Employers have called for strict monitoring of troubled NSW public insurer icare, saying hiking their insurance premiums will push some businesses to their limits.
Economically beleaguered icare had requested the NSW government allow it to raise premiums by 22 per cent in one hit.
This was rejected by Work Health and Safety Minister Sophie Cotsis, who directed the insurer to raise its premiums by eight per cent annually for the next three years.
"Our government has been left in a dire situation with respect to icare and its long-term financial sustainability to support injured workers," Ms Cotsis told reporters on Monday.
"It is going to be tough for small businesses, and I'm not sugarcoating this at all."
The workplace injury system and its finances were in an unacceptable and parlous state, Ms Costis said.
"It will take years to fix a decade of decline in the workers compensation system but the reform starts now."
The rise in premiums will be difficult for many businesses to absorb, including smaller operators who had struggled in recent years, Business NSW CEO Daniel Hunter said.
"For the sake of hardworking businesspeople, workers and taxpayers, the NSW government must strictly performance manage icare to ensure the eight per cent increase in the next financial year is significantly reduced in the following years," Mr Hunter said on Monday.
The rise will cost the state's farmers thousands of dollars and came at the worst possible time, NSW Farmers workplace relations spokesman Chris Stillard said.
A mixed farming business paying $350,000 in wages could have to pay about $6000 in additional premiums on average in the coming three years, initial calculations from NSW Farmers found.
"It's getting more and more expensive to grow food and fibre every day, and this will push some businesses to their limit," Mr Stillard said.
Other estimates suggested the rise would mean a small business paying $200,000 in wages will face an increase of about $300 per year, starting from the 2023/24 financial year.
The insurer, which manages the state's workers compensation scheme covering more than 3.2 million public and private employees, has been plagued by allegations of mismanagement and the leaking of personal data of nearly 200,000 injured workers.
Confidential briefing notes seen by AAP show the primary cause of icare's financial problems stem from a failure to increase premiums for seven years between 2014 and 2021.
Other contributing issues include high inflation and an increase in people reporting psychological injuries.
The government needed to put pressure on icare to keep premiums as low as possible, while also improving return rates for injured workers, Opposition Leader Mark Speakman.
"The new government needs to explain its justification for eight per cent increases, and explain to the community that everything possible has been done to keep premiums low," Mr Speakman told reporters on Monday.
Late last year a confidential briefing note was released showing the NSW treasury had significant concerns about icare's financial position, and it could only overcome its projected shortfalls by lifting premiums to 33 per cent in 2025.
Then-finance minister Damien Tudehope raised premiums by 2.9 per cent, taking them to an average rate of 1.48 per cent of wages.
That was well below both the break-even point of 1.91 per cent and the national average of 1.7 per cent but Mr Tudehope said businesses needed certainty in the face of natural disasters, COVID-19 and global inflationary pressures.
Former treasurer Matt Kean revealed in budget estimates last year the insurer was paid $1.9 billion to bail out its fund for police, teachers and nurses.
Up-to-date briefings indicate the eight per cent increase will be adequate to avoid another bailout when the budget is delivered in September, Ms Cotsis said.
