NSW government's workers comp changes dubbed a 'bandaid solution'

Australia Broadcast Center

20-05-2025

It's been slammed as "cruel", "dark-alley backstabbing," and "as morally bankrupt as a Kings Cross rubbish bin".
The outrage from unions, academics, lawyers and some medical experts, is largely directed at proposed changes to how psychological injury claims would be handled under the country's largest workers compensation scheme, which is managed by icare.
The proposed reforms, outlined in a draft exposure bill led by NSW Treasurer Daniel Mookhey, come against a backdrop of a mental health crisis sweeping Australia.
While there is broad agreement that the workers compensation system is broken — marked by delays, questionable case management and not enough focus on prevention and early intervention, as well as financial challenges — critics say these proposed changes won't fix the system but will instead make it harder for vulnerable workers to access support.
NSW Greens MP Abigail Boyd, who sat on last week's parliamentary inquiry into the draft bill, dismissed the government's framing of the reforms as "modernisation", calling it a piece of "Orwellian doublespeak".
"It is instead a reactionary step that will take workplace protections, and the painstaking work towards destigmatisation of mental health, backwards by decades."
Mookhey has signalled he wants the legislation introduced to Parliament the week of May 27 and debated the following week. He has warned that if it doesn't pass, he won't authorise further cash injections into the Treasury Managed Fund (TMF), which insures public sector workers including nurses, teachers, and police.
"I will not be authorising any further injections," Mookhey told the parliamentary inquiry.
"Not when that money is coming at the expense of schools, hospitals or kids in need of out-of-home care.
"That choice is clear for me."
In a statement, a spokesperson for the NSW Treasurer said the TMF had required cash top-ups of $6.1 billion since 2018 in order to remain solvent.
"You can have the best workers compensation scheme in the world on paper, but if it has no money, it's not helping anyone," he said.
One of the more contentious proposals is to more than double the Whole Person Impairment (WPI) threshold from 15 to 31 per cent for workers seeking ongoing support for a psychological injury beyond two-and-a-half years.
It's a threshold Unions NSW secretary Mark Morey told the recent inquiry, would disqualify 95 per cent of workers with permanent psychological injuries. "You're essentially catatonic," he said.
Slater and Gordon cited the case of Sarah, a NSW teacher with a 20 per cent WPI rating due to severe psychological injuries including major depressive disorder with psychotic features, caused by workplace bullying and false accusations. After a suicide attempt and eight weeks of psychiatric care, the firm said she continues to be unable to care for her children or leave home unaided.
Under the proposed reforms, Sarah, and others like her, would no longer qualify for ongoing entitlements.
Another proposal under fire is the requirement for workers with psychological injuries caused by bullying, sexual harassment, or racial abuse to first prove their case in a tribunal or court before being allowed to lodge a compensation claim.
It means early intervention won't be happening on these types of claims.
In a strongly worded submission, the NSW Nurses and Midwives' Association said the proposal revealed a fundamental misunderstanding of how psychological injuries occur.
"Between 2013-2015 and 2019-2021, there was a 150 per cent increase in psychological injury claims in this workforce, the highest growth rate of any profession," it said.
"This is not due to the malingering of nurses and midwives but reflects systemic failures."
Chronic understaffing, missed meal breaks, and rising patient aggression had left nurses especially exposed, the union said, warning the added layer would increase delays and compound trauma.
With dissent mounting, tensions are set to escalate within caucus and close stakeholders, including the unions.
There is intense interest among workers compensation specialists around the country about these plans.
Unions are launching public campaigns against the proposed reforms, and Mark Morey, Unions NSW secretary and an icare board member, has temporarily stepped down from the board, which has raised a few eyebrows about tensions on the board.
The brutal reality is the NSW workers compensation scheme has been plagued with deep seated problems for years.
Since 2018 it has faced persistent financial and operational scandals including financial underperformance.
A 2020 Four Corners investigation, Immoral and Unethical, revealed widespread underpayment of injured workers and cited internal NSW Treasury emails warning of "increasing concern about the financial viability of the workers' insurance scheme," pointing to ongoing losses and deep structural problems within icare.
In November 2022, Mookhey, who was then shadow Treasurer, described icare's finances as catastrophic and said it was a basket case.
He said employers couldn't afford the increase in premiums that were about to hit them.
"The system fell apart on [Dominic] Perrottet's watch," he said. "If the government is re-elected, as night follows day, they will try to eject even more injured workers from the scheme."
In March 2023, the Minns Labor government came to power on a platform that included reforming workers compensation and icare.
Two years on, the core problems persist and the government is now doing what it previously condemned: pushing injured workers off the scheme to appease business and plug a financial hole.
Critics say it is a manufactured crisis to justify cuts in lieu of proper policy attention on an issue that has been festering for years.
A spokesman for the NSW Treasurer said: "As at December 31 the scheme is only now holding 82 cents in assets for every dollar it expects in future claims. Absent reform, the scheme will plunge further into deficit when the scheme is revalued in six weeks time. This will lead to further instability in the scheme."
He said the government had made a number of changes, including a psychological health and safety strategy 2024-2026, enforcing workplace compliance, but said there was more to come.
icare continues to preside over a financial mess, key performance indicators like the Return to Work (RTW) rate have hardly moved, and premiums continue to rise. Meanwhile, prevention and early intervention — widely acknowledged as critical to long-term sustainability — have been sidelined, with key recommendations in previous reviews still to emerge.
Rising premiums are driving much of the urgency. With workers compensation insurance mandatory for NSW businesses, steadily increasing costs in recent years have triggered intense lobbying from the business sector, demanding swift reform.
A spokesman for the Treasurer said premiums have increased by 8 per cent per year for the past 3 years, and icare modelling shows they will need to increase a further 36 per cent in the next three years on current trends.
Business NSW CEO Daniel Hunter recently wrote an opinion piece that said the scheme is "out of control", citing a $3.6 billion deficit, which he said had increased by $1.8 billion in just one year. He blamed escalating claims, highlighting a rise in psychological injury claims.
"Workers with psychological claims typically take 20 weeks off work, compared to six weeks for non-psychological injuries," he wrote.
"More than half of workers with psychological injuries have never returned to that workplace, according to a survey of Business NSW members, leaving them short-staffed and burdened with excessive costs."
He said the current iteration of the system is not fit for purpose.
Icare, which manages both the Nominal Insurer (covering private sector workers) and the Treasury Managed Fund (TMF) for public sector employees, reported 5,300 psychological injury claims under the Nominal Insurer and 4,600 under the TMF in the year to June 2024. In its submission, icare stated this marked a 40 per cent increase for the Nominal Insurer and a 15 per cent rise for the TMF.
It estimated that psychological injury claims cost three to five times more than physical injuries, largely because affected workers remain off work longer. It said over the past two years, these claims added around $400 million to the Nominal Insurer's liabilities and $500 million to those of the Treasury Managed Fund (TMF).
But a number of experts and Greens politician Abigail Boyd said the numbers don't stack up.
"Psychological injury claims made up 5 per cent of workers compensation claims in the Nominal Insurer in 2015-16, and make up 7 per cent of claims today," Boyd said.
She noted the sharpest rise was among public sector workers, with psychological claims under the Treasury Managed Fund growing ballooning from 13 per cent in 2015–16 to 20 per cent today, highlighting the pressure within the government's own workforce. "And there's the rub. This is all about the government's own bottom line."
"The Treasurer's claims of modernising the scheme is a self-serving piece of Orwellian doublespeak. What is in fact happening is not a modernisation of anything, it is instead a reactionary step that will take workplace protections, and the painstaking work towards destigmatisation of mental health, backwards by decades," she said.
An expert in workers compensation reform with experience in both government and the private sector, who requested anonymity, described the proposed changes as a looming debacle.
"I don't think the government knows what the problem is. If they did they would never have done this," he said.
He said it was time the NSW Government recognised the current legislation was no longer fit for purpose.
"We need a new act fit for modern times, where the focus is on recovery and return to work, not liability and disability disputes. "The lawyers will love this, as will their Porsche dealers," he said.
When asked if it was time to revisit the legislation and start again, a spokesperson for the Treasurer referred to the tweaks the government planned to make.
"This is an exposure draft, which seeks input from all parties in reforming a system that is broken," he said.
"This exposure draft is intended to provide a starting point for the next phase of conversations and to highlight the scale of the challenges the scheme is facing.
"It is not the government's final position. The deliberations of the parliamentary committee which heard evidence last Friday, and consultations with the NSW Trade Union Movement, employers and members of parliament will help shape the bill the government intends to introduce shortly."
The Australian Lawyers Alliance noted that a 2023 parliamentary review recommended the development of a whole-of-government return-to-work (RTW) strategy to support the redeployment of psychologically injured staff who couldn't return to their original role or workplace. But the recommendation is yet to be implemented.
"We still have a nurse suffering from an injury in one public hospital unable to return to suitable duties in another public hospital, or an injured teacher unable to return to suitable duties at another public school," the ALA said in a submission.
It begs the question: why rush into major legislative changes before giving reforms and strategies a chance to take effect?
SafeWork NSW, the workplace safety regulator, has only just begun rolling out a new strategy aimed at reducing psychological injury claims. It's early days, and its impact is yet to be measured.
A spokesperson for the Treasurer said the exposure draft contemplates a system that is working in parallel.
The Minns government came to office promising to fix the scandal-ridden icare. Two years on it under fire from the very stakeholders it claimed to champion.
As one workers comp expert put it: "The scheme doesn't need more bandaid fixes, it needs a root and branch demolition and a rebuild from the ground up."