Most employers are required to carry workers’ compensation insurance. If an employee gets hurt on the job or contracts a work-related illness, this insurance policy pays for their medical care and replaces their lost wages.
You might know that you’ll receive monetary compensation if your workers’ compensation claim is approved. But do you know how that compensation is calculated? Here’s a closer look.
Types of Workers’ Compensation Benefits You Can Claim
If you get hurt at work and your employer has workers’ compensation insurance, their policy should pay for all necessary medical care related to your injury. However, if your injury causes some level of disability, you may be able to claim one of the following types of benefits:
- Temporary total disability (TTD)
- Temporary partial disability (TPD)
- Permanent total disability (PTD)
- Permanent partial disability (PPD)
Here’s a breakdown of each benefit type and the circumstances under which it might be approved.
Temporary Total Disability (TTD)
You might qualify for temporary total disability (TTD) if both of the following conditions apply:
- Your injuries have made it impossible for you to return to work.
- Your condition is expected to improve.
If your doctor believes that you’ll be able to come back to work in the foreseeable future, workers’ compensation should pay you a percentage of your weekly wage until you return. Each state has its laws concerning how much of a percentage eligible workers may be able to receive.
Temporary Partial Disability (TPD)
In some cases, you may be able to perform a modified version of your job while recovering from your injury. For example, if you have a broken leg and typically work on your feet, your position may allow you to work behind a desk while you recuperate.
If compensation for the modified version of your job is less than what you were making before, you could receive temporary partial disability (TPD) benefits until you can return to your regular duties.
Permanent Total Disability (PTD)
If your injury is so serious that your doctor believes you’ll be disabled for life, you may qualify for permanent total disability (PTD) benefits.
When you have a total permanent disability, you’ll typically receive the same level of compensation you’d receive with a temporary total disability. However, you’ll claim these payments for life.
Permanent Partial Disability (PPD)
Some work injuries can hinder your earning capacity without leaving you completely disabled. If your disability makes it harder for you to find work but doesn’t make working completely impossible, permanent partial disability (PPD) benefits may be an option.
Calculating PPD benefits is fairly complex. Your medical provider will assign you a disability rating, which is a percentage illustrating the extent of your impairment. In most cases, you’ll then receive that percentage of your state’s total disability benefits.
How Workers’ Compensation Benefits Are Calculated
One of the most important parts of filing a workers’ compensation claim is determining what benefits you’re owed.
Each state may set its guidelines, but in many cases, workers’ compensation for total disability is two-thirds of your average weekly wage. Some states rely on additional multipliers or offer specific compensation depending on the injured body part.
That might sound like it’s much less than what you’d normally make. However, the calculation of your average weekly wage doesn’t take taxes into account, and workers’ compensation payments are tax-free. While it’s not exact, paying temporarily or permanently disabled people two-thirds of their average weekly wage usually comes close to their typical earnings after taxes.
How Workers’ Comp Is Calculated for W-2 Employees
Suppose that you’re a W-2 employee in a state that pays two-thirds of your average weekly wage in benefits. You suffer a serious work accident that leaves you completely unable to work. If you make an average of $500 per week, that means you could receive about $333 in workers’ compensation benefits for temporary total disability (TTD) or permanent total disability (PTD).
Now imagine that the accident leaves you partially disabled. In this case, you would multiply your eligible workers’ compensation benefits by your disability percentage. For example, if your doctor believes you’re 60% disabled, you would receive about $200 (60% of $333) per week.
How Workers’ Comp Is Calculated for Gig Workers
As the gig economy has expanded, fewer people are working traditional W-2 jobs. Gig work has many advantages, but one downside is the lack of workers’ compensation insurance and other benefits. If you’re working as an independent contractor and get hurt on the job, there’s no workers’ compensation insurance to file a claim with.
Some companies deliberately misclassify employees as 1099 contractors so they can save on taxes. If you function more like an employee than an independent contractor, you may be able to take legal action. If you can convince the court that you should have been covered by a company’s workers’ compensation insurance, you might still be able to recover benefits.
Factors that Affect Total Payout for Workers’ Compensation Benefits
Calculating workers’ compensation benefits is more complicated than many people realize. The following are some of the key factors influencing how much you might receive:
- The Nature and Severity of Your Injury: Generally speaking, more serious injuries lead to more significant compensation. You’ll almost certainly receive greater benefits for a spinal fracture than a sprained ankle.
- How Much You Made Before the Injury: In most states, workers’ compensation isn’t an arbitrary amount — it’s a percentage of your weekly wage. With all else being equal, you’ll receive a greater settlement if you earn more.
- How Long You Are Disabled: If your disability is permanent, you might receive payments for the rest of your life. However, if it’s only temporary, the payments will generally cease once you return to work.
- Where You Live: Each state sets its procedures and guidelines for calculating workers’ compensation payments. Some require larger insurance payouts than others.
- Your Employer and Their Insurance Policy: While all workers’ compensation insurance providers must obey state law, each one handles claims slightly differently.
A Lawyer Can Help You Calculate Your Workers’ Comp Benefits
You aren’t legally required to retain a lawyer when filing a workers’ compensation claim. However, if you anticipate needing workers’ compensation disability benefits, it’s wise to work with an attorney.
Like other types of insurance companies, workers’ compensation insurers are in business for themselves. Their main goal is to pay out as little as possible. As such, there’s a very real possibility that the insurer may deliberately undervalue your claim.The average worker isn’t equipped to accurately value their own claim. However, since lawyers handle these cases daily, the right workers’ compensation attorney can calculate the benefits you’re entitled to with precision, and fight to make sure you get them.
