Overview
New South Wales workers’ compensation reforms. Why reforms were introduced, what has passed, iCare’s role, new psychological injury framework (including the “relevant event” test), conduct-based claim timelines and entitlements, dispute pathways (IRC vs PIC), premium and excess changes, and expected implementation milestones.
Why the Reforms and What Has Passed
Intent: repair and stabilise the NSW workers’ compensation scheme to ensure continued care and financial support for injured workers and maintain affordability for employers (supporting business confidence and economic growth).
Two bills were introduced to Parliament in 2025—one late last year and one early this year—and have now passed. Insurer guidelines (used to manage claims) are also being updated.
iCare’s Role and Scheme-wide Changes
iCare’s role is to operationalise the reforms and support employers and workers to understand and implement changes, including for mental health injuries and claims, and changed obligations for workers and employers.
Key scheme-wide adjustments (physical and psychological):
- Medical expenses test changes from “reasonably necessary” to “reasonable and necessary.”
- Limit to the number of permanent impairment assessments (single assessment framework) for Whole Person Impairment (WPI).
Employer Premiums and Excess
Excess will apply to all claims under policies issued after 4 pm on 30 June 2026 (to be staged). The exact calculation will be set by regulation.
Premium rate freeze: despite an average 80% rate increase over the last three years, a freeze is expected for the next two years from 30 June (details to come). Premiums may still change due to wages, business activity, industry rate changes, and experience rating for larger employers.
Psychological Injury Framework: “Relevant Event”
For primary psychological claims, employment needs to be the main contributing factor. A new requirement: injury must arise from a defined “relevant event” (two categories):
- Trauma-related events: witnessing a death or serious injury, natural disaster or explosion, motor vehicle accident or another accident, or a suicide or attempted suicide.
- Conduct-related events: unreasonable behaviour, including sexual or racial harassment, bullying, and excessive work demands.
Assessment standard for conduct: what a reasonable person would consider unacceptable; a worker’s perception counts only if reasonable.
Claims Process for Trauma vs Conduct-based Events
Trauma-related claims: worker nominates the event and provides evidence meeting the definition; otherwise, the process remains the same (current provisional liability pathway and timelines).
Conduct-based claims (bullying, harassment, excessive work demands):
- Insurer has up to 42 days to decide liability.
- During assessment, the worker is entitled to a non-provisional liability interim entitlement (different from provisional liability).
- If the insurer fails to decide within 42 days, it is deemed they accepted that the injury was caused by bullying, harassment, or excessive work demands.
- Mutual obligations: the worker must clearly identify the event and provide sufficient detail up front; employers must respond quickly (including any reasonable management action evidence) because the assessment window is short.
Post-Decision Entitlements and Reviews (Conduct-based)
If liability is accepted: insurer has 21 days to issue any back payment for weekly payments (up to 95% of pre-injury average weekly earnings) and to pay outstanding medical expenses.
If liability is disputed: insurer provides information on how to seek a review and pays a further 14 days of weekly benefits during the notice period. A review is mandatory before proceeding to the IRC.
Dispute Pathways and Acronyms
Industrial Relations Commission (IRC): a new body within the scheme with a specific role for psychological claims arising from conduct-based events. Its role is to decide whether the alleged conduct occurred (may consider employer/insurer evidence). Decisions are final and binding. Matters cannot be referred to the Personal Injury Commission (PIC). This is a new jurisdiction; currently, there are no procedural rules, practice directions, or case law.
Personal Injury Commission (PIC): cannot decide conduct-based disputes until the IRC has decided whether the conduct occurred.
Other acronyms referenced: WPI (Whole Person Impairment), WHS (Work Health and Safety), IME (Independent Medical Examination).
Employer-focused Impacts and Clarifications
Greater clarity on which psychological claims are compensable (as distinct from industrial relations issues). Interactions highlighted with WHS systems, industrial relations, and the reasonable management action defence. Back-end claim changes include limiting permanent impairment assessments, disputes funding, and fair dispute resolution.
What Is No Longer Compensable (Q&A)
Reforms narrow compensability by requiring a direct link to a defined relevant event, making it harder for many workers to qualify. Non-compensable examples unless tied to a relevant event:
- Disagreements with colleagues, personality clashes, or relationship breakdowns that don’t amount to bullying/harassment.
- General pressure, workload issues, or understaffing.
- Impacts from restructuring, duty changes, reasonable performance management, workplace culture, or dissatisfaction with management.
- Single episodes of rudeness, discourtesy, or frustration below bullying/trauma thresholds.
Reasonable Management Action Defence (Q&A)
Defence expanded and clarified: a wider range of reasonable employer actions can be relied on to deny compensation if done reasonably. Covered actions include:
- Performance management, disciplinary actions, issuing warnings, termination.
- Approving/denying leave, rostering, allocation of shifts or locations.
- Transferring/redeploying staff; suspending/standing down a worker.
- Giving performance feedback or counselling.
- Investigating misconduct; allocating/changing duties.
- Addressing behavioural issues; implementing workplace policies or procedures.
Test change: whether the employer’s actions were the significant cause of the injury.
Why Identifying Event Type Upfront Matters
Determines timeline, payments, and dispute body (PIC or IRC). Conduct-based events follow a 42-day expedited process with limited time for factual investigations or an IME (and it’s unclear if an IME is required to determine whether conduct occurred).
If the insurer fails to decide within 42 days, liability is deemed accepted; if disputed, an independent review is mandatory before the IRC decides whether bullying, harassment, or excessive work demands occurred. If the IRC is not satisfied the conduct occurred, or finds it was reasonable management action, no compensation is paid.
Pre-commencement Psychological Injury Notifications (Q&A)
Workers who notify their psychological injury before commencement will “retain access to these for WID claims.” If weekly payments ceased because the existing 21% WPI threshold wasn’t met at 260 weeks, and a later assessment determines the threshold is met, weekly payments will become payable again.
Timelines, Regulations, and Next Communications
Commencement date: not yet announced. Some changes will apply only to new primary psychological injury claims from the start date (e.g., relevant event requirement, reduced entitlement periods for primary psychological injury claims that don’t meet the relevant threshold). Other changes (e.g., reasonable and necessary test; limit to permanent impairment assessments) will apply to requests made on or after the start date.
The government is developing regulations and guidelines to go to public consultation. iCare is supporting employers, agencies, and claim service providers to gear up for required operational changes. The government will advise the start date; iCare will keep communicating updates and may run additional webinars.