Cuts in workers compensation benefits will force vulnerable families "out on the street", NSW MPs have been told, with unions warning against a race to the bottom in cutting the premiums paid by businesses.
A parliamentary inquiry is examining reforms to tackle a $4.1 billion blowout to the WorkCover scheme, which Premier Barry O'Farrell says must be reined in to avoid massive premium hikes harmful to jobs and the state's economy.
Mr O'Farrell has cited a PricewaterhouseCoopers (PwC) actuarial report stating premiums would have to be increased by 28 per cent to bridge the deficit in five years.
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But giving evidence before the parliamentary committee on Friday, unions backed PwC's other finding that an eight per cent increase over 10 years would see the deficit disappear.
Unions NSW state secretary Mark Lennon on Friday accused the government of exaggerating the financial difficulties facing WorkCover to create a "sense of crisis" justifying cuts to premiums and payouts.
Appearing at the WorkCover inquiry, Mr Lennon advocated the more modest eight per cent premium increase, saying cuts would be a "race to the bottom".
He also questioned a WorkCover discussion paper recommending cutting benefits and entitlements in an effort to encourage injured workers back to work.
"We don't believe that trying to incentivise people by dropping their payments is an effective way of trying to get people back to work," Mr Lennon said.
The issues paper, which is being examined by the parliamentary inquiry, suggests capping the duration of weekly payments, limiting medical benefits, and introducing a step-down from 100 per cent payments before the current 26 weeks.
An end to claims of nervous shock by families of workers injured or killed on the job and the scrapping of journey claims between home to work were also included in the paper's 16 recommendations.
NSW secretary of the Australian Manufacturing Workers Union (AMWU), Tim Ayers, said if benefits were cut the union would introduce its own insurance product into every enterprise agreement that would be "a lot more expensive" than a nominal premium increase.
But Mark Goodsell, the NSW director of the Australian Industry Group, opposed any premium increase as "an answer to the scheme's problems".
"The problem is a systemic problem and premium increases would be just papering over the cracks," he told the inquiry.
Jodie Wormleaton, who appeared at the inquiry with injured workers from the building industry, said since her construction worker husband David lost his leg their family was reliant on payments of just under $500 a week.
A full-time carer to her son, who has cerebral palsy, Ms Wormleaton said her family would be "out on the street" if the payments were cut.
"It doesn't give your leg back, it doesn't replace the way things were before, but it might make life a little easier," she told reporters outside parliament.
NSW president of the Construction, Forestry, Mining and Energy Union, Rita Mallia, dismissed business groups' claims that WorkCover suffered from a "lump sum culture" or "pot of gold mentality".
Rather, injured construction workers suffered a loss of income when relying on compensation.
"We're talking about workers who earn in excess of $1500 to $2000 working six days week," she told the inquiry.
"There is no pot of gold when they're stuck on compo."
