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How Is Workers' Comp Calculated?

Updated 02:00 PM EST, Wed March 13, 2019

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How to Calculate Workers’ Compensation

Workers’ compensation insurance, also known as workers’ comp insurance and workman’s compensation, provides benefits to employees if they’re hurt or sick from a work-related cause. If one of your employees is injured or sick, they can file a workers’ compensation claim and receive a weekly benefit. This benefit can be used to help cover their medical bills, recover lost wages, and more.
The weekly compensation an employee receives depends on state regulations. The employee receives a percentage of their average weekly wage. The average weekly wage is the amount they make if they were still working in the position they had before an injury or illness. The average weekly wage is an important element to determining how much an employee can receive in workers’ compensation benefits. A state’s workers’ compensation board or agency uses the average weekly wage as part of its calculations if an injury or illness occurred.
Different factors can affect an employee’s average weekly wage. These include:
  • If the employee was employed for a full year, five days a week.
  • If the employee wasn’t in the same industry for a full year.
  • Whether the employee was a seasonal or temporary worker.
In most cases, the average weekly wage is determined by multiplying an employee’s daily wage by the number of days worked in a year. That number is then divided by 52 to get the employee’s average weekly wage.
For example:
  • A full-time employee made $50,000 last year. They worked 242 days.
  • Divide $50,000 by 242. This equals $206.61, which is the employee’s daily wage.
  • Multiply $206.61 by 260 – the number of days a full-time employee would work in a year. This equals $53,718.60.
  • Divide $53,718.60 by 52 – the number of weeks in a year. The employee’s average weekly wage is $1,033.05.
The weekly amount provided to the employee is also based on whether the injury or illness is partially or totally disabled. For a totally-disabled employee, the typical benefit is 60% or ⅔ of the average weekly wage. For a partially disabled employee, their weekly pay is a certain percentage of their average weekly wage after it’s reduced by an earnings cap. Each state also has a maximum weekly rate. Since workers compensation law varies, make sure you understand the rules and maximum benefits amount for your respective state.
In the above example, if the employee is totally disabled, they can receive 60% or two-thirds of their average weekly wage. This ranges from $619.83 to $688.01.

Workers’ Comp Calculator

With the right information, you can calculate your employees’ average weekly wages to determine how much they may receive in benefits.
It’s a bit more complicated to calculate workers’ compensation premium costs. Numerous factors contribute to the overall insurance premium. This includes:
  • Class codes
  • Number of employees
  • Payroll
  • Claims history
A simple formula to give you an estimate is:
Class Code Rate X Experience Mod. X (Payroll/$100) = Premium*
The classification code is determined by each state. It represents the type of work performed by the employees of the business. Different jobs are given different codes. States also determine the experience mod, which is unique to each business. This number is determined by comparing a specific business to an average business in the same industry.

Learn More About Workers’ Compensation from The Hartford

Buying workers’ compensation can be an intimidating process. The Hartford can help make workers’ compensation less confusing. We’ve been helping small businesses for over 200 years. Our team can help you get the coverage you need to protect your business and employees.
Get a quote today or call 855-829-1683 to speak to one of our representatives about workers’ compensation insurance.
* This is a simplified formula only for reference. An actual workers’ comp premium calculation can be more complicated. Experience mods are subject to state requirements and do not apply to every policy.

Certain coverages vary by state and may not be available to all businesses. All Hartford coverages and services described on this page may be offered by one or more of the property and casualty insurance company subsidiaries of The Hartford Financial Services Group, Inc. In TX, this insurance is written by Sentinel Insurance Company, Ltd., Hartford Casualty Insurance Company, Hartford Lloyd’s Insurance Company, Property and Casualty Insurance Company of Hartford, Hartford Underwriters Insurance Company, Twin City Fire Insurance Company, Hartford Accident and Indemnity Company and Hartford Fire Insurance Company. In CA by Sentinel Insurance Company, Ltd. (CA license # 8701) and its property and casualty insurance company affiliates, One Hartford Plaza, Hartford, CT 06155.
The Hartford® is The Hartford Financial Services Group, Inc. and its property and casualty subsidiaries, including issuing company, Hartford Fire Insurance Company. Its headquarters is in Hartford, CT.