NSW workers’ comp scheme in urgent need of reform, says Business NSW

Business NSW is calling for urgent reform of the NSW workers’ compensation scheme to stop the system from being misused and causing issues for businesses.

The body warned if reform of the compensation scheme was not achieved, the inaction would likely crush businesses and leave workers without the support they needed.

According to Business NSW, the workers compensation deficit had hit $3.6 billion after growing by $1.8 billion last year alone, equating to almost $5 million a day – leading to its call for urgent reform.

Daniel Hunter, Business NSW CEO, said the need for reform was critical and the compensation scheme was currently being misused and was harming both workers and businesses.

“We fully support the right of injured workers to revive care, rehabilitation and fair compensation – that’s why Business NSW helped establish the workers’ compensation scheme more than a century ago,” he said.

“Time away from work is a bad outcome for everyone – it is costly and leaves a business under-resourced. The evidence shows, however, that it can be very bad for a worker and their mental health to be disconnected from their workplace.”

The organisation also noted that State Insurance Regulatory Authority data showed c psychological injury claims had risen by 65 per cent since 2021-22, now exceeding 11,000 claims a year.

Hunter said Business NSW would continue to push for the reform as many of the organisation’s members had reported the scheme being used to escalate workplace grievances and performance issues.

“On business had an employee lodge a psychological claim after a routine performance meeting. That claim was eventually upheld on appeal based solely on the worker’s ‘perception of being overworked’ – despite doing half the workload of colleagues,” Hunter said.

Three years on, the worker is still not fit to work more than 16 hours a week which has caused the business to pay higher premiums, struggle to replace the role and lose precious hours of productivity and admin, Hunter added.

“These stories are becoming all too common. The rules changed to allow provisional payments even when the injury stems from performance management. That tipped the balance too far.”

In an opinion piece published in The Daily Telegraph last week, Hunter said though he supported “a reasonable mechanism to hold managers to account when they are not doing the right thing by legitimately injured workers”, the workers’ compensation scheme in NSW had gotten to a point that was “out of control”.

Though Business NSW played a hand in the state’s compensation scheme to begin with, Hunter noted the scheme was in dire need of change as it had become an all-to-common entry point for workplace disputes between managers and staff.

“Business NSW will be advocating to ensure these systems are better managed – for everyone’s sake,” Hunter said.

“The workers’ compensation scheme was originally designed to address physical injuries, not every conceivable workplace issue. Over time, its scope expanded to include psychological injuries. But the pendulum has now swung too far.”

The body said it would back the NSW government’s push for reform and would keep advocating for a system that distinguished genuine injuries from workplace disputes.

“We must restore integrity and fairness to the system before it collapses under its own weight. This isn’t about taking rights away – it’s about making sure the system works for the people it was designed to protect.”