BUSINESS ILLAWARRA BACKS REFORM TO FIX BROKEN WORKERS’ COMPENSATION SCHEME, CALLS FOR LOCAL CASE STUDIES

9 MAY 2025 

 
BUSINESS ILLAWARRA BACKS REFORM TO FIX BROKEN WORKERS’ COMPENSATION SCHEME, CALLS FOR LOCAL CASE STUDIES  

Business Illawarra is supporting the need for urgent reform to the state’s workers’ compensation scheme, warning that without decisive action, businesses across the South Coast and Highlands face financial collapse — and injured workers will let down by a broken system. 

“It’s critical we say this clearly: workers have the right to be safe at work, and if someone is injured, they must receive proper care, rehabilitation and compensation,” said Business Illawarra Director, Coralie McCarthy. “People deserve to go home the same way they arrived — safe and well. Business NSW helped establish this scheme more than a century ago, and we remain committed to that core purpose.” 

However, Ms McCarthy said the scheme is no longer fit for purpose in a modern workplace environment, especially as psychological injury claims continue to rise.  

”You don’t have to look far in our region to hear stories about how the system is being misused — and it’s hurting both workers and businesses. Mental health injuries are real and deserve support, but they cannot be managed like a broken bone. It does not work” . 

She highlighted that extended time away from work can worsen outcomes for everyone involved. “Time off work is costly, disruptive, and can disconnect individuals from the very workplace support that would aid their recovery.  A supported return to work as soon as possible is documented to helps improve wellbeing.” 

The numbers are staggering: the scheme recorded a $1.8 billion deficit last year — around $5 million every day, that’s $150m every month. There is a total $3.6 billion deficit.  Psychological injury claims have jumped 65% since 2021–22 and now exceed 11,000 annually, according to the State Insurance Regulatory Authority (SIRA).  

“Our members report that workers’ compensation is increasingly being used to escalate performance issues and interpersonal grievances,” Ms McCarthy said. 

“One local construction business told us they informed an employee that they wouldn’t be required for half an hour of overtime. The worker never returned, later claiming psychosocial injury. Despite evidence of a pre-existing mental health condition — including years of text messages from the employee — the claim was upheld. The business’s insurance premiums have nearly doubled.” 

“In another case, a business is on the brink of collapse due to a claim upheld despite evidence that the worker was employed in two other jobs. It’s unsustainable.” 

Ms McCarthy said rule changes allowing provisional payments, even in cases stemming from performance management, have taken the system too far. 

“This isn’t about taking rights away — it’s about restoring fairness and integrity to a system that is failing everyone. Honest businesses are being punished, and that includes small businesses, not-for-profits, and large employers alike.” 

She also noted a growing stigma is preventing some employers from speaking up publicly.  

“There’s real shame. Employers feel they made a mistake in recruitment or fear reputational backlash for telling their story. Many are delaying retirement, absorbing costs themselves, or downsizing other roles just to keep their doors open.” 

Business Illawarra is backing the NSW Government’s push for reform and is calling for local businesses to come forward and share their experiences. 

“Real-world case studies are critical to demonstrate why change can’t wait. This reform must happen before the whole scheme collapses under its own financial weight. It’s about making sure the system works for the people it was designed to protect” Ms McCarthy said.  

Businesses can email info@businessillawarra.com or policy@businessnsw.com.  

Media Contact  

Coralie McCarthy  

Director, Business Illawarra 

M: 0417 431 564 

E Coralie.McCarthy@businessnsw.com