Workers' compensation benefits are calculated by applying a state‑specific rate to a portion of the employee's average weekly wage (AWW). First, determine the AWW, then multiply it by the statutory benefit percentage and adjust for any maximum caps.
- 1. Determine the Average Weekly Wage (AWW)
- 2. Apply the Statutory Benefit Rate
- 3. Account for Benefit Caps
- 4. Example Calculation
- 5. Other Benefit Types
- 6. Common FAQs
- What if the employee's earnings vary?
- Do overtime and bonuses count?
- How often are benefits paid?
- 7. Quick Checklist for Calculating Benefits
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1. Determine the Average Weekly Wage (AWW)
The AWW is the employee's earnings over a base period, usually the 52 weeks before the injury. Use one of these methods, depending on state law:
- Total earnings method: Sum all wages, overtime, and commissions earned during the base period, then divide by 52.
- Highest earnings method: Identify the highest‑earning 52‑week span within the base period and divide that total by 52.
2. Apply the Statutory Benefit Rate
Most states set the temporary total disability (TTD) rate at a fixed percentage of the AWW, commonly 66⅔ % (or two‑thirds). Some states use a different percentage, so verify the local rate.
3. Account for Benefit Caps
States often impose a maximum weekly benefit amount. If the calculated benefit exceeds this cap, the payout is reduced to the cap value.
4. Example Calculation
Assume an employee earned $52,000 in the 52 weeks before injury, and the state TTD rate is 66⅔ % with a $1,200 weekly cap.
| Step | Calculation | Result |
|---|---|---|
| Average Weekly Wage | $52,000 ÷ 52 | $1,000 |
| Statutory Rate (66⅔ %) | $1,000 × 0.6667 | $667 |
| Apply Cap | Compare $667 to $1,200 cap | $667 (no cap applied) |
The employee would receive $667 per week.
5. Other Benefit Types
Beyond TTD, workers' comp may include:
- Medical benefits: Reimbursement for reasonable and necessary medical care.
- Permanent disability (PD): A lump‑sum or ongoing payment based on a rating of the injury's lasting impact.
- Vocational rehabilitation: Funding for training or job placement if the employee cannot return to the previous role.
6. Common FAQs
What if the employee's earnings vary?
Use the highest‑earning 52‑week period or the average of the last 13 weeks, per state guidelines, to smooth out fluctuations.
Do overtime and bonuses count?
Yes, most states include overtime, commissions, and bonuses in the AWW calculation, unless specifically excluded.
How often are benefits paid?
Payments are typically issued weekly or bi‑weekly, but timing can differ by jurisdiction and insurer.
7. Quick Checklist for Calculating Benefits
- Gather total earnings for the base period.
- Choose the appropriate AWW method.
- Identify the statutory benefit percentage.
- Check the state's maximum weekly benefit cap.
- Apply the formula: AWW × benefit % → compare to cap.