How Does the Insurance Company Calculate My Workers’ Compensation Benefit Rate?

April 30, 2021
Stern & Cohen
calculating average weekly wages for injured worker
Under the Pennsylvania Workers’ Compensation Act, injured workers are entitled to wage loss (“indemnity benefits”) based on the earnings at the time of injury.  Generally speaking, indemnity benefits are calculated based on two-thirds (2/3) of your average weekly wage (“AWW”).  However, there are other factors in this calculation.  The Pennsylvania Department of Labor & Industry sets the Workers’ Compensation rate calculations for each year.  Your benefit rate is calculated dependent upon the year of your injury.  For instance, if you are injured on December 31, 2019, but you do not stop working until 2020, indemnity payments will be based off what the Department of Labor & Industry set for 2019.  One unfortunate aspect of the law is that there are no cost-of-living increases.  For example, if you were injured in 2013 and remain disabled today, your indemnity payments are whatever the rate calculation was in 2013.

Let’s look at the 2021 rate schedule as an illustration of how benefits are calculated.  If you were injured in 2021 and making more than $1,695.00 per week, the maximum benefit you can receive is $1,130.00, irrespective how much over $1,695.00 your make per week.  This “max rate” is an unfortunate law, but most states have this.  If you make between $847.51 and $1,695.00 per week then your compensation rate is two-thirds of your weekly wage. So, if you made $900 per week, your compensation rate is $600.  If you make between $627.77 and $847.50, your compensation rate is a flat rate of $565.00. If you make less than $627.77, your compensation rate is 90% of your weekly pay.  So if your weekly checks average $627.50, then you are entitled to $564.75 per week.  Keep in mind, the insurance company uses your gross earnings to come up with the average (not your after-tax dollars).  Additionally, workers’ compensation benefits are paid at a percentage of your salary since they are tax-free.  Note that your indemnity paychecks should be paid at the same frequency as you were paid when you were working before your accident.  Therefore, if you received paychecks every two weeks, then your indemnity benefits should come every two weeks. If you were paid once a week, you should receive an indemnity payment every week.

How is your AWW calculated?

The Pennsylvania courts have made law to ensure that the calculation of wages is an accurate and realistic measure of what you could have expected to earn had you not been injured. Your compensation rate is based on your gross average earnings before taxes are taken out. If you have set wages, then the calculations should be easy. However, if your wages vary based on overtime, fluctuating hours, etc., the Act lays out how to calculate the AWW to meet the goal of a more fair and accurate representation of your earnings. The Act covers three different situations: (1) Employees who have been employed for at least three consecutive periods of 13 calendar weeks; (2) Employees who have been employed for at least one, but less than three, consecutive periods of 13 calendar weeks; and (3) Recently hired employees, that is, employees who worked less than a single complete period of 13 calendar weeks at the time of the work injury such that there is no accurate measure of AWW.

First, for employees who were employed more than three consecutive periods of 13 calendar weeks, the wage is calculated by taking the average of the highest three of the last four consecutive periods of 13 calendar week in the 52 weeks immediately preceding the injury.

Second, if the employee has not been employed by the Employer for at least three consecutive periods of 13 calendar weeks in the 52 weeks immediately preceding the injury, the AWW is to be calculated by dividing by 13 the total wages earned with the employer for any completed period of 13 weeks immediately preceding the injury and by averaging the total amount earning during such periods.

Third, if the employee has worked less than a complete period of 13 calendar weeks and does not have fixed weekly wages, the AWW will be the hourly rate multiplied by the number of hours the employee was expected to work per week under the terms of employment.  The hourly rate and the number of hours an employee is expected to work per week are factual determinations subject to the Judge’s credibility assessments. During litigation, you may have to give a deposition or testify in front of the judge about your expected wages and hours.  For example, if you were injured two weeks after your start date, and it was expected that you would have worked 40 hours per week and made $20 per hour, then $800 would be the average weekly wage and the compensation rate would be calculated from that figure.

What happens if you have two jobs?

If you are concurrently employed at the time of your injury, your earnings from your other job(s) will be taken into consideration.  For example, say you work as a bus driver during the day and do some bartending at a restaurant on the side. You rely on both incomes in paying your rent, bills, food, etc. If you were injured while driving the bus and this causes you to be unable to perform your job duties as a bus driver and a bartender, you will be compensated for the money you are losing from both jobs.

What if you disagree with the insurance company’s calculation?

Your Employer may accept your injury and begin to pay you indemnity benefits. If your payments are short because they do not include your overtime, wages from your concurrent employment, or any other dispute that you may have with the figure, Stern & Cohen can file what is called a Petition to Review Average Weekly Wage.  Under these circumstances, the issues will focus specifically on what your compensation rate should be based on your actual earnings. It is a very narrow issue.  You may have to give a deposition related to your actual earnings. Your Employer will then have an opportunity to rebut your testimony, usually producing their own witness like a Human Resource representative or supervisor.  Obtaining the actual paystubs is often very important here too.

If you have any questions about the calculation of workers’ compensation benefits, please call us.  The consultation is always free.