Employers in New South Wales know that workers’ compensation reform is in the offing. However, one of the contributing factors, the sharp rise in psychological injury claims, should open the eyes of employers well outside of New South Wales.
What’s going on, and what should employers know? Read the article to find out.
Rise in psychological injury at work claims spur on workers’ compensation reform
Speaking to the state Parliament in mid-March 2025, Treasurer Daniel Mookhey emphasized the urgency of reforming the state’s workers’ compensation scheme, as a drastic uptick in psychological injury claims was becoming an increasing financial burden.
How prevalent are psychological injury claims in NSW?
According to the state’s statistics, psychological injury claims doubled over the past six years, far outpacing the rise of other workplace injury types, which only increased by 16%.
Meanwhile, the claims themselves are more expensive. Although only compromising 16% of all claims, psychological injury claims constitute a staggering 38% of total scheme costs, with the average cost per claim doubling from AUD 146,000 in 2019-20 to AUD 288,542 in 2024-25.
Worse still, forecasts suggest that an additional 80,000 psychological injury claims could be lodged over the next five years in the absence of reforms.
Proposed reforms to reduce the number of psychological injury at work claims
So, what then are the reforms being proposed? The long list of potential changes includes the following:
New role for the NSW Industrial Relations Commission
Assigning jurisdiction of workplace bullying and harassment matters to the NSW Industrial Relations Commission.
Clarifying legal definitions
Establishing new statutory definitions to ensure legal certainty and less room for subjective interpretation.
More powers accorded to SafeWork NSW
Likely delegating more authority to SafeWork NSW to address the matter, as laid out in recommendations from an independent review of the state’s safety regulator.
Next step for employers
Of course, these proposed reforms only affect New South Wales, but employers should be cognizant of the fact that increases in incidents of psychological injury and resultant claims aren’t just a local issue.
In the U.S., for instance, a National Safety Council survey found that not only was physical safety correlated to a respondents’ history of injury, but so too was their psychological safety. Of respondents working in person at least one day a week, those who felt psychologically unsafe on the job were 80% more likely to report they had been injured at work, requiring medical attention and/or missed days of work.
What then can employers do to prevent psychological injury in the workplace? Well, following the pandemic-related increase in psychological injury incidents, then-Surgeon General Vivek Murthy outlined Five Essentials for Workplace Mental Health and Wellbeing, intended to help employers develop, institutionalize, and update policies, processes, and practices that best support the mental health and wellbeing of all workers.
The Five Essentials comprise of:
1. Protection from Harm
Creating the conditions for physical and psychological safety is a critical foundation for ensuring mental health and wellbeing in the workplace. To this end, workplaces can:
-
- Prioritize workplace physical and psychological safety
- Enable adequate rest
- Normalize and support focusing on mental health
- Operationalize Diversity, Equity, Inclusion, and Accessibility (DEIA) norms, policies, and programs
2. Connection and Community
Fostering positive social interaction and relationships in the workplace supports worker wellbeing. To this end, workplaces can:
-
- Create cultures of inclusion and belonging
- Cultivate trusted relationships
- Foster collaboration and teamwork
3. Work-Life Harmony
Professional and personal roles can create work and non-work conflicts. To this end, workplaces can:
-
- Provide more autonomy over how work is done
- Make schedules as flexible and predictable as possible
- Increase access to paid leave
- Respect boundaries between work and non-work time
4. Mattering at Work
People want to know that they matter to those around them and that their work matters. Knowing you matter has been shown to lower stress, while feeling like you do not can increase the risk for depression. To this end, workplaces can:
-
- Provide a living wage
- Engage workers in workplace decisions
- Build a culture of gratitude and recognition
- Connect individual work with organizational mission
5. Opportunities for Growth
When organizations create more opportunities for workers to accomplish goals based on their skills and growth, workers become more optimistic about their abilities and more enthusiastic about contributing to the organization. To this end, workplaces can:
-
- Offer quality training, education, and mentoring
- Foster clear, equitable pathways for career advancement
- Ensure relevant, reciprocal feedback
How to apply these Essentials in your workplace, though? We lay it out in our guide, Understanding the Surgeon General’s Framework for Mental Health & Wellbeing in the Workplace.
.svg)
.svg)
.svg)