Glossary
Average weekly wage, defined
The figure a workers compensation carrier uses as an injured employee's normal pre-injury earnings, from which every disability benefit is calculated. Each state defines how it is computed, usually from the pay earned over a set number of weeks before the injury.
In practice
Getting it right matters because every disability benefit is a fraction of it. Overtime, bonuses, tips, shift differentials and the value of employer-provided housing or meals may or may not count depending on the state, and an employee who worked a partial year, held two jobs, or had just been hired is handled under special rules. The carrier calculates it from payroll records the employer supplies, and errors run both ways: an understated figure short-changes the employee and invites a dispute, an overstated one inflates the reserve and the employer's experience modification rate. Concurrent employment is a common surprise, since some states include earnings from a second employer that the first knew nothing about. The analysis tells an employer what records to keep so the figure is right the first time.
A worked example
Suppose an employee in Idaho earned $52,000 over the prior year, including $4,000 of overtime, and the state counts overtime. The figure comes to $1,000 a week. Suppose the state's wage benefit is two thirds, $667 a week. Had the employer omitted the overtime from the payroll report, the figure would have been $923 and the benefit $615, and the employee would have grounds to contest it. Hypothetical figures.
Applies to: Workers' Compensation Insurance