NSW workers compensation laws changed significantly from 1 July 2026, with new rules affecting employer obligations, premiums, psychological injury claims, return to work and injury management.
For employers, the reforms make it even more important to have the basics right — from maintaining the correct insurance cover and reporting accurate information to managing workplace injuries and employment processes appropriately.
Here are some of the key changes NSW employers need to know.
Higher penalties for insurance and premium breaches
Employers must hold a current workers compensation policy and provide accurate information to their insurer.
The maximum penalties for failing to hold the required insurance have increased, and there is also a new offence for recklessly failing to provide information relevant to the calculation of workers compensation premiums.
For large employers, the maximum penalty can be the greater of three times the avoided premium or $110,000, with imprisonment of up to two years also possible. Other employers can face penalties of up to $55,000 and up to six months imprisonment.
The message for employers is simple: make sure your policy is current and the wage and business information provided to your insurer is complete and accurate.
Premium rates are frozen — but your premium may still change
For employers insured through icare, premium rates have been frozen for the 2026–27 and 2027–28 financial years.
That doesn't necessarily mean your workers compensation bill will remain unchanged. An individual employer's premium can still increase or decrease depending on factors including wages, business activity and claims experience.
A higher excess applies to some claims
Employers insured through icare or a specialised insurer are now required to pay an excess on claims involving weekly payments where the claim is made against a policy issued or renewed on or after 4pm on 30 June 2026.
The excess is equivalent to the weekly payments made to the worker for the first two weeks after they become entitled to weekly payments.
This makes early injury notification and effective claims management particularly important.
Providing suitable work matters more than ever
Employers are required to provide suitable work to an injured worker wherever it is reasonably practicable to do so.
The maximum penalty for failing to meet this obligation has doubled from 50 to 100 penalty units.
Providing appropriate duties early can play an important role in helping an injured worker recover at work — and the reforms reinforce the importance of employers actively supporting this process.
Greater clarity around reasonable management action
The reforms have also strengthened and clarified the reasonable management action provisions applying to psychological injury claims.
A psychological injury is not compensable where a significant cause is reasonable management action, the worker's expectation of reasonable management action, or their perception of reasonable management action being taken in relation to them.
Reasonable management action can include:
performance appraisals
transfers, demotions and redeployment
promotions
misconduct investigations
disciplinary action
dismissal
redundancy processes.
This does not mean employers have free rein when managing employees. How a management process is conducted still matters.
Clear procedures, fair decision-making, appropriate communication and good documentation remain important when dealing with performance, conduct and organisational change.
Changes to psychological injury claims
New eligibility requirements, entitlements and claims processes apply to primary psychological injury claims notified from 1 July 2026.
There are also specific processes applying to some claims involving workplace conduct such as bullying, sexual harassment, racial harassment and excessive work demands.
Importantly, employers must continue to notify their insurer within 48 hours of becoming aware of an injury, including a psychological injury.
Treatment must be “reasonable and necessary”
From 1 October 2026, medical and related treatment expenses covered by the workers compensation scheme must meet a “reasonable and necessary” test.
Among other things, treatment needs to primarily treat the compensable injury, be clinically justified and represent value for money.
Certain services are specifically excluded from employer liability, including some alternative therapies, wellness services and unprescribed massage.
Employers can't attend medical appointments unless invited
Employers and their representatives are not entitled to attend a worker's medical treatment or medical examination unless the worker requests their attendance.
Employers can, however, continue to participate in case conferences designed to support recovery and a safe return to work.
Check your workplace injury information
Employers also need to make sure workers have access to the required information about what to do if they are injured at work.
You can use SIRA's If you get injured at work poster or provide your own workplace information, provided it includes:
how to report an injury
how to make a workers compensation claim
your insurer's details or confirmation that your organisation is self-insured.
What should NSW employers do now?
For many businesses, the reforms won't require wholesale changes to the way workplace injuries are managed. But they do make it important to check that your systems, documentation and management practices reflect the new requirements.
Now is a good time to review:
your workers compensation policy and premium information
injury reporting and notification procedures
return-to-work and suitable duties processes
how performance, misconduct and other management processes are conducted and documented
the information available to employees about reporting workplace injuries.
With psychological injury attracting increasing attention, employers should also make sure managers understand the difference between exercising legitimate management responsibilities and managing those situations poorly.
Not sure whether your current processes are up to date?
Total HRM can help you understand your obligations, review your existing practices and support your managers to handle workplace matters appropriately.
Get in touch with our team or call 1800 868 254.
Source: State Insurance Regulatory Authority (SIRA), Key changes for employers – Workers compensation legislative reform 2026.