Stressed, bullied and burnt-out workers are being blamed for an unsustainable burden on a compensation scheme designed for people who lose limbs or break bones on the job.
Those claiming psychological injuries from bullying or harassment in the workplace will soon have to prove their claims in court before being paid out under flagged changes to the billion-dollar NSW benefit system.
Treasurer Daniel Mookhey warned the state and insurers could not afford to keep compensating burnt-out and traumatised workers as the number of claims sky-rocketed.
"Our workers compensation system was designed at a time when most people did physical labour – on farms and building sites, in mines or in factories," he said on Tuesday.
"A system that approaches all psychological workplace hazards the same way as physical dangers needs to change."
The system needed to reflect modern ways of working and prevent projected claims from 80,000 people for psychological injury over the next five years, Mr Mookhey added.
NSW insurer Icare does not hold the assets required to care for the state's injured workers, while premiums for businesses are expected to rise by more than a third in coming years.
Icare paid out more than $5 billion in workers compensation claim benefits in the 2024 financial year.
Changes would include a requirement that workers prove claims through a bullying and harassment division in the state's Industrial Relations Commission before pursuing compensation.
"Right now the system is not working to protect those people either ... they will often find themselves stuck in litigation rather than getting treatment, let alone prevention," Mr Mookhey said.
Allowing the commission to address psychological hazards in workplaces and define what constituted an injury could also create a "prevention culture", he added.
Combating fraud is one reform target, while the state is also expected to provide further responses to recommendations from an independent 2023 review of workplace health and safety regulator SafeWork NSW.
Businesses and unions are yet to be consulted on the changes.
The NSW Nurses and Midwives Association flagged its early opposition to the shift, although it indicated support for prevention measures.
"Instead of making it harder for injured nurses and midwives to access support, the government must address the workplace conditions that are leading to these claims in the first place," secretary Shaye Candish said.
Business NSW chief executive Daniel Hunter said businesses faced increasing premiums even if they had no claims against them.
"Without significant changes the weight of the scheme will crush businesses and leave workers needlessly suffering," he said.
Return-to-work rates have fallen in recent years, with the increased costs to the scheme blamed on psychological injuries.
Only 40 per cent of workers claiming psychological injury returned to work within 13 weeks, an audit in April reported.
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