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As workplaces continue to place greater focus on psychological health and wellbeing, understanding how workers compensation responds to psychological injury is increasingly important for employers. For recruitment and staffing businesses, new NSW workers compensation scheme reforms introduce important changes to the way primary psychological injury claims are assessed and managed.
From 1 July 2026, significant changes apply to primary psychological injury claims in NSW that are first notified on or after that date. The reforms introduce new eligibility tests and processes that may change whether a claim is compensable, how quickly liability is determined and the length of time some claims remain open.
What has changed?
For a primary psychological injury to be compensable, there must generally be a relevant event or series of relevant events, a real and direct connection between the event and employment, and employment must have been the main contributing factor to the injury.
The reforms also strengthen the reasonable management action defence. Management actions such as performance management, disciplinary processes, workplace investigations, training, transfers and leave management may be considered where the action was taken reasonably and was reasonable in all the circumstances.
For claims involving relevant conduct, including bullying, sexual or racial harassment, and excessive work demands, insurers now have 42 calendar days to determine liability. If there is insufficient information to determine liability within that timeframe, the claim is automatically accepted, making timely employer input critical.
The reforms also increase thresholds for access to certain longer-term benefits and work injury damages, while introducing a single assessment process for determining a worker’s eligibility for compensation benefits. The expected outcomes following these changes include fewer compensable psychological injury claims, faster timeframes for liability determinations, shorter claim durations and fewer assessments.
For recruitment businesses, one of the most practical ways to prepare is to ensure relevant workplace records can be provided quickly when a claim is lodged.
Employers should consider maintaining accessible records covering:
• employee information and employment arrangements
• a clear timeline of the alleged events
• relevant emails, messages and other communication records
• workplace complaints and investigation records
• workload, rosters, hours worked and work environment evidence
• relevant policies, procedures and training records.
Records relating to performance management, KPIs, staffing levels, workload assessments, witness information and actions taken following investigations may also assist in establishing the circumstances surrounding a claim.
For staffing businesses managing people, performance and client expectations every day, good documentation can be an important risk management tool. Having clear workplace processes and well-organised records before a claim arises can help employers respond efficiently and support effective claims management.
If you have any questions or need any assistance, please contact Mark Farrugia on 0437917315 or e-mail Mark.Farrugia@safescope.au. We are here to help.
