Major reforms to New South Wales’ workers compensation system have passed State Parliament, delivering relief for employers across construction while strengthening recovery pathways for injured workers.

The changes, described by the Government as the most significant overhaul of the scheme in a generation, are designed to stabilise a system that had been facing sharp premium increases and growing financial pressure.

For builders, subcontractors and trade businesses, the reforms provide cost certainty in the short term and aim to improve return-to-work outcomes across physically demanding industries.

What Has Changed

The reforms were passed this week after securing support in both houses of Parliament, following a compromise developed with Lower House crossbench members late last year.

Key elements of the package include:

• A legislated 18-month cap on average workers compensation premium increases
• Retention of existing Whole Person Impairment (WPI) thresholds
• A new intensive Return to Work program offering an additional year of medical treatment and income replacement
• New powers for the Treasurer to adjust WPI thresholds if deemed in the public interest
• A replacement support program for Business Connect
• Updated terminology around the reasonable management action defence

The Government has confirmed that without these reforms, employers with no claims history were facing premium increases of at least 36 per cent over the next three years.

Why It Matters for Construction Businesses

Workers compensation is a significant overhead for builders and trade contractors, particularly in sectors with higher injury risk such as residential construction, civil works and specialist trades.

Premium volatility has been a growing concern, especially for small and medium operators already managing rising material costs, labour shortages and tighter margins.

By limiting premium growth in the short term, the reforms give businesses breathing room while broader changes are implemented to improve scheme sustainability.

Daniel Mookhey said the reforms were essential to restoring confidence in the system.

“These reforms finally allow us to stabilise the workers compensation system and return it to a secure footing,” he said, noting that employers, injured workers and taxpayers had all been let down by the previous trajectory.

A Stronger Focus on Recovery and Return to Work

Beyond premiums, the reforms place a greater emphasis on early intervention and recovery, a critical issue for the building industry where extended absences can disrupt projects and place pressure on teams.

Sophie Cotsis said the changes were designed to support injured workers back into meaningful employment sooner.

“These reforms ensure early support to injured workers and a clear road to recovery and return to work,” she said.

The new Return to Work intensive program extends access to medical care and income replacement, recognising that recovery timelines in physical trades often extend beyond standard benefit periods.

Broader Mental Health and Safety Investment

The reforms sit alongside a broader package of safety and mental health initiatives introduced over the past year, including:

• A $344 million workplace mental health investment
• Funding for 50 additional SafeWork inspectors, including psychosocial specialists
• New pathways for public sector workers to address bullying and harassment
• Improved dispute resolution powers for the Industrial Relations Commission
• Expanded access to wraparound psychological support services

For construction businesses, these measures signal a growing regulatory focus on both physical and psychological safety, particularly as mental health claims continue to rise across the industry.

Industry and Community Support

The reform package followed extensive consultation with business groups, unions and the not-for-profit sector.

Support has been expressed by organisations including Business NSW, the Business Council of Australia, the Australian Hotels Association, major charities and health bodies.

Jihad Dib said the reforms were aimed at long-term stability.

“These changes are about protecting the workers compensation scheme for the long term, so it remains strong, fair and able to support the people who rely on it,” he said.

What Builders and Trades Should Watch Next

While the immediate pressure of premium hikes has eased, implementation will be key.

Builders and trade employers should stay informed as the new programs roll out, particularly around return-to-work requirements, claims management processes and any future adjustments to impairment thresholds.

The reforms mark a shift toward prevention, early support and sustainability, but they also reinforce the importance of strong safety systems on site and clear processes when injuries occur.

For an industry built on people, keeping workers healthy, supported and able to return to work safely remains just as critical as managing costs.

Author: TGB Editorial