When a worker is injured, employers don’t cover their wages. Instead, workers’ comp pays the employee's medical costs and partial wages for as long as they’re out.
Let’s break down some of the complexities of workers’ compensation insurance coverage so that both employers and employees know who’s financially responsible for what.
How Much Do Injured Employees Get Paid?
Workers’ comp policies pay 66.66% of the employee’s weekly base pay—up to a certain max—which is determined by the workers’ compensation law in your state.
In general, an insurance adjuster uses the company’s payroll records for the period before the injury (many states use the 52 weeks prior) to calculate the employee’s average salary and determine pay.
The workers’ comp insurer divides the employee’s total earnings by the number of days worked to determine their average daily wage. This number would be the basis for what they are paid while out on disability.
Employee benefit payments can be more or less depending on if an employee has a full or partial disability and how long they have been working for the company. If the worker has been employed for less than a year, the formula can vary based on the state they’re in.
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Example of Employee Benefits on Workers’ Comp
Let’s use New York to see how workers’ comp works. Here, no disability benefits are paid unless the employee is out for at least seven days. After that period, employees out on full disability will earn two-thirds of their average pay, subject to certain state maximums.
So an employee who makes $900 a week and is out on temporary total disability would receive payments of almost $600 ($900 x 66.6%) a week until they return to work.
What Happens if a Worker is Partially Injured?
If an employee can return to work partially (i.e., not full-time) after their injury, they can still receive workers' comp benefits. But how much can they expect to see?
Generally, insurers use a formula to determine the employee’s eligibility for partial benefits. They use the care provider’s report to assign a percentage to the worker’s disability, such as a 25 percent disability. In that case, the employee would receive 66.6% of their average weekly salary, multiplied by 25%.
Using our previous example, the employee would receive a weekly workers’ comp payment of about $150. Here’s the math:
$900 x 66.66% = $599.94
That’s how much they’d make on full disability. But for partial, you’d keep doing some math:
$599.4 x $25% = $149.99
An employee on partial disability would get $149.99 per week.
Do Employees Lose Their Workers’ Comp Benefits If Fired?
In most cases, a worker who is fired after they are injured can still receive workers’ comp benefits. But this is not always true.
If a worker is fired, for example, for testing positive for drug or alcohol use while they were still at work, their benefits may be denied. This is also true if the injury was caused by misuse of equipment, fighting while on the job, or refusing to perform light duties that have been approved by the employee’s physician.
Maximum Weekly Benefits Available Under Workers’ Compensation
Maximum and minimum weekly benefits vary by state and the degree of disability, such as $242.86 minimum and $1,619.15 maximum in California for a temporary total disability.
Here’s an overview of what an injured employee might receive in varying situations:
- Medical benefits: All medical treatments should be covered by workers’ compensation. In fact, the injured worker may be able to receive reimbursement for medical expenses even before the claim is approved.
- Temporary partial disability: These payments are earned by an employee who can return to work part-time, but only in a modified version of their job for a period of time after an accident. Remember that partial benefit amounts are directly related to the doctor-assigned disability percentage (this is true for both temporary and permanent partial disability).
- Temporary total disability: If the employee cannot work at all temporarily due to injury or illness, they will receive this benefit, which is 66.66% of their salary.
- Permanent partial disability: If the injury is determined to have lifelong consequences, but not so much that the employee can never work, they may receive these disability payments. For example, if an injury at a worksite left a worker with a permanent limp, but they can still do desk jobs, they may receive this payment.
- Permanent total disability: This benefit kicks in if a job-related injury leaves an employee completely disabled and unable to work in any capacity. In most states, it will be 66.66% of the employee’s salary in the period before the injury.
- Supplemental job displacement benefits: This money is used for vocational training designed to help an employee retrain or enhance their skills if they can work again, but not at the job they formerly held.
- Death benefits: If an employee is killed by an on-the-job accident, their dependents will receive a payment. The amount varies from state to state. In California, for example, the death benefit is a flat sum of $250,000 for one family member, $290,000 if there are two family members, and $320,000 that will be split between three or more family members.
The Difference Between Workers’ Compensation and Disability Insurance
Workers’ comp is mandatory for many businesses, while disability insurance is optional and can be purchased by anyone.
Workers’ compensation insurance is also regulated by the state and covers most employees. It pays medical costs, rehabilitation services, and a portion of their wages if they miss work because of a work-related injury or illness. The part that pays for lost wages is referred to as temporary or permanent disability benefits.
Disability insurance is a different type of policy that can be purchased either by employers as a benefit for their employees or by the employees themselves. While it also pays out a portion of an employee's wages if they are injured on the job, it can also pay for those happening outside of work. An employee might purchase disability insurance to supplement their own health insurance.
In general, policies cost between 1% and 4% of the employee’s annual income and pay out up to 70% of their salary as a benefit if they are disabled.
And to add one more to the mix, there’s also Social Security Disability Insurance (SSDI). This is a federal benefit that an employee could be eligible for if they have paid into the Social Security system for long enough (payments into the system are taken automatically out of an employee’s paycheck). Generally, it kicks in if the employee has been disabled for five months or more.
What Does a Workers’ Comp Claim Involve?
A workers’ comp claim involves filing paperwork about the injury that is then reviewed and either approved or denied by the insurer.
If an employee is injured on the job, there are several steps that should be taken as soon as is reasonable:
- Get medical care for the employee: The first priority is to get medical care for the injured employee. Workplace injuries should not be taken lightly, so even if the employee seems okay, it's a good idea to have them checked over by a medical provider.
- Submit claim form: Next, the employer gives the employee a workers’ compensation claim form, which needs to be filled out and submitted to the employer’s insurance company ASAP. The claim form will include all the details of the injury or illness so that a claim can be opened for the case. In some states, a form must also be filed with the state’s workers’ compensation board.
- Wait for the insurer to approve or deny the claim: The insurer assesses the claim, and either approves or denies it. If the claim is denied, the employee can bring their case before a judge who will rule on the case. The claim could be settled in as little as a month, or it could take a year or more.
Does Every Business Need Workers’ Comp?
Workers’ comp is mandatory in all states except Texas and South Dakota for most businesses with employees.
Some exceptions are if you’re a:
- Self-insured employer, in which case you would have funds set aside for this purpose.
- Business based in Texas or South Dakota since these states don’t require workers’ comp.
- Self-employed and have no employees. You’d be responsible for your medical bills. Personal medical insurance doesn’t usually cover workplace injuries. Some states require self-employed people in certain professions to have workers’ comp, even if they don’t have employees—such as roofers in CA.
- If you have less than a certain number of employees in a handful of states. Most states require you to have workers’ comp if you have a single employee. These states have higher thresholds: AL, AK, FL, GA, MS, MI, NM, NC, SC, TN, VA, and WI.
If a worker is injured on the job and the employer should have an active policy but doesn’t, they could be held liable for the costs related to the injury and be at risk of a lawsuit.
If the employer isn’t required to have workers’ comp, employees can sue the employer to cover medical costs, lost wages, and other losses. Another option is to file a claim with the state’s uninsured employer fund, if the state has one.
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Frequently Asked Questions
Which of the Following is Not Typically Provided by Workers’ Compensation?
Although workers’ compensation covers most work-related injuries and illnesses, there are a few exceptions. These include injuries or illnesses caused:
- Before the employee was hired
- By a worker who is injured when fighting or playing around with other employees
- While the employee is committing a crime or violating company policy
- When the employee is intoxicated or using illegal drugs or other prohibited substances
- When an employee willfully hurts themselves or another employee. The other employee, however, would be eligible for workers’ comp.
- While the employee is participating in an off-duty recreational activity, such as a softball game with the company team
Employees in any of the above scenarios are most likely not going to be eligible for benefits payments. Every state has its own laws and workers’ compensation policies, so you may find other examples of non-eligible injuries in your own state.
How Does Florida Workers’ Compensation Work?
Workers’ comp is mandatory in Florida for most employers. Injuries need to be reported by the employer to the insurer within seven days of learning of them. Disability benefits are calculated using wages earned during the 91 days before the accident. As with most states, Florida pays two-thirds of the employee’s average weekly compensation for full disability.
What Are My Rights Under Workers’ Compensation in California?
As an employee, you have the right to receive payments for medical care, temporary or permanent disability benefits, and supplemental job displacement benefits. In the event of your death, your heirs will receive death benefits. If you are an employer, carrying a workers’ comp policy gives you the right to avoid liability lawsuits if an employee is injured on the job.
Workers’ Compensation Protects Both Employer and Employee
Whether you’re a business owner or an employee, the important thing to know is that workers’ compensation insurance is there to protect both of you. If you are injured on the job, it pays for your medical bills, lost wages, and more.
If you’re an employer, having workers’ comp means your injured employee, in most cases, can’t sue you for their injuries and will have their financial needs taken care of.
