So I have a somewhat unique homebrew that I shall be presenting to my group in the not too distant future but I'm going to introduce something literally within the first session which will give their characters a slap sideways.

Specifically, in this world, demon worship amongst the lower classes is common enough that the group shall be presented with it after a local farming festival (they're going to be starting in a location that is a farming/fishing rural settlement) where the local guards and leader have succumbed to the worship of a local demon. Although the cities in the realm are reasonably well protected, there aren't enough "Faithful" to protect all of the outlying settlements.

This is where our hook comes in; namely a werebear "pirate" captain who sails around coastal settlements with his small fleet of werebear warriors destroying nests of demon worshippers where they find them. It is this Captain who shall rescue the party but not before they become inflicted with werebear lycanthropy as a way to tie them, and their mode of transport, together. A little railroad-y but I think my group will thorougly enjoy it.

I shall be using the werebear template here: https://www.realmshelps.net/monsters/templates/werebear.shtml

My question is, shall I need to do anything special to balance encounters, or because the templates are level replacements, should I just balance for their level?

You have the fundamental problem that the werebear template you're using is from 3.5e.

Hmm, so after checking my sources it appears that the 5e lycanthrope is actually even stronger as it gains immunity to nonmagical attacks that are bludgeoning, piercing and slashing damage. I think that for the purposes of balance I'll just make that resistance but the question still stands; can I balance encounters at level or should I bump them up somewhat?

This is probably not super helpful to you, but the primary thing I use to balance encounters is how the encounters went last session. I'd start out as if they weren't any stronger than usual, then ramp up from there if fights are too easy.

Being forced to be a werebear is a bit railroady for my tastes, then again maybe you know your group so well that you can pull it off without them noticing. I might suggest the werebear leader offers the boon of lycanthropy as a reward for earning the werebears trust somehow. Alternatively if lycanthropy is more of a curse then they infect the party until  they accomplish some goal. Players who want to remain were creatures can choose to do so. Just my 2 cents.

I personally am not a big fan of how lycanthropy applies to Player Characters in 5e, and I'm writing my own set of rules for it (oddly similar to the link you've presented, which makes me sad because I thought I'd thought of it first...).

If you're interested, I can try to polish off the werebear section and you can have a look to see if you want to try it out in your game?

I am always willing to have a look, it will be some time before everything kicks off as we're currently running through the Tomb of Annihilation.

And yes, my group are always happy to have a left field thing for story. Ultimately they will get the choice to keep the curse or relieve themselves of it so that'll work out in the wash.

Quote from Nostrus >>

I am always willing to have a look, it will be some time before everything kicks off as we're currently running through the Tomb of Annihilation.

And yes, my group are always happy to have a left field thing for story. Ultimately they will get the choice to keep the curse or relieve themselves of it so that'll work out in the wash.

 I'll see what I can do, every time I start working on it I add more things to work on instead of finishing anything off XD