How is Workers’ Compensation Calculated?

You’re out of work after an injury on the job, and two questions keep coming back: how much will the checks be, and when will the first one arrive? If you’re counting the days and aren’t sure the insurance company got your number right, that’s a normal worry.

The short answer: workers’ comp pays a weekly benefit set by formula, a percentage of your average weekly wage before the injury, up to a weekly maximum. In many states, that’s about two-thirds of your gross pay. Michigan pays 80% of your after-tax pay, up to $1,201 a week for injuries in 2026. Medical care is paid separately. Michigan’s rules are in the boxes marked “In Michigan.”

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How is workers’ comp calculated?

Your weekly benefit is a percentage of your average weekly wage, capped at a maximum. Your state’s law sets the percentage, the wages that count and the cap, so the same injury can pay different amounts in different states.

1. Find your average weekly wage: your gross pay before the injury, averaged over a period your state sets.
2. Apply your state’s percentage.
3. Compare the result with your state’s weekly maximum, and with its minimum if it has one.

The waiting period, the kind of disability and other benefits you receive then decide how many weeks you’re paid and whether anything comes off. For the rest of the claim, see our guide to workers’ compensation. (Employers’ premiums are figured differently.)

What counts as your average weekly wage?

It’s your gross pay before the injury, averaged over the weeks your state’s law uses. Texas uses the 13 weeks before the injury (Texas Department of Insurance), and Illinois generally uses the 52 weeks before it (Illinois Workers’ Compensation Commission). Every payment is figured from this number, so ask how your state treats overtime, a second job and benefits that stop while you’re off.

What percentage of your wages does workers’ comp pay?

On average, about two-thirds of your gross wage. A few states, Michigan among them, use a percentage of after-tax pay instead (National Academy of Social Insurance).

Some examples, as of September 2026:

Why does workers’ comp pay only two-thirds?

Two-thirds replaces more than it sounds: the checks generally aren’t taxed (IRS Publication 525), and tax-free benefits replace a bigger share of lost wages than taxable ones would (National Academy of Social Insurance). So compare your check with your take-home pay, not your gross.

Is there a maximum or minimum weekly benefit?

Yes. States set a maximum weekly benefit, some also set a minimum, and the amounts vary (National Academy of Social Insurance). If you earned a high wage, the maximum, not the percentage, decides your check.

How much does workers’ comp pay in Michigan?

Michigan pays 80% of your after-tax average weekly wage, up to $1,201 a week for injuries in 2026 (MCL 418.351(1), 418.355(2); Workers’ Disability Compensation Agency). You don’t have to do the tax math. The agency’s yearly Weekly Benefit Tables turn an average weekly wage into a weekly rate, based on your tax filing status and number of dependents, and the law makes those tables conclusive (MCL 418.313).

Here’s the math for a made-up worker. The worker and the wages are invented; the rates come from the agency’s 2026 tables.

What the example shows:

• Short absences lose the first week. Back at full pay in under two weeks, the worker gets nothing for the first seven days (MCL 418.311).
• 80% of after-tax pay isn’t always more than two-thirds of gross. A state paying two-thirds of gross wages would pay this worker $666.67 a week ($1,000 × 2 ÷ 3), before its maximum.
• The cap matters only at high wages. At $2,000 a week, filing jointly with three dependents, the 2026 table gives $1,202.10, so that worker gets the $1,201 maximum.

How long does it take for workers’ comp to pay?

In Michigan, the first payment is due 14 days after your employer knows about the disability, and it covers everything owed up to then. Across the states, wage benefits usually start after a waiting period of three to seven days, and almost every state pays those days back if you’re out long enough (National Academy of Social Insurance).

What does workers’ comp pay, and for how long?

Comp pays wage benefits while you can’t work or can only earn less, for as long as your state allows. It also pays for medical care: in principle, all covered medical costs of the injury (National Academy of Social Insurance). California, for example, generally limits temporary disability payments to 104 weeks within five years of the injury (Cal. Lab. Code § 4656(c)(2)).

Comp generally doesn’t pay for pain and suffering. A lawsuit against someone other than your employer who caused the injury, such as another company on a construction site, can. See workers’ comp compared with a personal injury claim and when you can sue after a workplace injury.

Can other benefits reduce your workers’ comp check?

Yes, depending on your state: unemployment, a pension or Social Security retirement benefits for the same weeks can reduce it. Social Security disability works the other way: federal law generally reduces those benefits when they and your comp together exceed 80% of your “average current earnings” before the disability (42 U.S.C. § 424a).

Do you pay taxes on workers’ comp?

Generally, no. Workers’ comp for a job-related injury or illness is fully exempt from federal income tax if it’s paid under a workers’ compensation act. Payments to your survivors are exempt too (IRS Publication 525). The exceptions:

• If part of your comp reduces your Social Security or equivalent railroad retirement benefits, that part counts as Social Security benefits and may be taxable.
• Retirement plan benefits based on your age, length of service or own contributions aren’t covered by the exemption, even if you retired because of the injury.
• Pay for light duties after you return to work is taxable as wages.

What do workers’ comp calculators get wrong?

A calculator can multiply a wage by a percentage, but it can’t check the facts that decide your rate, and none can tell you what a settlement is worth. It needs, and often misses:

• The right wage: the weeks your state uses, overtime, a second job and benefits that stopped.
• Your state’s formula and maximum. Two-thirds of gross pay is the wrong formula for Michigan, and Michigan’s maximum depends on the year you were hurt.
• Taxes and dependents. In Michigan’s 2026 table, a $1,000 weekly wage converts to $605.38 for a single filer with no dependents but $650.69 for a joint filer with two. The rate can also change later, for example when a dependent child turns 18 (MCL 418.353(2)).
• Offsets and earning capacity. Other benefits can reduce the check, and in Michigan, partial benefits can be based on wages you’re capable of earning, even if you aren’t working (MCL 418.301(4)(b), (8)).

Is a settlement figured the same way as weekly benefits?

No. There’s no set formula. A settlement usually trades some or all of your future benefits for a lump sum. The amount is negotiated, and depending on your state, it may need approval from the comp agency or a judge.

Before you weigh an offer, work out what you’d give up: the weekly checks you could still receive, and future medical care, which a settlement can close for good. See our guide to workers’ comp settlements.

Offered a settlement, or not sure your weekly rate is right? Get a free case review. Four quick questions, no cost, no obligation.

What to do next

1. Gather your pay records for the 52 weeks before the injury, including overtime, a second job and benefits that stopped.
2. Report the injury in writing, and make sure a claim is filed. In Michigan, tell your employer within 90 days and make your claim within two years (MCL 418.381(1)).
3. Check the insurer’s math. In Michigan, the insurer must send you a copy of Form WC-701 after the first payment and when benefits change or stop (Mich Admin Code R 408.31a(6), (7)). It lists your wage, lost fringe benefits, second-job pay, filing status and dependents, so check each one (Workers’ Disability Compensation Agency).
4. Log every check with its date and amount, so a late or short payment stands out.
5. Get a free case review before you sign a settlement. A lawyer can check your rate, your deadlines and whether someone else should also pay. Get a free case review, or, if you were hurt in Michigan, compare Michigan injury lawyers.

What waiting can cost

• Your claim. A missed deadline can cost you benefits. In Michigan, you have 90 days to tell your employer and two years to make the claim (MCL 418.381(1)).
• Back benefits. In Michigan, benefits generally can’t be paid for any period more than two years before you file an application for hearing (MCL 418.381(2)). If you were already paid weekly benefits and apply to have them restarted, the limit is generally one year (MCL 418.833(1); Martin v Somberg-Berlin Metals Co, Michigan Supreme Court, 1980).
• Money every week. A mistake in your wage, filing status or dependents repeats in every check until it’s fixed.

What a good outcome looks like

Your first check arrives on time, figured from your real wages, including overtime, a second job and the benefits you lost. Your medical bills go to the insurer, not to you. If you settle, you know exactly what you’re trading away. From wondering whether your check is right to knowing how it’s figured, when it’s due and what to do if it isn’t.

For more on injuries at work, see the most common workplace accidents, browse the workplace injury guides, or read Michigan personal injury law in plain English.

Updated September 25, 2026

This guide is general information, not legal advice, and laws change. For advice about your situation, talk to a lawyer licensed in your state. Reading this page or contacting us does not create an attorney-client relationship.