work outcomes.

For many organisations, the biggest risk is not the legislation itself — it is being unprepared for how these changes will impact their premiums, claims management and internal processes.

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The Real Cost Drivers Employers Need to Understand

Across the NSW scheme, the main factors driving premium increases remain consistent:

  • Poorly managed claims that remain open for extended periods
  • Delayed return-to-work outcomes
  • Psychological injury claims with long durations
  • Limited oversight of insurer claim decisions
  • Lack of internal expertise in managing complex claims

In many cases, employers only become aware of these issues after a significant premium increase has already occurred.

By that point, the financial impact can be substantial and far more difficult to correct.

Why the Traditional Approach No Longer Works

Historically, many employers have relied almost entirely on their insurer to manage claims and control costs.

However, insurers are responsible for thousands of claims across multiple employers, and their priorities do not always align with the commercial interests of individual businesses.

As the scheme becomes more complex, employers are increasingly recognising the need for independent oversight and specialist advice.

The Role of Specialist Workers Compensation Consultants

This is where experienced workers compensation advisory firms play an important role.

Specialist consultants work alongside employers to:

  • Review claim management strategies
  • Identify opportunities to reduce claim costs
  • Challenge decisions that unnecessarily increase claim exposure
  • Improve return-to-work outcomes
  • Provide strategic advice on complex claims, particularly psychological injuries

The goal is not simply to manage claims — it is to actively control the factors that influence an employer’s workers compensation premiums.

A Strategic Opportunity for Employers

The current reforms provide an opportunity for organisations to reassess how they manage workers compensation risk.

Employers who take a proactive and strategic approach to claims management are far more likely to:

  • reduce premium volatility
  • improve return-to-work outcomes
  • minimise long-term claim exposure
  • create more sustainable workplace injury management systems.

LenehanWhite, we work closely with the employers to provide independent, employer-focused workers’ compensation expertise. Our focus is on helping organisations:

  • Review workers’ compensation systems and processes
  • Gain greater control of their claims portfolio
  • Identify exposure created by the new legislation
  • Reduce unnecessary claim costs
  • Improve engagement with insurers and stakeholders
  • Test documentation, claims handling and injury management practices
  • Provide practical, commercial advice aligned with compliance obligations
  • Achieve better outcomes for injured workers and the business

Our advice is frank, robust, and focused on long-term improvement rather than short-term fixes.

Without this visibility, organisations may unknowingly allow claims to remain open longer than necessary, miss opportunities to challenge insurer decisions, or fail to identify patterns that increase their overall claims exposure.

The introduction of new dispute processes involving the Industrial Relations Commission, changes to Whole Person Impairment thresholds and the new employer excess structure also mean that individual claim decisions can have a more direct financial impact on businesses than in previous years.

As a result, employers who take a proactive approach to reviewing claims, engaging with insurers and strengthening internal injury management processes are far better positioned to control both risk and cost.

With the NSW scheme continuing to evolve, having the right expertise and support in place has never been more important.

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Speak to a Workers’ Compensation Specialist

If you would like to understand how these changes affect your organisation or want support reviewing your current approach before your next renewal, speak with Lenehan White.

Early intervention and informed decision-making are now more important than ever.

Contact us to discuss your workers’ compensation risks, obligations, and our helpful approach. Our advice and recommendations will be frank and robust. Call +61 488 257 311
or email peter@lenehanwhite.com.au.

Important Disclaimer 

The information on this page is general in nature and does not constitute legal, financial or insurance advice. Workers’ compensation obligations, claims outcomes and premiums vary depending on individual circumstances. Employers should seek appropriate professional advice before making decisions relating to workers’ compensation or insurance arrangements.

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