image source: www.smallbusiness.nsw.gov.au
What It Means for Newcastle and the Hunter
The NSW Government has confirmed that workers compensation premiums will rise by an average of 8% for the 2025 to 2026 financial year. This is the third consecutive annual increase and is part of an effort to stabilise the state’s system. While capped at 8% on average, businesses with higher risk profiles or poor claims histories could face steeper rises, making this a pressing issue for employers in Newcastle and across the Hunter.
Rising psychological injury claims, complex case management, and increasing scheme costs have left regulators with little choice but to pursue both premium increases and reform. For local businesses, especially those already managing tight margins, these changes cannot be ignored.
The Local Business Impact
The premium rise will affect businesses of all sizes and across all sectors in the Hunter. Large employers will see significant increases in their baseline costs, but it is small and medium sized enterprises that are expected to feel the sharpest impact. Many SMEs already operate with limited financial buffers, meaning that even a modest premium increase can be the difference between maintaining staff levels or cutting back.
Business NSW has warned that without meaningful reform, many operators may be forced to reduce headcount, scale back operations, or delay expansion plans. Survey data shows that almost half of affected businesses expect to reduce staff, more than a third are considering shrinking operations, and a third are likely to freeze growth initiatives. In the most extreme cases, some SMEs face the real prospect of closure.
These increases are not isolated to individual businesses. Because industries in the Hunter are deeply connected through supply chains, cost pressures in one part of the economy quickly ripple out to others. For example, increased premiums for transport and logistics firms flow into higher freight costs, which then affect manufacturers, retailers, and service providers. The cumulative effect is a heavier cost burden across the entire regional economy, at a time when businesses are already managing inflationary pressures, labour shortages, and high energy costs.
What Help Is Available
Employers who pay upfront and on time can access discounts of up to 5% for smaller businesses and 3% for larger employers. The Safe Employer Reward provides up to 7.5% off for businesses with strong safety records and effective claims management, but from July 2026 eligibility will also require employers to submit actual wage declarations within four months of policy expiry.
These measures can provide some relief, but without proactive safety systems and preventative measures in place, many businesses will remain exposed to higher costs.
Reform on the Horizon
The NSW Government has acknowledged the growing strain on the workers compensation system and is pursuing reforms, particularly in response to the rise in psychological injury claims. Proposed changes include lifting impairment thresholds and requiring court rulings for certain claims. These measures are controversial and have been met with resistance, but business groups argue they are necessary to avoid unsustainable increases of up to 36% in future years.
For Newcastle and the Hunter, the outcome of this reform debate will be critical. Without meaningful change, the scheme risks becoming unmanageable for many local operators, particularly SMEs.
Looking Ahead
Employers who focus on preventative strategies, workforce training, and safe recruitment practices are already seeing measurable gains. Independent assessments show that pre-employment safety screening can reduce claims by up to 15%, improve supervisor ratings by 30%, and lift productivity by 10%. For some organisations, these improvements have translated into hundreds of thousands of dollars in annual savings.
Over the next three to five years, businesses that embed safety into their workforce strategies will be best placed to manage premiums and maintain operational stability. Those that do not may face rising costs and the possibility of scaling back their workforce or operations.
How peoplefusion Can Support Preventative Solutions
One of the most effective ways to manage workers compensation costs is to focus on prevention from the very beginning of the employment cycle. At peoplefusion we work with clients alongside an external assessment provider to deliver pre-employment assessments that identify safety and risk traits before a candidate joins the workforce. This is particularly valuable in high risk and blue collar environments, where risk screening for entry level roles helps employers select employees who are both productive and safe.
The evidence is clear. Research shows that 80% of safety incidents are linked to just 20% of the workforce. Employees identified as high risk are 4 times more likely to be injured at work and 11 times more likely to be injured than those deemed low risk. Crews led by managers with low safety leadership aptitude experience 3.5 times more injuries, while targeted coaching programs have reduced safety incidents by as much as 64%.
For businesses that have embedded risk screening assessments into their recruitment and onboarding processes from the outset, the outcomes have included;
10–15% reduction in workers compensation claims
5–10% improvement in productivity
10–15% increase in quality of work
20–30% uplift in supervisor ratings
When implemented effectively, these strategies have saved organisations hundreds of thousands of dollars each year through lower premiums, fewer injuries, and stronger workforce performance.
By embedding preventative strategies into recruitment, businesses in Newcastle and the Hunter can reduce exposure to premium increases, strengthen safety performance, and build more resilient teams.
If you would like to chat about preventative solutions and support to help manage the impacts outlined above, please reach out. I would love to have a conversation, perhaps over a coffee.
You can contact me on 0412 421 855 or at krystlep@peoplefusion.com.au.