The NSW government is going ahead with its overhaul of workplace compensation laws aimed at tackling the rise in mental injury claims.

Today, it introduced in parliament a final bill that includes a “range of refinements” to proposals that raised concerns among lawyers, unions and mental health advocates.

One refinement relates to the change to the whole person impairment threshold for assessing a psychologically injured worker’s access to benefits and damages. 

The government has decided on a gradual increase to the threshold determining weekly payments for life, rising to 25% from October and more than 30% from July 1 next year.

Its draft bill had included a 31% threshold for psychological injury for access to weekly payments beyond 2.5 years, lump sum payments for permanent problems and access to damages.

The final bill also introduces commutations allowing psychologically injured workers with a whole person impairment of 30% or below to access a lump sum before their weekly payments stop.

Under the current regime, there is no specific reference for the degree of impairment required for psychological injuries, while the Workers Compensation Act 1987 states no damages may be awarded unless an injury results in the death of a worker or in a degree of permanent impairment of at least 15%.

The government says the Workers Compensation Legislation Amendment Bill 2025 will “address the lack of focus on preventing psychological injury [and] the low rate of recovery and return to work for psychological injuries, and arrest the sharp rise in premiums”.

It says only half of workers with psychological injury claims return to work within the first year and the average cost of the claims has jumped $100,000 in five years to almost $300,000.

As a result, businesses are facing a 36% rise in workers’ compensation premiums.

State Treasurer Daniel Mookhey said: “We are creating a modern system that will better protect workers from psychological injury and provide better help when they need it. 

“As the workplace evolves, our capacity to support people in it must adapt accordingly.”