How to Calculate Workers Comp Per Hour

Workers’ compensation wage replacement benefits provide financial support to individuals who experience a work-related injury or illness that prevents them from earning their usual income. These benefits replace a portion of lost wages, helping to alleviate the financial burden during recovery. Calculating these benefits involves several steps, primarily focusing on determining an average of the injured worker’s pre-injury earnings. This process ensures individuals receive a consistent income stream while they are unable to perform their regular job duties.

Understanding Wage Replacement Benefits

Wage replacement benefits are a form of financial compensation for employees who sustain injuries or illnesses directly related to their employment. While these benefits are often discussed in terms of “per hour” lost, they are typically paid on a weekly basis. The weekly payment amount is derived from an average of the worker’s pre-injury earnings, rather than being a direct hourly payment for time not worked.

Two primary types of temporary wage replacement benefits exist. Temporary Total Disability (TTD) benefits are provided when a work-related injury or illness renders an employee completely unable to perform any work for a temporary period. This means the worker is entirely out of work while recovering. Temporary Partial Disability (TPD) benefits apply when an injured worker can perform some work, but their earning capacity is reduced due to the injury. This might involve working light duty, fewer hours, or in a lower-paying role. Both TTD and TPD benefits compensate for lost earning capacity, distinguishing them from medical benefits that cover treatment costs.

Calculating Your Average Weekly Wage

The Average Weekly Wage (AWW) is the foundation for determining workers’ compensation wage replacement benefits. This figure represents an injured worker’s typical weekly earnings before the injury occurred. Accurately calculating the AWW is important, as it directly impacts the amount of compensation received.

To establish the AWW, all forms of gross earnings received by the employee are typically considered. This includes regular hourly wages, overtime pay, commissions, tips, and bonuses. Even the reasonable value of non-cash benefits provided by the employer, such as housing or meals, can be factored into the AWW. Conversely, certain types of income, like expense reimbursements, health insurance benefits, or retirement contributions, are generally excluded from the AWW calculation.

The look-back period for calculating AWW usually spans a specific duration immediately prior to the injury. A common period is the 52 weeks preceding the date of injury. However, some states may use a shorter period, such as 13 weeks, especially if the employee has not worked for the full 52 weeks. If an employee has worked for less than the standard look-back period, the AWW may be calculated by averaging earnings over the actual weeks worked or by using the earnings of a similar employee.

The method for calculating AWW varies based on the employee’s pay structure. For hourly workers, the total gross earnings over the look-back period are summed and then divided by the number of weeks in that period. Salaried workers typically have their weekly salary set as their AWW. For those with variable income, such as commission or tip-based workers, methods involve averaging their fluctuating earnings over the designated look-back period. When an employee holds multiple jobs at the time of injury, earnings from all concurrent employment may be included in the AWW calculation.

Applying State Rules to Determine Your Benefit Amount

Once the Average Weekly Wage (AWW) is established, state-specific rules are applied to determine the actual weekly benefit amount for lost wages. Most workers’ compensation systems pay a percentage of the AWW as the weekly benefit. This percentage commonly ranges from two-thirds (approximately 66.67%) to 75% of the AWW. For instance, if an AWW is $900, a two-thirds rate would result in a weekly benefit of $600.

In addition to a percentage rate, states impose statutory maximum and minimum weekly benefit amounts. These caps mean that regardless of how high an individual’s AWW is, the weekly benefit cannot exceed a certain state-defined maximum. Conversely, there is often a minimum weekly benefit, ensuring that even workers with very low pre-injury earnings receive a baseline level of support. These maximum and minimum limits are updated periodically.

For example, if a worker’s calculated AWW is $1,500, and the state’s benefit rate is 66 2/3%, the calculated weekly benefit would be $1,000. However, if the state has a maximum weekly benefit of $950, the worker would receive $950, not $1,000. Conversely, if the calculated benefit falls below the state’s minimum weekly benefit, the worker would receive the minimum amount. These percentages and caps vary considerably by state.

Adjustments for Partial Return to Work

When an injured worker returns to work in a reduced capacity while still recovering, the calculation of wage replacement benefits adjusts to account for their continued earnings. This scenario typically involves Temporary Partial Disability (TPD) benefits, which bridge the income gap. These benefits are designed to compensate for the difference between what a worker earned before the injury and what they are currently earning in their light-duty or restricted role.

The calculation for TPD benefits often involves determining a “wage differential.” This differential is the difference between the worker’s pre-injury Average Weekly Wage (AWW) and their current gross earnings from the modified work. A percentage, often the same two-thirds rate used for total disability or a different state-specific rate, is then applied to this wage differential. For instance, if an AWW was $900 and the worker now earns $600 in a light-duty role, the wage differential is $300. Applying a two-thirds rate to this differential would result in a TPD benefit of $200 per week.

This TPD payment supplements the worker’s current earnings, aiming to partially restore their pre-injury income level. The purpose of these benefits is to incentivize a return to work by ensuring that the worker does not suffer an undue financial penalty for accepting a reduced-capacity position. TPD benefits continue until the worker fully recovers, reaches maximum medical improvement, or can return to their pre-injury earning capacity.