Understanding the Core Formula
Workers compensation is typically calculated by multiplying the employee's average weekly wage by a state‑defined benefit rate, then applying the injury's disability percentage.
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Step‑by‑Step Calculation
1. Determine the average weekly wage (AWW). Add the employee's earnings for the 52 weeks before the injury and divide by 52.
2. Find the statutory benefit rate. Most states set this at two‑thirds (66.67%) of the AWW for most injuries.
3. Identify the disability rating. Medical evaluation assigns a percentage (e.g., 20% for a minor strain, 80% for a severe injury).
4. Apply the formula: Benefit = AWW × Benefit Rate × Disability %. The result is the weekly compensation amount.
Adjustments and Caps
Some states impose maximum weekly benefits or adjust rates for high‑wage earners. Check local regulations to ensure the calculated amount does not exceed these caps.
Example Calculation
Assume an employee earned $52,000 in the year before injury (AWW = $1,000). The state benefit rate is 66.67% and the injury is rated at 30% disability.
Benefit = $1,000 × 0.6667 × 0.30 ≈ $200 per week.
Key Considerations
- Use the most recent 52‑week earnings period, not calendar year totals.
- Disability ratings are medical judgments; they can be contested.
- Permanent partial disability may involve a lump‑sum payout instead of weekly benefits.