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Calculation Of Workers’ Compensation Awards

If you are injured or contract an occupational disease at work and are found eligible for workers’ compensation benefits, how will your award amount be calculated? Although there are other possible types of workers’ comp benefits, such as vocational rehabilitation or medical bill coverage, we focus here on typical compensation for wage loss. Because workers’ compensation law is state-specific, how your wage loss award is determined will depend on your state’s laws. An attorney experienced in workers’ compensation, the workers’ compensation agency in your state or both can assess your situation.

The policy behind this type of benefit is to replace the regular income of the worker so as to prevent household financial crisis. Most states employ the “average weekly wage” (AWW) concept to determine the benefit amount. Under the AWW concept, the benefit amount is based on an average of actual past earnings usually going backward in time from the date of injury and applying one of several mathematical formulas. Many states have minimum or maximum benefit amounts. By contrast, some states use average statewide monthly earnings as the basis for calculation. Another type of benefit is for a scheduled injury, where the state has a predetermined benefit amount that depends on the particular physical loss of the worker. For example, the state may always pay $2,000 per month for the loss of a functioning arm, regardless of how much the worker made on average in the past.

Workers’ comp benefits for lost wages can be temporary, such as when the worker is convalescing but will eventually be able to return to work, or permanent. A permanent injury may be partial, such that the worker’s earning capacity is diminished but not extinguished, in which case the workers’ comp authority will usually look at the difference between what the worker can realistically do after the injury and what he or she could have earned without the injury. An employee can also be completely and permanently disabled from ever working again, in which case the monetary award will either be based on past wage amounts or on an estimate of future earnings.

To promote fairness to injured workers and sound public policy, most states have special rules for calculating benefit amounts when there are unique work situations, conditions or factors to consider, such as:

  • Irregular earnings
  • Part-time earnings
  • Work dependent on unpredictable factors, such as the weather
  • Publicly supported employment programs
  • Wage amounts that vary or are difficult to ascertain
  • Multiple-job holders
  • High absence rates
  • Short-term or temporary positions
  • Overtime
  • Certain fringe benefits
  • Average wages that are less than the minimum wage
  • Job availability in the area
  • Average local wages of similar employees or other employees at the same company
  • Recent pay raises or cuts
  • Recent job changes
  • Receipt of other public or private benefits
  • Self-employment
  • Strike participation
  • New hires
  • Delayed manifestation of disease or injury, cumulative injury or progressive disease
  • Unlawful employment, such as that of children or illegal immigrants
  • Business expenses
  • Business profits
  • Tips and bonuses

To be sure that the state is paying you the correct amount of workers’ comp wage loss benefits, you may discuss the details of your situation with a skilled attorney or local workers’ compensation agency. If you believe the benefit amount is incorrect, you probably have the right to appeal the benefit award amount but be careful not to miss any deadlines in your appeal.