NSW Workers Compensation Reform: What Employers Need to Know

Tash Hutchin
Nov 21
3 min read

On Tuesday 18th of November 2025 the NSW Parliament passed a modified version of the Workers Compensation Legislation Amendment Bill 2025. These amendments mark a significant shift in how the State’s workers compensation scheme will operate moving forward.

Below is a clear summary of what has changed, what’s still to come, and how LHB Partners is supporting businesses through the transition.

Key Changes Passed by Parliament

The Bill introduces several reforms aimed at modernising the scheme, improving clarity, and tightening eligibility in specific areas. The main changes include:

1. New eligibility requirements for primary psychological injury claims

These changes refine access to psychological injury benefits and are expected to impact both claim numbers and assessment pathways.

2. A dedicated bullying and harassment jurisdiction in the NSW Industrial Relations Commission

This creates a clearer avenue for addressing bullying and harassment issues within the workers compensation framework.

3. “Reasonable and necessary” test for medical entitlements

The previous test of “reasonably necessary” will be replaced, aligning the scheme with other injury compensation systems and strengthening the standard required for medical treatment approvals.

4. A single process to determine Whole Person Impairment (WPI)

Workers will no longer need multiple assessments. A single assessment will determine their level of permanent impairment, simplifying the process and reducing delays.

5. Merit-based certification for legal proceedings

Legal representatives for both workers and insurers must now certify the reasonable prospects of success before commencing litigation, helping to reduce unnecessary disputes.

6. Reduced entitlement periods for certain psychological claims

Where WPI is assessed at under 21% for primary psychological injury, the worker’s weekly and medical entitlements will be limited to shorter periods than before.

7. Employer claims excess

Employers will be responsible for up to two weeks of weekly payments before insurer liability begins, sharpening the focus on early return-to-work support and proactive injury management.

8. Annual indexation of entitlements

Instead of twice a year, indexation will now occur annually.

What Happens Next?

The Bill has passed, but the practical application of these changes is yet to be finalised.

Start dates still to be announced

The NSW Government will now determine the commencement dates (which may be staggered) and communicate these in due course.

New regulations to be drafted by SIRA

Significant regulatory work is required to give operational meaning to the legislative changes. These regulations will provide the detail needed to implement the reforms across the scheme.

Additional reforms in development

The NSW Treasurer has also announced further steps, including:

Amendments to the second Bill (expected August 2025) following crossbench negotiations
Commissioning the Chief Psychiatrist to design an improved and more consistent process for assessing psychiatric impairment

Links to the Bill, the Treasurer’s statement and related documents can be provided for readers who want deeper insight, just get in touch.

What This Means for Your Business

When legislation changes, the impact can be felt quickly—particularly in workers compensation, where entitlements, premiums and internal processes are closely linked.

Employers may soon need to review:

Injury management procedures
Psychological injury response frameworks
Claims handling and escalation processes
Internal documentation and policies
Early intervention and return-to-work strategies

Understanding these changes early ensures your business is prepared before the reforms take effect.

How LHB Partners Is Supporting Employers

At LHB Partners, our experienced team is already working through the new legislation and preparing guidance for our clients.

As your trusted Workers Compensation partner, we will:

Keep you informed as commencement dates and regulations are released
Provide clear, practical updates tailored to your industry and workforce
Offer strategic advice to help you minimise disruption and maintain compliance
Work alongside your business to protect your people, your operations and your bottom line

Legislation may be changing — but our commitment to supporting you remains the same.