For NSW employers, there’s a rare piece of good news on the compliance front. The state government has introduced a two-year freeze on workers compensation premium rates, meaning one of your biggest employment-related overheads just became predictable through to mid-2028.

The change comes under the Workers Compensation Legislation Amendment (Reform and Modernisation) Act 2026. At scheme level, premium rates will remain pegged at 2025–26 levels for both the 2026–27 and 2027–28 policy years.

So what does this actually mean for your business? And how should you factor it into your cash flow planning?

A quick refresher: what is NSW workers compensation?

Workers compensation in NSW is a compulsory statutory insurance scheme covering any worker who sustains an injury or illness connected to their employment. The scheme sits under the Workers Compensation Act 1987 (NSW) and is regulated by the NSW State Insurance Regulatory Authority (SIRA).

Every NSW employer with staff on the payroll is required to maintain cover — it’s not optional, and non-compliance carries significant penalties. The scheme funds medical treatment, wage replacement during recovery, rehabilitation, and in serious cases, lump-sum payments.

Premium rates vary by industry classification (based on injury risk) and are then adjusted at the individual business level by factors like payroll size, claims history, and specific incentive programs. The scheme-level freeze introduced by the 2026 Act applies to that base rate — the industry-level starting point before business-specific adjustments.

What the freeze actually means in practice

The headline is simple: the base rate your industry pays won’t jump during the 2026–27 or 2027–28 policy years. For most NSW employers, that translates into more stable premium costs year-on-year.

But — and this matters — individual premiums can still move. Your actual premium can change if:

• Your total wages bill increases or decreases
• Your business activity changes classification
• You lodge new claims (or your claims history improves)
• Your eligibility for incentive discounts changes
• You add new staff or restructure the workforce

So the freeze locks in the industry baseline, but your personal number will still reflect what’s happening in your business. If you’re growing your team or wages are climbing, your premium will still move upward — just not as sharply as it would have without the freeze.

Three ways the freeze affects your employment costs

1. No surprise premium hikes at renewal

The biggest practical benefit is removing the possibility of unexpected scheme-wide rate increases hitting your business at renewal. If you’ve ever opened a premium notice and found your base rate has moved by 10–20% without warning, you know how disruptive that is to a fixed budget. For the next two years, that specific risk is off the table.

2. Easier budgeting and workforce planning

Workers compensation is often one of the top three employment costs after salaries and super. When the base rate is stable, your total employment cost per hire becomes much more predictable. That makes it easier to model the cost of adding a new team member, running pay reviews, or restructuring hours — because one of the big variables has been held constant.

3. Potential cash flow benefit

If scheme-wide pressure had pushed rates higher this year, that cost would have landed as higher instalment payments throughout 2026–27. The freeze keeps that cash in the business, available for operations, investment, or reserves rather than going out as larger premiums.

For businesses on tight margins, that cash flow protection is more valuable than it looks on paper.

What NSW employers should do

A few practical actions worth taking:

Review your current workers compensation setup. Even with the freeze, you may be paying more than necessary if your industry classification is wrong, your payroll figures are overstated, or you’re missing out on incentive programs you’d qualify for.

Model your 2026–27 and 2027–28 employment costs with the freeze baked in. Having accurate forecasts helps with hiring decisions, pricing reviews, and cash flow planning.

Keep your claims history clean. Workplace safety isn’t just about compliance — a strong claims history directly reduces your individual premium through experience-based discounts.

Factor the saved cost into your business plan. If you were budgeting for a premium increase that isn’t coming, consider what else that money could do — hiring, equipment, training, debt reduction, or a buffer against other cost pressures.

Need help forecasting your employment costs?

Workers compensation sits inside the broader picture of payroll, super, PAYG withholding, and other employment-related costs. Modelling how changes to any of these affect your cash flow and working capital is exactly the kind of work a good accountant should be helping with.

If you’d like a clearer picture of your true employment cost per hire — and how the freeze affects your 2026–27 and 2027–28 forecasts — our payroll and advisory team can walk you through it.

Disclaimer: This article is general information only and does not constitute financial, tax, or legal advice. For advice specific to your circumstances, please contact Outback Accounting.