The Minns Government's proposed overhaul of the New South Wales workers compensation scheme is shaping up to be one of the most significant and troubling shifts we have seen in decades, particularly for workers suffering psychological injuries.
When interviewed recently by the Sun Herald, I said the proposed changes were extreme and harsh, and would leave seriously injured workers without longer term support.
Having practised in this field for many years, I have witnessed firsthand the struggles injured workers face, and how vital access to timely compensation is to their recovery. From where I stand, these proposed reforms would make it extraordinarily difficult for genuinely injured workers to obtain the support they need, at precisely the time they need it most.
Raising the bar beyond reach
One of the headline changes being contemplated is to double the threshold for psychological injuries to qualify for lump sum compensation — from the current 15% whole person impairment (WPI) to 30%.
On paper, this might sound like a technical adjustment to control rising costs. In reality, it would all but eliminate access to lump sum entitlements for workers suffering serious psychological injuries.
Reaching 15% WPI already requires significant and lasting impairment across multiple areas of life, including basic self-care, interpersonal relationships, social functioning, and work capacity. It is not a threshold that is satisfied and met lightly. Increasing that threshold to 30% would, in practical terms, require a level of psychiatric injury so severe that the worker would likely be permanently housebound, reliant on carers, or even institutionalised.
In my years practising in this space, I have seen very few psychological injury cases that would meet a 30% threshold. It sets an almost impossibly high bar and effectively tells the vast majority of injured workers: your suffering is real, but not serious enough to warrant meaningful compensation.
It is important to remember that psychological injuries often arise from deeply traumatic experiences — such as bullying, sexual harassment, violence in the workplace, or repeated exposure to traumatic events, as is common for healthcare workers, first responders and child protection workers. These are not minor grievances. They are real injuries that deserve recognition and support.
Procedural barriers that discourage legitimate claims
The government has also proposed that claims related to bullying, harassment and other psychological hazards first be brought before a to be established bullying and harassment jurisdiction within the NSW Industrial Relations Commission (IRC) before a workers compensation claim can proceed which is said to be modelled on the existing Fair Work Commission regime (FWC).
At first glance, this may appear to prioritise early intervention and hazard prevention. But in practice, it introduces a significant and often insurmountable barrier for injured workers.
Workers suffering from psychological injuries are already vulnerable. Requiring them to undertake an adversarial legal process against their employer before they can even access compensation is likely to deter claims altogether. Many workers will simply not have the emotional resilience or financial resources to pursue such proceedings, particularly when facing the power imbalance inherent in challenging an employer.
In my experience, early access to treatment, income support and rehabilitation services is key to improving outcomes for psychologically injured workers. The proposed IRC process will cause delays, compound stress, and deter legitimate claims. Rather than fostering safer workplaces, it risks creating a culture of silence where hazards go unreported for fear of litigation. This is not a trauma-informed response. It is a system redesign that prioritises procedural hurdles over worker welfare.
Systemic issues cannot be fixed by shifting the burden
There is no doubt that the NSW workers compensation scheme is under financial pressure. Rising psychological claims and declining return-to-work rates are concerning trends.
However, it would be a serious mistake to assume that these trends are solely the result of workers lodging frivolous claims or seeking to exploit the system. Much of the pressure on the scheme stems from systemic mismanagement over the past decade particularly failures in the administration of icare, the state's nominal insurer.
Missteps such as poor claims handling practices, inadequate early intervention, loss of specialist expertise, and governance failures have been widely documented. These systemic issues have eroded trust, worsened outcomes for injured workers, and inflated costs.
Workers particularly the most vulnerable should not be asked to bear the burden for these failures through diminished entitlements and increased barriers to support. Effective reform must start with fixing the system's management, not restricting the rights of those it is supposed to protect.
The risk of unintended consequences
Beyond the immediate injustice to injured workers, the proposed reforms carry broader risks.
Denial of appropriate compensation does not make injuries disappear. Instead, it shifts the cost elsewhere to the public health system, to social services, and to families struggling to care for loved ones with severe psychological injuries.
We know that untreated psychological injuries can escalate into long-term disability, homelessness, and chronic health conditions increasing costs to the State. A robust workers compensation scheme is not only a safety net for individuals it is an investment in community wellbeing and economic productivity.
Moreover, undermining the credibility and accessibility of the scheme risks disincentivising early reporting of psychological hazards. If workers know that they are unlikely to receive meaningful support after suffering harm, many will simply stop raising concerns. This undermines workplace safety efforts and leaves hazardous conditions unaddressed.
Lessons from other jurisdictions
The government has pointed to South Australia's 30% impairment threshold as justification for the proposed changes. However, it is critical to recognise that different jurisdictions use different methodologies to assess impairment, and South Australia's system is not directly comparable to New South Wales.
Furthermore, the experience from South Australia has been mixed. While some cost containment has been achieved, serious concerns have been raised about injured workers falling through the cracks and the long-term social costs of exclusion. Reform should be informed by comprehensive, independent evaluation of all consequences not by superficial comparisons or budgetary imperatives.
A call for balanced, evidence-based reform
There is a genuine need for reform in the workers compensation space. Rising costs, poor return-to-work rates, and inconsistent claims handling practices all demand attention. But reforms must be carefully designed to balance financial sustainability with fairness, humanity, and evidence-based policy.
The focus should be on:
- Strengthening early intervention and rehabilitation services to improve recovery outcomes.
- Restoring specialist expertise in claims management, particularly in psychological injury cases.
- Improving governance, transparency, and accountability within icare and related bodies.
- Enhancing workplace mental health initiatives to prevent injuries before they occur.
- Ensuring that thresholds for compensation are proportionate, based on clinical evidence, and reflective of the realities faced by injured workers.
Psychological injuries are complex, often invisible, but no less devastating than physical injuries. Our workers compensation system must continue to recognise and respond to that reality. As a practitioner who has spent my career standing alongside injured workers, I urge the government to reconsider the path it is taking. Workers deserve a system that supports recovery, respects their dignity, and acknowledges their injuries not one that raises barriers and compounds their suffering. Reform is necessary. But it must be smart, compassionate, and driven by evidence not short-term financial expediency.
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