Average Weekly Wage & Workers’ Compensation
Your weekly workers’ compensation is based upon your “average weekly wage” at the time of the work injury. Under the Pennsylvania Workers’ Compensation Act, your average weekly wage is calculated by using the gross wages at the time-of-injury employer, without payroll deductions, that an employee earned for the 52 weeks preceding the work injury. Gross wages may also include room and board received from the time-of-injury employer, tips, bonuses, incentive pay, profit sharing, overtime, exercised stock options, vacation pay, maternity leave pay, and sick pay. How these gross wages are calculated to determine an average weekly wage depends on how the wages were earned by the employee. Bonuses, incentive pay and sometimes vacation pay are prorated over the entire year, and are not lumped into the week these types of wages were received. Fringe benefits (employer contributions for retirement accounts, 401Ks, pensions; health and welfare; life insurance or any plan for the benefit of employee or dependents; flex dollars to pay medical, dental or health and welfare benefits), mileage reimbursement and wage increases subsequent to the date of disability are not included in an average weekly wage calculation. Veterans, Social Security Disability or Unemployment Compensation benefits are also not considered wages and are not used in calculating an average weekly wage. However, if workers’ compensation wage loss benefits are received in the 52 weeks preceding a work injury due to a work injury with the same employer, they are included in an average weekly wage calculation. All of the proper wages are often excluded when an average weekly wage is first calculated by the workers’ compensation insurance company.
Average Weekly Wage Calculation Schedules
An employee also need not have earnings with the time-of-injury employer during the entire 52 weeks preceding a work injury to calculate an average weekly wage. As long as an employment relationship is maintained between the employee and employer, the following calculation schedules apply:
- For employees who are salaried, the average weekly wage is determined by dividing the annual salary with the time-of-injury employer by 52 and then adding in any bonus or incentive pay received.
- For employees who are hourly and/or work overtime, the wages earned by an employee at the time-of-injury employer for the 52 weeks preceding a work injury are split into four (4) 13 weeks periods, which are described as “quarters”.
- The quarters are then divided by 13, the three (3) highest quarters are added, and that number is then divided by 3 to determine the average weekly wage. The lowest quarter is discarded. For example:
- Quarter One: $5,000 ÷13 = $384.61
- Quarter Two: $3,000 ÷13 = $230.76
- Quarter Three: $5,000 ÷13 = $384.61
- Quarter Four: $5,000 ÷13 = $384.61
- $1,153.83 ÷ 3 = $384.61 average weekly wage
- If an employee has not been employed by the time-of-injury employer for three (3) consecutive quarters, the average weekly wage is calculated by dividing by 13 the total wages earned for any completed quarter and averaging that amount.
- If an employee has not worked at least one (1) quarter with the time-of-injury employer, the average weekly wage is determined by multiplying the number of hours expected to be worked by the hourly rate. Any expected overtime is to be included in this calculation. However, if the hours expected to be worked are sporadic, the average weekly wage is calculated by taking the employees actual earnings with the time-of-injury employer and dividing them by the number of weeks worked. This type of scenario is often miscalculated by the insurance company.
Seasonal employees and volunteer emergency workers are treated differently.
Finally, if an employee had concurrent employment (worked for two employers at the same time) at the time of injury, wages from both jobs are to be used in determining the average weekly wage. In this instance, the average weekly wage for each job is calculated separately. Again, this scenario is often ignored by the insurance company, resulting in a huge underpayment of compensation to the injured worker. A $20.00 adjustment to the weekly compensation rate can affect the settlement value of a workers’ compensation case by over $10,000.00.
Once you have had your average weekly wage calculated, you can then determine your weekly compensation rate.
Contact Us For Workers’ Compensation Questions
There are many other factors and nuances to consider when calculating an average weekly wage. This article touches on many, but not all, of these factors. If you feel your average weekly wage has been incorrectly calculated, please call Calhoon and Kaminsky P.C., for a free review of the accuracy of your compensation rate calculation. Ten percent interest is owed on all past underpayments of workers’ compensation. In addition, 50% penalties and attorney fees may be assessed against the workers’ compensation insurance company.
If you have additional questions about workers’ compensation in Pennsylvania or would like to speak to one of our lawyers about a free case evaluation, call us today at (717) 695-4722 or fill out our form, and someone will be in touch.