In most states, workers’ compensation pays about two thirds of your average weekly wage while you are unable to work because of a job injury, up to a weekly maximum set by your state. It also pays your medical bills related to the injury, usually with no deductible or copay. If the injury causes lasting impairment, you may receive additional permanent disability benefits.
The exact amount depends on your state’s formula, your earnings before the injury and the type of disability. Here is how the calculation usually works, the different benefit types and how to check that you are being paid correctly.
Step 1: Your Average Weekly Wage
Almost every benefit starts with your average weekly wage, often shortened to AWW. It is usually calculated from your earnings over a period before the injury, commonly the previous 52 weeks, though some states use 13 weeks or another method.
What counts toward AWW varies by state, but it can include:
- Regular wages or salary
- Overtime
- Bonuses and commissions
- Tips that were reported
- Earnings from a second job, in some states
- The value of certain benefits, like employer provided housing or meals, in some states
Errors in AWW are common. If overtime or a second job was left out, your weekly benefit will be too low for as long as you receive it. Ask the insurer how they calculated your AWW and compare it with your pay stubs.
Step 2: The Benefit Rate
Most states set temporary disability benefits at about 66.67 percent of your AWW. A few use slightly different percentages, and some base the benefit on a percentage of your after tax wages instead.
Example: if your AWW is $900, your weekly benefit at two thirds would be $600.
Step 3: State Minimums and Maximums
Every state caps weekly benefits at a maximum, usually tied to the statewide average weekly wage and updated each year. Most states also set a minimum. High earners often hit the cap, which means they receive less than two thirds of their real pay. Low earners may receive a minimum amount even if two thirds of their wage would be lower.
Maximums vary widely from state to state, from well under $1,000 a week in some states to well over $1,500 in others. Check your state workers’ compensation agency’s website for the current figures.
Workers’ Comp Benefits Are Tax Free
Workers’ compensation benefits are generally not subject to federal income tax. That means two thirds of your gross pay in comp benefits can replace a larger share of your take home pay than it first appears. Some exceptions apply, for example when comp benefits offset Social Security disability payments.
The Types of Wage Benefits
| Benefit type | When it applies | How it is usually paid |
|---|---|---|
| Temporary total disability (TTD) | You can’t work at all while recovering | About two thirds of AWW, up to the state maximum |
| Temporary partial disability (TPD) | You can work with restrictions but earn less | Often two thirds of the difference between your old wage and your current earnings |
| Permanent partial disability (PPD) | You have a lasting impairment but can still work | Based on an impairment rating or a schedule of body parts |
| Permanent total disability (PTD) | You can never return to gainful work | Ongoing weekly payments, sometimes for life |
Temporary Total Disability in Detail
TTD is the benefit most injured workers receive first. It pays while your doctor says you can’t work at all. Most states have a waiting period of three to seven days before TTD starts. If your disability lasts longer than a set period, often two weeks, many states then pay you retroactively for the waiting days.
TTD usually stops when you return to work, when your doctor releases you to work, when you reach maximum medical improvement, or when you hit a maximum duration set by your state.
Temporary Partial Disability
If you go back to light duty at fewer hours or lower pay, TPD makes up part of the difference. Example: you earned $1,000 a week before the injury and now earn $600 on light duty. The difference is $400. At two thirds, TPD would pay about $267 a week, subject to state rules.
Permanent Partial Disability
Once your condition stabilizes, your doctor may assign an impairment rating, a percentage that represents lasting loss of function. States use different systems:
- Scheduled injuries: many states have a schedule assigning a set number of weeks of benefits to specific body parts, like a hand, arm, leg or eye. The impairment percentage is applied to that number of weeks.
- Unscheduled injuries: injuries to the back, neck or other parts not on the schedule are often rated based on whole body impairment, sometimes combined with factors like age, education and job.
- Wage loss systems: some states focus on how much your earning ability actually dropped.
Example in a scheduled state: if a hand is worth 200 weeks under the schedule and you have a 20 percent impairment, you might receive 40 weeks of benefits at your PPD rate.
Permanent Total Disability
If your injury leaves you unable to do any kind of work, you may qualify for PTD. These are the most serious cases. Benefits may continue for years or for life, depending on the state. Some states automatically presume total disability for certain catastrophic injuries, such as the loss of both eyes or both legs.
Medical Benefits
Workers’ comp pays reasonable and necessary medical treatment for your work injury, generally with no deductible or copay. That includes doctor visits, hospital care, surgery, physical therapy, prescriptions, medical equipment and often mileage to appointments. In many states, medical benefits can continue long after wage benefits end, as long as the treatment relates to the work injury.
Other Benefits
- Vocational rehabilitation: retraining or job placement help if you can’t return to your old job
- Disfigurement benefits: some states pay for serious scarring
- Death benefits: weekly payments to dependents and funeral expenses if a worker dies from a job injury
Settlements in Workers’ Comp
Many workers’ comp claims eventually end in a settlement. Common types include a lump sum that closes out future wage benefits, and in some states a settlement that also closes future medical benefits. Settlements usually need approval from the state agency or a workers’ comp judge. Closing out future medical care is a big decision, especially for injuries that may need more treatment later. If you receive Medicare or expect to soon, special rules may apply to protect Medicare’s interests.
What Workers’ Comp Doesn’t Pay
Workers’ comp is a trade off. You get benefits without having to prove your employer was at fault, but in most cases you can’t sue your employer, and comp doesn’t pay for pain and suffering. If someone other than your employer caused the injury, such as a negligent driver or a defective machine maker, you may have a separate third party claim that can cover pain and suffering and full lost wages.
How Workers’ Comp Affects Social Security Disability
If you receive both workers’ comp and Social Security Disability Insurance, your SSDI may be reduced. Federal rules generally limit the combined total of workers’ comp and SSDI to 80 percent of your average earnings before the disability, though a handful of states reduce comp benefits instead. The way a workers’ comp settlement is worded can affect how much the offset reduces your SSDI over time. If you are on SSDI or applying for it, make sure your workers’ comp lawyer knows before any settlement is drafted.
Benefits if You Have Two Jobs
Many people work more than one job. If you are hurt at one job and can’t work either, some states include wages from both jobs when calculating your AWW. Others only count the job where you were injured. This can make a big difference for part time workers or anyone with a side job. Bring pay records from every job when you report your injury and ask the adjuster how your state treats concurrent employment.
Late Payments and Penalties
Insurers are generally required to pay benefits on time once a claim is accepted. Many states impose penalties when payments are late without a good reason, often a percentage added to the late amount. If your checks arrive late or stop without notice, document the dates and contact the adjuster in writing. If that doesn’t fix it, your state agency or a workers’ comp lawyer can help.
A Quick Example
Ray, a delivery driver, earns an average of $1,050 a week including overtime. He injures his shoulder lifting a package and can’t work for 12 weeks. At two thirds of his AWW, his TTD rate is $700 a week, assuming that is under his state’s maximum. Over 12 weeks, he receives about $8,400 in tax free benefits, plus all his medical treatment. When he reaches MMI, his doctor assigns a 10 percent impairment to the shoulder, which leads to additional PPD benefits based on his state’s formula.
If the insurer had calculated his AWW from base pay alone, leaving out overtime, his weekly rate would have been noticeably lower for every week of benefits.
How to Check Your Benefits Are Right
- Ask the insurer in writing for their AWW calculation
- Compare it with your pay stubs for the same period
- Make sure overtime, bonuses and any second job were included if your state allows
- Check your state’s current maximum and minimum rates
- Confirm the waiting period and whether you will be paid retroactively
- Track every payment you receive
Raises and Cost of Living Adjustments
Your workers’ comp rate is usually locked in based on your wages at the time of injury. If you would have received a raise later, temporary benefits typically don’t increase. A small number of states provide cost of living adjustments for long term or permanent total disability benefits. If you are on benefits for a long time, ask whether your state offers any adjustment.
What to Do Next
If you are receiving workers’ comp, check your benefit rate against your pay records today. Visit your state workers’ compensation agency’s website for current maximums and rules. If your rate seems low, your benefits stopped unexpectedly, or you are being offered a settlement, talk to a workers’ comp lawyer. Consultations are usually free, and fees are typically set or approved by the state.
Sources
- U.S. Department of Labor: Workers’ Compensation
- National Academy of Social Insurance: Workers’ Compensation Benefits and Costs
- IRS Publication 525: Workers’ Compensation and Taxes
This article is for general information only and is not legal advice. Laws change and every case is different, so speak with a licensed attorney in your state about your own situation.
Frequently Asked Questions
Do I get paid for the first few days off?
Most states have a short waiting period of three to seven days. If you are out longer than a set period, many states pay those days retroactively.
Who pays workers' comp benefits?
Your employer’s workers’ comp insurer pays benefits, or the employer itself if it is self insured. Benefits don’t come out of your paycheck.
Can I get workers' comp and unemployment at the same time?
Usually not for the same period of total disability, since unemployment requires being able to work. Rules vary by state, especially for partial disability.
How much does workers' comp pay per week?
Most states pay about two thirds of your average weekly wage, up to a state maximum.
Is workers' comp taxable?
Workers’ compensation benefits are generally not subject to federal income tax.
Does workers' comp include overtime?
Many states include regular overtime when calculating your average weekly wage. Check how your state handles it.
How long can I receive workers' comp?
It depends on the benefit type and state. Temporary benefits often end when you return to work or reach maximum medical improvement, and many states set maximum durations.
Does workers' comp pay for pain and suffering?
No. Workers’ comp pays medical and wage benefits, not pain and suffering. A third party claim may cover it if someone other than your employer caused the injury.
What is an impairment rating?
A percentage assigned by a doctor that reflects lasting loss of function. It is used to calculate permanent partial disability benefits.
