Victoria's WorkCover scheme needs to be reformed but the government has missed the mark with premium hikes and changes to worker eligibility, business and union groups say.
Premier Daniel Andrews on Friday announced plans to overhaul the system, saying it was broken and unsustainable.
Under the changes, businesses will pay an average of 1.8 per cent of remuneration from July 1, up from 1.27 per cent.
Eligibility for mental injury claims will also be adjusted, with workers suffering stress and burnout no longer able to access weekly WorkCover benefits.
They will instead be eligible for provisional payments for 13 weeks to cover medical treatment, along with access to enhanced psychosocial support services.
Workers receiving payments beyond two-and-a-half years will have to undergo another impairment and capacity test to see if they're still eligible.
Return to Work Victoria will also be established to help people get back into the workforce.
"WorkCover in our state is broken," Mr Andrews said on Friday.
"These changes are all about making sure that WorkCover is sustainable, that it doesn't grow so big that it simply falls over."
WorkCover's claims liability has tripled in Victoria since 2010, mainly due to the increased cost of weekly income support.
Many workers are also staying on the scheme for longer and mental injury claims now represent 16 per cent of new claims.
The scheme needs to be reformed but rising the premiums to 1.8 per cent is not the answer, the Victorian Chamber of Commerce and Business says.
"Business will continue to play its part in looking after its workers," chief executive Paul Guerra said.
"But business needs to be treated fairly and a 42 per cent increase on premiums is not the right way to go."
Mr Guerra said a business with a $2 million payroll would pay an extra $12,000 each year under the changes, while larger companies with a $10m payroll would pay $60,000.
The actuaries advised government to increase the premiums to 1.74 per cent, Mr Guerra said.
The Victorian Trades Hall Council has also criticised the changes to eligibility requirements and testing, saying workers are being denied access to much-needed support.
"This was one of the best schemes in the nation but this takes it back a significant step," secretary Luke Hilakari said.
Shadow treasurer Brad Rowswell argued the changes would not transform the broken system.
"Reform looks much more detailed and much more complicated," he said.
Mr Andrews said the WorkCover changes would be criticised but he maintained it was a balanced approach to ensure the longevity of the system.
He said any surplus achieved through the changes would be reinvested in either lower premiums or greater support for workers.
Legislation to change the eligibility and testing requirements will be introduced to parliament later this year.
