NSW Government Passes New Workers Compensation Reforms

On the 5^th of February 2026, the NSW Government passed new reforms to the state’s current workers compensation scheme through the Workers’ Compensation Legislation Amendment (Reform and Modernisation) Bill 2025. The new reforms were implemented to stabilise the long-term sustainability of the scheme, further strengthen support for injured workers and to protect employers from large premium increases. These changes have been made with a goal of maintaining a viable system for employers whilst ensuring that injured workers are continuing to receive appropriate care and support.   

Why reform was needed

The NSW workers compensation scheme has faced a huge increase in financial pressure over the past few years, particularly in relation to a significant rise in psychological injury claims. Without introducing these reforms, it was expected that there would be substantial premium increases for employers and additional strain on the scheme’s ability to effectively support injured workers. These reforms have been made to create a sustainable balance between supporting both injured workers and employers.

Key changes in the new workers compensation reforms

The new workers compensation reforms introduce several key changes for employers and employees. They include:

• An 18-month legislative restriction on average premium increases to help protect employers and businesses from being imposed with extreme and sudden cost increases.
• Maintaining the Whole Person Impairment (WPI) thresholds for psychological injury claims.
• New Return to Work Intensive Program which provides eligible workers with an additional year of medical treatment and income support.
• The NSW Treasurer now has the authority to lower the Whole Person Impairment thresholds where it is considered necessary in the public interest.
• Introduction of a replacement program for Business Connect which aims to support employers navigate challenges and maintain productive and sustainable workplaces.
• Updates to legislative terminology relating to reasonable management action.

What do these reforms mean for employees

The new workers compensation reforms aim to strengthen recovery pathways for injured workers whilst maintaining access to appropriate support. The key changes relevant to employees are:

• Receiving greater certainty and structure around return-to-work support.
• Continued access to medical treatment and income support through an expansion of existing recovery programs.
• Updates to impairment thresholds which could affect eligibility for certain long term compensation benefits for psychological injuries.

What do these reforms means for employers

For employers, the new workers compensation reforms aim to provide stability and clarity when it comes to managing workplace injuries and compensation obligations.

They key changes for employers are:

• Creating better stability by having premium increases constrained for at least 18 months.
• Greater focus on early intervention and effective return to work practices.
• More clarity around legislative terminology.
• Continued emphasis on proactive injury management and prevention strategies.

How to support better recovery outcomes

The new reforms reinforce the importance of implementing early intervention strategies to support injured workers and achieve sustainable recovery outcomes. At Recovery Partners we support organisations through proactive injury management and early intervention measures that help to reduce risk, support workers and improve return to work outcomes.

We support businesses across Australia through a range of early intervention services designed to assist workers and improve recovery outcomes. They include:

• 24/7 Injury Triage.
• Psychological Health Monitoring.
• Psychometric Pre-Employment Health Assessments.
• Physical Pre-Employment Health Assessments.
• Psychological Early Intervention Assessment.