How is Workers’ Comp Calculated?
In the event of a work-related injury, the two most pressing questions for claimants – injured employees seeking workers’ compensation – are, what benefits will I qualify for and how is workers’ comp calculated?
Among the potential types of workers’ comp benefits are full medical treatment cost coverage, replacement of lost wages (via weekly payments or lump-sum settlements), specific (scheduled) loss awards, disfigurement benefits and subsequent injury benefits.
The types of benefits claimants are eligible for, or likely to receive, are largely dependent upon the nature and severity of their injury, as well as the time their injury forces them to miss from work.
Each category of benefits has its own unique method of calculation; some of which are much more straightforward than others.
For example, medical treatment coverage benefits are provided by the workers’ compensation insurance company in the form of direct payment to your medical providers and often require no calculation or negotiation by the claimant. However, other categories, such as weekly lost wage compensation, have a rather complex calculation process with multiple determinative factors.
Three Factors That Determine Workers’ Compensation Payments
The first factor is an eligibility component related to the severity of the injury; namely, whether the injury is partially or totally disabling.
Partially disabling injuries – those which stem from a disability rating of less than 50% and allow employees to return to work with limited hours or a reduction in income – are compensated at a percentage rate of the difference between wages earned before and after the injury.
Totally disabling injuries – those which result in at least 7 days of missed work – are compensated at a percentage rate of the average earned income prior to the employee’s injury and inability to work.
The percentage rate at which wage loss compensation is provided is determined by the amount of income an employee earned before an injury. Generally speaking, employees in the lowest income brackets are compensated at the highest percentages of their average earnings.
Current Wage Benefits
The second factor in determining wage loss compensation is whether or not a claimant already receives another form of wage benefit, such as Social Security, pension or disability.
Claimants who receive wage benefits prior to filing a workers’ comp claim are likely to have their wage loss compensation reduced based on their existing benefits and average earnings.
Average Weekly Wage
The third and most important factor in determining workers’ compensation wage loss benefits is a metric known as Average Weekly Wage (AWW).
This metric is not only used to calculate the average earnings discussed in the previous two factors, but also functions as the primary basis for all monetary calculations conducted by the Pennsylvania Department of Labor and Industry’s Workers’ Compensation Board.
How Average Weekly Wage (AWW) is Calculated
Average Weekly Wage (AWW) is calculated based on the total gross wages earned by an employee, from all of their employers, at the time of injury. This includes overtime compensation, bonuses, paid time off, and any gratuities earned during the course of work.
The nature of a claimant’s employment – whether they’re paid hourly or salaried, if they work full or part time, and the length they’ve worked for their employer – will determine the way in which their Average Weekly Wage (AWW) is calculated.
Hourly employees, as dictated by the Pennsylvania Workers’ Compensation Claim Handing Guidelines, will calculate their AWW by splitting the total wages earned in the 52 weeks preceding their injury into four 13-week periods known as quarters.
The quarters are then divided by 13 to get average weekly earnings for each of the four periods.
To calculate annual AWW, the three highest quarter averages are added together and then averaged (divided by three).
Quarter One Average Earnings: $6500 ÷ 13 = $500
Quarter Two Average Earnings: $5800 ÷ 13 = $446.15
Quarter Three Average Earnings: $6750 ÷ 13 = $519.23
Quarter Four Average Earnings: $6000 ÷ 13 = $461.54
AWW: ($500 + $519.23 + $461.54) ÷ 3 = $493.59
Recently Hired Employees
Employees who have not worked for the same employer for a 52-week period prior to injury will calculate their AWW by getting an average weekly earnings figure for any completed, 13-week quarter period.
Quarter One Total Earnings: $6500
AWW: $6500 ÷ 13 = $500
Employees who have not worked at least a one-quarter period with their employer can calculate their AWW by multiplying their expected weekly hours by their hourly compensation rate.
AWW: 38 Hours x $18/Hour = $684
Salaried employees can calculate their AWW by dividing their annual salary by the total number of days worked in the 52 weeks preceding their injury, to get their daily wage. AWW is calculated by multiplying an employee’s daily wage by 260 (the number of days a full-time employee is expected to work annually) and then dividing that figure by 52 (the number of weeks in a year).
Daily Wage: $50,000 ÷ 245 = $204.08
AWW: ($204.08 x 260) ÷ 52 = $1,020.40
Salaried employees who’ve worked for their employer for less than 52 weeks prior to injury will need to calculate the AWW of an employee in the same position for at least one calendar year for the PA DLI Workers’ Compensation Board.
This ensures that the AWW figure submitted to the board reflects a full year’s worth of average earnings with a claimant’s employer.
How Calculate Workers’ Compensation Benefits are Calculated
Once an employee’s average weekly wage has been calculated, wage loss compensation benefits can be calculated.
In accordance with the 2019 Pennsylvania Workers’ Compensation Rate Schedule, employees are eligible for a maximum weekly compensation rate of $1,049.00. The weekly compensation rate for wage loss benefits is determined by a claimant’s Average Weekly Wage (AWW).
Claimants with an AWW of between $786.76 and $1,573.50 are subject to a weekly compensation rate of 66.66% of their AWW.
Weekly Compensation Benefits: $1000 (AWW) x 66.66% (Weekly Compensation Rate) = $666.66
Claimants with an AWW of between $582.78 and $786.75 are subject to a weekly compensation rate of $524.50.
Claimants with an AWW below $582.77 are subject to a weekly compensation rate of 90% of their AWW.
Weekly Compensation Benefits: $500 (AWW) x 90% (Weekly Compensation Rate) = $450
Still Have Questions About Workers’ Compensation Rates? Talk to an Attorney Today
The experienced workers’ comp attorneys at Krasno Krasno & Onwudinjo are here to assist you in all aspects of your workers’ compensation claim.
To schedule a free consultation, contact us today via email or call us at (844) 243-4849 or toll-free at 877-794-2396.