How Much Does Workers’ Comp Pay in Minnesota?
Workers' compensation benefits include wage loss benefits, medical benefits, rehabilitation, and permanent partial disability.
Wage loss benefits:
Injured workers may be entitled to payment for time missed from work or reduced income caused by a work-related injury.
Medical treatment:
Workers’ compensation pays medical bills for medical care that is reasonable and necessary to cure or relieve the effects of a work-related injury.
Rehabilitation benefits:
Injured workers may be entitled assistance from a vocational professional, retraining, or other services to assist in the return to work.
Permanent partial disability benefits:
The treating physician may assign a percentage rating that corresponds to a lump sum benefit paid to the injured worker.
For wage loss benefits, workers' compensation insurance will make weekly payments that are 2/3 of the employee’s average pre-tax earnings. Because workers’ compensation benefits are not taxed, the employee’s take-home pay is likely to be similar. Insurers often miscalculate average pre-tax earnings, which can result in underpayment of workers’ compensation benefits. Employees have the right to dispute the insurers’ average weekly wage (aww) calculations.
Do You Get Paid Full Wage on Workers' Comp?
Workers’ compensation insurance does not exactly pay the employee’s full wage. It pays 66.67%, or 2/3, of the employee’s average pre-tax earnings. Because workers’ compensation benefits are not taxed, the employee’s take-home pay is likely to be similar, but not exactly the same.
Why Does Workers’ Comp Only Pay 2/3?
It is difficult to say with precision the reason why any law passes. It is likely that 2/3 compensation came to be by balancing the objectives of fairly compensating the injured worker, controlling costs for the employer, and preventing windfall in light of the fact that workers’ compensation payments are not taxed.
Tax-Free Benefits:
Because workers’ compensation benefits are not taxed, payment at rate of 2/3 is likely to be close to take home pay after taxes. The Workers’ Compensation Act expressly aims to “fairly compensate the person unable to engage in gainful employment…” Minn. Stat. Sec. 176.095.
Cost Control:
The stated intent of the Workers’ Compensation Act is “to assure the quick and efficient delivery of indemnity and medical benefits to injured workers at a reasonable cost to the employers…” Minn. Stat. Sec. 176.001.
Prevention of Windfall:
It is a common concept in insurance law that a claimant ought not to profit from an insurance claim. Workers’ compensation is no exception.
Weekly Wage Rate
If an employee has a regular work schedule, then the average weekly wage is predictable. An employee that is regularly scheduled for 40 hours per week and earns $20 per hour has an average weekly wage of $800.
If an employee has an irregular work schedule, then the average weekly wage may become less predictable. A common method of calculation is to add up the gross earnings for the past 26 weeks and divide that by 26. The method of calculation can depend on a variety of factors.
Insurance companies commonly calculate employees’ weekly wage rates too low. Although this happens for many reasons, the following two errors are the most common:
Exclusion of overtime
Overtime should be included in the wage calculation if it is regular and frequent throughout the year. Courts have found overtime in 1/3 pay periods to be regular and frequent throughout the year.
Use of a 26-week average for regularly scheduled employees
The workers’ compensation statute proscribes a calculation of the average only for employees whose weekly wage rate is irregular or difficult to determine. For an employee with a regular schedule, the wage rate would normally just be based on the regular schedule. Using the 26 week average for a regularly scheduled employee often has the effect of reducing the employee’s wage rate by the amount of PTO that was taken in the 26 weeks prior to the injury. This often incorrectly affects the employee’s weekly wage rate.
An incorrect weekly wage rate calculation can slightly or dramatically reduce the workers’ compensation benefits being paid to the employee. Injured workers may consult an attorney for help determining the correct weekly wage rate.
Conclusion
It is necessary for injured to understand how workers’ compensation benefits are calculated in Minnesota to ensure they receive the full amount they are entitled to. While the system is designed to replace roughly two-thirds of an employee’s pre-tax wages—and often comes close to matching typical take-home pay—the accuracy of those payments depends heavily on the insurer’s weekly wage rate calculation.
Unfortunately, mistakes such as excluding regular overtime or misapplying the 26-week averaging method can significantly reduce an employee’s benefits.
If you believe your wage rate is lower than it should be or you’re unsure whether your benefits are correct, you don’t have to fight the system alone. A workers’ compensation attorney can help review your earnings, identify errors, and advocate for the proper calculation. Ensuring the correct weekly wage rate not only protects your financial stability while you recover but also upholds the fairness the Workers’ Compensation Act is intended to provide.
About the Author
Luke Smith is a Minnesota workers' compensation lawyer. He graduated from Mitchell Hamline School of Law in 2016 and has been practicing workers’ compensation law since 2016. He has experience representing employers, insurance companies, and employees in workers’ compensation cases. A free consultation is available to Minnesota injured workers on request. Feel free to reach out with any questions about workers' compensation benefits.
