Changes to psych claims NSW

NSW is proposing major reforms to workers compensation laws that will directly affect how psychological injury claims are assessed and managed in your workplace.

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Read proposed reforms HERE. We detail them below as well as a case study from a national logistics group outlining how they are addressing psychosocial hazard management.

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Most Significant Reforms (in our view)

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1. Two-Week employer excess (cost shift to employers)

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“To incentivise safer workplaces.”

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Implication: If a claim is accepted, the employer pays for the first two weeks of time off. That cost sits with the business, not the insurer.

For employers: This means a direct financial penalty for every injury, even minor ones. It encourages employers to prevent issues early because once a claim is made, you're paying immediately.

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2. SafeWork NSW to become a standalone agency with psych injury focus

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“Bolstered capacity to investigate psychological injury.” ‍

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This shows a clear intent to treat psychological injury with the same seriousness as physical injury. Employers should expect more scrutiny and more enforcement action under this model

For employers: You’ll need to show how you’re identifying, consulting on, and controlling things like workload pressure, poor communication, and bullying

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3. New jurisdiction for bullying and harassment (Preventive Focus)

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“Establish a bullying and sexual harassment jurisdiction in the IRC…”

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Implication: Employees won’t need to wait for harm to be diagnosed as a psychological injury before action is taken. If someone is being bullied or harassed, they can go straight to the Industrial Relations Commission to seek orders before it becomes a workers comp claim.

For employers: This creates a legal risk for unresolved conduct issues. You’ll need to act early and document your response to any report of poor behaviour. It can now become a formal legal issue even if no injury has occurred yet.

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4. Stronger definition of compensable psychological injuries

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“So that workers and employers can better navigate the workers compensation system.”

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Implication: Only injuries where work is clearly the main cause will be eligible. That means less grey area for claims, but it also means employers need clear evidence if they want to dispute that work was the cause.

For employers: If you don’t have a documented process for managing psychosocial risks, you may struggle to prove the injury wasn’t work-related.

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5. Clarification of reasonable management action‍

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Ambiguity in this defence has led to disputes. Clarifying what qualifies will force employers to ensure fair process, clear communication, and consistency in all management decisions, especially performance-related ones.

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What this means for employers

• You will need to prove your processes, not just say they exist via a policy.
• Internal consultation must be structured, consistent, and ongoing.
• If your business cannot demonstrate consultation and risk control efforts, you will be exposed to uncontestable claims.
• There is now a direct cost to your business. The two-week employer excess means you’ll pay up front when claims are accepted, not just your insurer.

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What this means for employees

• Employees with legitimate psychological injuries will face a clearer but more rigorous pathway to claim.
• Those working in certain emergency or high-risk public sector roles may see automatic acceptance of claims.
• Workers will have stronger protections if employers fail to provide safe systems of work or consult on psychosocial hazards.
• The new rules may also reduce delays and uncertainty in claim outcomes.

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Case study: How Watco and Intermodal Group manage psychosocial risk efficiently

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The below case study outlines how Watco and Intermodal Group manage Psychosocial risk with Skodel. Key outcome was a verifiable process aligned to WHS laws:

• Survey open for 21 days with easy reminder option for staff yet to complete it
• Survey time took 2 minutes (consultation mechanism)
• 80 staff suggested controls
• Risk assessment was automatically created against the 17 hazards in Comcare Model Code of Practice
• Consultation logs stored automatically

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We hope you found this useful and as always, thank you for reading.