How is workers comp calculated in 2026?

The short answer, for anyone in a hurry

Workers compensation has three moving pieces: a weekly indemnity benefit (paid while you can't work), a permanent partial disability award (a lump sum if you have lasting impairment), and medical benefits (paid directly to providers, no cap in most states).

The weekly benefit is the headline number. In most states it equals two-thirds (66.67%) of your average weekly wage before the injury, capped at the state maximum. A few states use other percentages: 60% (MA, NH), 70% (TX, NJ, OK), 75% (CT, RI — of after-tax), 80% (IA, MI, AK — of after-tax). Iowa's cap is the highest ($2,161/week in 2025); Mississippi's is the lowest ($556/week).

The PPD lump sum is calculated from a scheduled number of weeks for the body part injured, multiplied by your weekly benefit, multiplied by the impairment rating a physician assigns (typically 5%–50% for serious injuries). That rating is where most of the negotiation happens.

Want a real number for your state? Use the workers comp settlement calculator — it implements the formula with each state's actual 2025 cap, PPD schedule, and tight-deadline warnings.

The 66.67% weekly formula

The core formula is short and almost identical across states:

Weekly benefit = min(State maximum, Average weekly wage × State percentage)
Weekly benefit = max(State minimum, ...)

In plain language: take your average weekly wage, multiply by your state's percentage (66.67% in most states), then apply the state cap. If the result is below the state minimum, you receive the minimum instead.

Three things move the result more than anything else:

• The percentage. In Iowa (80% of after-tax), a $1,500/week earner receives substantially more than the same worker in Massachusetts (60%). Run the math on your specific state.
• The cap. A $2,500/week earner in Georgia (cap $800) receives $800/week — 32% of pre-injury income, not 67%. The same worker in Iowa (cap $2,161) receives the full $1,666.67/week.
• What counts as "wage." Most states include overtime, tips, bonuses, and per-diems; some only base wage. Push to include everything.

The state weekly cap — the most overlooked variable

Every state sets an annual maximum weekly benefit, based on the State Average Weekly Wage (SAWW). The maximum updates each January 1 in most states. Once your raw formula result exceeds the cap, you receive the cap — not the formula.

This matters dramatically for above-median earners. Example: a software engineer earning $3,000/week in Georgia is capped at $800/week — a 27% effective replacement rate. The same engineer in Iowa is capped at $2,161/week — 72%. The state cap is the single largest variable in individual workers comp outcomes.

How "average weekly wage" is defined

The standard definition is total earnings during the 52 weeks before injury, divided by 52. The details vary by state:

• What's included: base wage always counts. Overtime, tips, and bonuses count in most states; commissions usually count. Per-diems and travel allowances vary.
• New employees: if you worked fewer than 52 weeks at the employer, most states use the period you worked and divide by weeks actually worked. Some states use "similar employee" wages instead.
• Multi-employer stacking: if you work two jobs and only get injured at one, many states stack the wages from both for AWW. Texas, Florida, and a handful of others don't.
• Concurrent employment: if you held a second job at injury time, document it immediately with paystubs.

Bring 12 months of paystubs (or your W-2 and last few paystubs) to the first benefit calculation meeting. Insurers default to base wage unless you provide proof of the rest.

TTD vs TPD vs PPD vs PTD — the four classifications

Workers comp pays benefits under four distinct categories. Each has its own formula. You can move between them over the life of a claim.

TTD — Temporary Total Disability

You cannot work at all, but recovery is expected. You receive the full weekly benefit (66.67% of AWW, capped) for the duration of disability. Most states cap TTD at 104, 156, 260, 400, or 500 weeks. A few (TX, IL, WA) pay TTD as long as you remain disabled, with no statutory limit.

TPD — Temporary Partial Disability

You returned to modified-duty work at a lower wage. The benefit pays two-thirds of the wage difference between pre-injury AWW and post-injury reduced earnings. Formula:

TPD weekly = (Pre-injury AWW − Reduced earnings) × State percentage
TPD weekly = min(State maximum, ...)

PPD — Permanent Partial Disability

You reached Maximum Medical Improvement (MMI) with permanent impairment. PPD is calculated as a lump sum: scheduled weeks for the body part × weekly benefit × impairment rating. See the next section.

PTD — Permanent Total Disability

You cannot return to any gainful employment. Most states pay PTD for life (some have age caps at 65–67). PTD is rare — typically reserved for catastrophic injuries: paralysis, severe traumatic brain injury, loss of multiple body parts.

The PPD lump-sum formula — where most settlement value lives

For most claimants who recover with some permanent impairment, the PPD lump sum is the largest single payment. The formula:

PPD lump sum = Scheduled weeks × Weekly benefit × Impairment rating

Each state publishes a schedule of weeks for body parts. Examples (Illinois):

• Arm: 253 weeks
• Leg: 215 weeks
• Hand: 205 weeks
• Foot: 167 weeks
• Back (loss of use): up to 400 weeks
• Eye: 162 weeks
• Hearing (one ear): 54 weeks

Worked example: Illinois back injury, 25% impairment rating, $666.67 weekly benefit (capped from a $1,000/week earner at 66.67%):

PPD = 400 weeks × $666.67 × 0.25 = $66,667

Same injury, same wage, in Mississippi (cap $556, scheduled weeks lower): the PPD lump sum drops to roughly $27,800. State choice doubles the number on identical facts.

The impairment rating fight — where the real negotiation happens

The impairment rating is a percentage your treating physician (or an Independent Medical Examiner) assigns at MMI. It reflects how much function you've permanently lost. The rating multiplies directly into your PPD lump sum, so a 5-point swing can mean $20,000–$50,000.

Most physicians use the AMA Guides to the Evaluation of Permanent Impairment (5th or 6th Edition, depending on state). The Guides provide tables and modifiers, but two physicians on the same case regularly produce ratings 10–20 points apart.

The standard pattern:

1. Your treating physician issues a rating (often 15–35% for surgical injuries).
2. The insurer schedules an Independent Medical Examination (IME) with their preferred physician, who almost always issues a lower rating (often half of the treating's).
3. You can challenge the IME with your own counter-IME or a Functional Capacity Evaluation (FCE).
4. The state board resolves the dispute, or you settle in the middle.

A worked example, start to finish

Maria, 42, warehouse worker in Illinois. Pre-injury AWW: $1,100/week. Herniated L5-S1 disc while lifting a pallet. Surgery (microdiscectomy) at month 4. PT through month 9. MMI at month 11 with a 20% lower-back impairment rating from her treating orthopedist.

The weekly benefit:

• Raw: $1,100 × 66.67% = $733.37/week
• Illinois cap (2025): $1,897.92 — not reached
• TTD weekly benefit: $733.37

Time off work (TTD):

• 11 months × ~4.33 weeks = 47.6 weeks
• TTD total: 47.6 × $733.37 = $34,909

PPD lump sum at MMI:

• Scheduled weeks for back (IL): 400
• Weekly benefit: $733.37
• Impairment rating: 20% (treating physician's number)
• PPD: 400 × $733.37 × 0.20 = $58,670

Total indemnity (TTD + PPD):

• $34,909 + $58,670 = $93,579
• Plus medical bills paid directly: ~$48,000 (surgery + PT + imaging)
• Plus future medical (if not bought out): open-ended

How the negotiation actually played out:

1. Insurer's IME issued a 10% rating — would have cut PPD to $29,335.
2. Maria's attorney secured an FCE supporting the 20% rating.
3. Insurer offered 15% to close the file.
4. Final negotiated rating: 18%, PPD $52,803.
5. Settlement included a $35,000 future medical buy-out.
6. Total settlement: $87,712 + $34,909 already paid in TTD = $122,621 gross.
7. Less 20% attorney fee on the new settlement: net $87,170.

The 8-point rating fight (10% IME vs 18% settled) was worth $23,468 to Maria — a much higher return than the attorney's 20% cut on the settlement.