Most people know that when you cannot work due to a word-related injury or illness, they can receive workers’ compensation benefits. However, how those benefits are calculated can be confusing. In this article, we will explain how your benefits are determined.
When the workers’ compensation board awards lost wages benefits to a worker, they must first ascertain the average weekly wage (AWW) and the worker’s degree of disability.
Average weekly wage refers to the total earnings the worker earned from the employer for the year prior to the injury or illness. If you normally work five days per week, your AWW will be set by dividing your total salary by the total number of days paid. This yields your average daily wage. You then multiply the result by 260, which is the average number of days worked by most employees each year. Finally, you divide that total by 52, reflecting the number of weeks in the year.
For example, if a person earns $60,000 in the year prior to the accident and was paid 255 days, the AWW is calculated as follows: $60,000/255= $235.29. You then multiply this by 260, $235.29 x 260 = $61,176.47. Next, we divide $61,176.47 by 52 weeks to arrive at $1,176.47. In this example, AWW would be set at $1,176.47 to determine your workers’ compensation benefit rate. Since some workers work more or less than 5 days per week or have seasonal jobs, there are different calculations used in those situations to arrive at a fair reflection of what your average weekly earnings are. Likewise, if you were working more than one job at the time of your injury, your second job’s wages are added in to calculate your AWW.
Once the injured workers’ AWW is known, the next question is what degree of disability the doctor is reporting. A worker can be totally disabled from all work or partially disabled. A totally disabled worker is entitled to 100% of their full workers’ compensation benefit. If a worker is partially disabled, they may be unable to perform heavy manual work but are physically capable of working light duty while they recover from their injury. For example, a worker may be 50% or 75% disabled from all work but capable of working light duty, full time.
Once AWW and degree of disability are known, the workers compensation benefit can be calculated. In the above example, our injured worker has an AWW of $1,176.47. If they are 100% disabled, their benefit is 2/3 of their AWW. The reason workers’ compensation pays 2/3 of your AWW is because workers’ compensation benefits are exempt from taxes. The goal of the workers compensation law is to give the worker the same net pay they would have received if they had not been injured.
The calculation for our worker is: $1,176.47 x 2/3=$784.31. Thus 100% workers’ compensation disability is $784.31 per week. If our worker’s doctor says they are 50% disabled, they would receive 50% of their total disability rate, or $392.16 per week. It is important to bear in mind that payments of workers’ compensation benefits to injured workers who are missing time from work are subject to a waiting period. No compensation is due for the first week of disability unless the injury results in a disability lasting more than two weeks. If the time lost from work due to the injury lasts more than two weeks, the injured worker will retroactively receive the pay for the first week of lost time.
Of course, if you are a union member, your benefits while you are out of work may be different, depending on what your collective bargaining agreement provides. Some collective bargaining agreements allow for an injured worker to collect their full pay for a period of time before they receive workers’ compensation pay. You should become familiar with your agreement and speak to your union representative if you have any questions.
As you can see, workers’ compensation benefits can be complicated. If you ever have a question about them, feel free to contact Fine, Olin & Anderman and we will be happy to review your claim to ensure you are being paid properly.
Prepared by David Stauber, Esq.
