The formula, in one line
Nearly every state computes weekly wage-replacement benefits the same way: average weekly wage × statutory rate (usually 66⅔%), bounded by a state minimum and maximum. Medical treatment for the injury is covered separately, in full, with no deductible — the wage formula only governs the check that replaces your paycheck.
Step 1: Average weekly wage (AWW)
The AWW is typically your gross earnings over the 52 weeks (or 13 weeks, in some states) before the injury, divided into a weekly figure. Overtime, bonuses, and a second job may or may not count depending on state law and documentation — disputes about the AWW are one of the most common sources of underpayment, because every dollar of AWW moves every weekly check. Keep pay stubs covering the full lookback period.
Step 2: The statutory rate
Most states set the rate at 66⅔% of the AWW; a minority use 60%, 70%, or a different structure. The result is your tentative weekly benefit before the bounds apply. Because benefits are generally tax-free, the take-home gap versus your paycheck is smaller than the percentage suggests.
Step 3: State minimum and maximum
Every state caps the weekly benefit — most at or near 100% of the statewide average weekly wage (SAWW), some higher or lower. High earners therefore receive less than two-thirds of actual pay; very low earners are lifted by a statutory floor. The caps adjust annually, and they differ enough between states to change the same injury's value by tens of thousands of dollars over a long disability — see maximum benefits by state.
Where disability ratings enter
The formula above pays while you recover (temporary disability). When recovery plateaus, a physician assigns a permanent impairment rating — a percentage of whole-person loss — that converts, via each state's schedule, into a number of additional weeks of benefits. The same 10% rating is worth very different amounts for a shoulder versus a finger, and in different states. Temporary vs. permanent disability explains that transition. Estimate your own figures with the Workers' Comp Settlement Calculator, then verify the current rates against your state agency's published schedule.
The whole calculation, end to end
A warehouse worker's last 26 weeks of gross pay total $29,900, so the AWW is $29,900 ÷ 26 ≈ $1,150. The statutory rate at 66⅔% gives $1,150 × ⅔ ≈ $767 per week — call it the tentative benefit. The bounds check: if the state maximum is $1,200, $767 survives; if the maximum is $700, the check is $700. That weekly figure then multiplies by every week of entitlement, which is exactly why the AWW fight matters — a $50/week error in the wage base is $2,600 over a 52-week disability. Hypothetical illustration; the lookback window, overtime treatment, and current bounds are your state's to set.
The tax asymmetry most people miss
Workers' compensation benefits are generally not subject to federal income tax — so a two-thirds check arrives without withholding, while your old paycheck was already bearing federal (and usually state) tax, plus FICA. For a typical worker, two-thirds of gross wages tax-free lands surprisingly close to full take-home pay. This is why the comp check feels smaller than it is when compared against gross salary, and larger than expected when compared against what actually cleared the bank. It is a general principle, not personal tax advice — unusual benefit combinations (for example, coordinated Social Security payments) can create taxable situations worth an accountant's confirmation.
What the wage formula deliberately does not touch
The 66⅔% formula prices exactly one thing: the paycheck. It does not discount medical care — treatment for the accepted injury is covered in full, separately, with no deductible and no annual maximum, which is often the system's largest financial contribution by far. Many states also reimburse reasonable travel for medical appointments (mileage at a statutory rate), and most fund vocational rehabilitation or retraining when the injury ends the old occupation. When evaluating any settlement, remember that a lump sum usually means giving up that open medical coverage — the trade-offs are in the temporary-to-permanent transition.
Multiple jobs and unusual schedules
Two wrinkles distort the AWW more often than any other. Concurrent employment: many states let you aggregate wages from a second job when the injury removes your capacity to do both — but some require the second employer to also carry coverage, and "sporadic" overtime may be excluded while "regular" overtime counts, a distinction fought claim by claim. Seasonal and variable work: a construction worker employed nine months of the year should not have summer layoffs averaged into a lower AWW — most states have special averaging methods (multiplied weekly wage methods) precisely for this. Both issues are evidence problems: the more complete your pay records, the closer the AWW lands to reality. The wage-base mechanics are expanded in lost wages and workers' comp, and the state rules that govern the edge cases are in how state rules affect workers' comp.