Generally, the weekly rate of compensation is expected to be approximately 80 percent of your “average weekly spendable earnings.” Your spendable earnings are actually representative of your gross weekly earnings, having your payroll taxes taken out. This is because your workers’ compensation benefits themselves are not taxable. In short, your average spendable earnings are the basis for calculation of your workers’ compensation rate of pay. There are other factors that also impact and determine your workers’ compensation rate.
Because the workers’ compensation benefits are not taxable, the benefits themselves must reflect an adjustment of what would normally be your payroll taxes. This is accomplished by determining your average weekly wage at the time of the injury and determining the number of tax exemptions you have for income tax purposes. Your average weekly wages are generally determined for an hourly employee by calculating the average weekly pay you received in the 13 calendar weeks immediately prior to your date of injury. The total number of exemptions is based upon your marital status, and the number of dependents that you claim on your income taxes. Once those two pieces of information are calculated and determined, an appropriate workers’ compensation rate can generally be established.
There are, however, individuals who are compensated not by the hour, and are paid differently than every single week. In those circumstances, Iowa Code §85.36 specifies a number of methods of calculating the workers’ compensation rate. There are also times when the particular weeks used by the insurance carrier are not really representative of the average earnings of an injured worker. For example, if you normally work 40 plus hours per week, and during the 13 weeks before your injury you only worked 25 hours during a particular week, using that 25-hour week would result in a lower workers’ compensation rate. The law, therefore, allows that significantly lower week to be thrown out and not used in calculating your workers’ compensation rate.
What must be clear by now is that the calculation of a workers’ compensation rate is a very complicated and fact-specific process. If you have questions regarding how the insurance carrier calculated your workers’ compensation rate, contact them directly and have them provide you written documentation of the method of calculation. If you still have serious questions regarding whether the workers’ compensation rate has been determined, an attorney specializing in workers’ compensation would be able to analyze the facts and provide you with your proper workers’ compensation rate.
If you were injured and would like answers to your questions, I will be happy to answer any of your questions, or even meet with you, without any cost to you. To contact me, email me at MDake@wertzlaw.com or call and ask for Matt Dake at (319) 861-3001 or toll free across the state of Iowa at 888-860-6060.