How Is Workers’ Compensation Calculated?

When you are hurt at work, you expect to have workers’ compensation benefits to help with medical costs, lost wages, and other expenses. But how is workers’ compensation calculated? There are many factors that come into play, such as the employee’s wage, injury severity, and type of disability.

Let’s look at these calculations so you can maximize your benefits

Workers’ Compensation Calculation

These wage replacement benefits are calculated based on a few factors, such as:

Average Weekly Wage (AWW)

In most states, these calculations are based on the employee’s average weekly wage (AWW) earnings over a specific period before the injury. Most of the time, it can range from 13 to 52 weeks. This will include:

• Regular wages or salary
• Overtime pay
• Bonuses, commissions, or tips
• The monetary value of non-cash benefits, such as housing or meals

However, the calculation will vary based on employment type. For example, full-time employees will have their AWW calculated by dividing total earnings over the specified period by the number of weeks worked.

On the other hand, the calculation methods may vary for seasonal or part-time workers. In these cases, the methods may involve averaging the earnings from a similar job or using an industry-standard formula to approximate weekly wages.

Compensation Rate

Once the AWW is determined, the compensation rate is calculated. Most states set this rate at two-thirds (66.67%) of the AWW. That means if an employee’s AWW is $900, their weekly compensation rate would be $600 ($900 × 2/3).

In some states, they might impose minimum and maximum weekly benefit limits. As a result, that can affect the final benefit amount.

Disability Classifications

Sometimes, the extent of the employee’s injury can influence these benefits. Workers’ compensation may fall into these classifications:

• Temporary Total Disability (TTD): If an employee cannot work for a temporary period, their benefits are calculated as a percentage of the AWW.
• Temporary Partial Disability (TPD): For employees who can work in a reduced capacity while recovering, these benefits compensate for the difference between pre-injury and post-injury earnings.

These benefits depend on how long an employee is unable to work. For instance, temporary disability benefits will stop once the employee returns to work or reaches the Maximum Medical Improvement (MMI).

However, permanent disability benefits may be available if the injury results in long-term impairment. These can include:

• Permanent Total Disability (PTD): If a worker is permanently unable to work, they are often paid at the PTD rate. Under some circumstances, these wages may be paid for life in some states.
• Permanent Partial Disability (PPD): For employees who suffer permanent injuries but can still work, benefits are calculated based on a schedule or formula that assigns values to specific injuries, such as losing a finger.

Workers’ compensation also provides medical expenses related to workplace injury or illness. While these costs do not directly influence wage-replacement calculations, they are still important to employee benefits.

What Can Influence Workers’ Compensation?

There is a difference between scheduled and non-scheduled injuries. With scheduled injuries, some states specify an amount assigned to a certain body part, such as a leg. When workers are injured, they receive compensation based on a predetermined rate.

On the other hand, if a schedule does not cover the injury, then an employee’s benefits are determined by the above guidelines.

What About Dependents and Death Benefits?

If the illness or injury resulted in workplace fatalities, the worker’s dependents could be eligible for death benefits. Once again, these are calculated as a percentage of the AWW, but sometimes, they can face state-specific limits. In some cases, additional compensation might be provided for funeral and burial expenses.

Problem with Workers’ Compensation Calculations

Unfortunately, some calculations may face a few problems. In some situations, there could be disputes over AWW. This is more common for those employees with irregular wages or non-cash benefits.

Also, some insurers may raise objections about whether an injury is temporary, permanent, total, or partial.

Additionally, states can impose their own caps. In these cases, the employees might see their benefits refused, even if their pre-injury earnings would lead to larger payments.

The calculation process relies on a combination of the employee’s average weekly wage, compensation rates, disability classifications, and state-specific regulations. While the formulas appear clear-cut, individual circumstances, state laws, and disputes can complicate the process for your workers’ compensation claims.

If you face any of these issues, you might need legal assistance to maximize your benefits. At Work Injury Advisor, we can help you get the help you need to collect the appropriate benefits for your claim.