Workers’ comp doesn’t pay your full salary. It pays a portion — usually two-thirds — of your average weekly wage, tax-free, plus medical care for the injury. Here’s how each piece is calculated and where the caps kick in.
The four kinds of workers’ comp payments
Most states pay four distinct things:
- Medical benefits — every medical expense related to the injury, paid directly to the provider under the state fee schedule. No co-pay, no deductible, no cap on duration for most injuries.
- Temporary disability (TD) — wage replacement while you can’t work. Usually two-thirds of your average weekly wage. Subject to state-specific weekly maximums.
- Permanent disability (PD) — a lump sum or weekly payment for permanent impairment after you’ve recovered as much as you’re going to. Calculated from an impairment rating × state-specific formula.
- Vocational rehabilitation — retraining if you can’t return to your old job. Availability varies dramatically by state.
How temporary disability is calculated
The starting point is your average weekly wage (AWW), usually based on the 52 weeks before the injury — though some states use 13 weeks, others use 4. Overtime, shift differentials, bonuses, and tips are usually included. Health insurance contributions sometimes are.
Once AWW is set, the weekly TD benefit is typically:
TD = AWW × 0.667 (or 2/3)
Subject to state-specific minimums and maximums. Examples for 2026:
- California: max TTD ~$1,619/week
- Florida: max ~$1,260/week
- Texas: max ~$1,151/week
- New York: max ~$1,222/week
- Pennsylvania: max ~$1,381/week
Caps change every July 1 in most states based on a state-average-wage formula. Your adjuster should send the exact rate calculation with your first check.
The cap means high earners lose ground
If you earn $3,000/week ($156,000/year), 2/3 of your AWW is $2,000/week — but the California cap of $1,619 limits what you actually get. The difference ($381/week) is your loss for the duration of the disability.
This is why high earners with serious injuries often need a lawyer — recovering full economic loss may require pushing toward a structured settlement that goes beyond statutory weekly caps.
Tax treatment
Workers’ comp benefits are tax-free at the federal level under IRC § 104(a)(1) and tax-free in every state. You get the gross check; nothing’s withheld.
Practically, that means 2/3 of your gross AWW (the WC benefit) is often close to your normal take-home pay (after federal, state, and FICA withholding). This is why the “2/3 formula” isn’t as punishing as it sounds for middle-income workers.
Exception: if you take WC and Social Security Disability (SSDI) simultaneously, your combined benefits may be reduced ("offset") so the total doesn’t exceed 80% of your pre-injury wage.
When TD starts and stops
Most states have a 3- to 7-day waiting periodbefore TD starts (you get nothing for the first few days off work), but the waiting period is paid retroactively if your disability extends past a longer threshold (usually 14–21 days).
TD stops when one of these happens:
- Your doctor releases you to full duty
- You return to modified duty at full wages
- Your treating physician declares Maximum Medical Improvement (MMI)
- You reach the state cap on TD duration (104 weeks in California, 260 weeks for catastrophic injuries; varies elsewhere)
Permanent disability — the big-ticket payment
Once you reach MMI, the doctor assigns an impairment rating: a percentage representing your permanent loss of function. The rating × state formula = your PD award.
Formulas vary wildly:
- California: uses the AMA Guides 5th Edition with state-specific adjustments — apportionment, age, occupation. A 10% rating on a $40,000 worker is roughly $7,000; a 50% rating is roughly $80,000.
- Florida: impairment income benefits at 75% of TTD for a number of weeks equal to 2× the rating percentage. A 10% rating = 20 weeks of payments.
- Texas: impairment income benefits at 70% of AWW for 3 weeks per percentage point. A 10% rating = 30 weeks.
The rating itself is the most-contested number in workers’ compensation. Your treating doctor proposes a number; the carrier’s medical examiner often proposes a lower one; the difference between them can be tens of thousands of dollars. See our impairment-rating explainer (coming soon) for the underlying methodology.
Medical benefits — what’s covered
Every medical expense reasonably related to the work injury, for as long as you need treatment. That includes:
- Doctor visits, ER, urgent care
- Imaging (X-ray, MRI, CT, ultrasound)
- Physical therapy, occupational therapy, chiropractic
- Surgery, including cosmetic repair of disfigurement
- Prescription medications
- Medical equipment (braces, walkers, modified bedding)
- Mileage to and from authorized appointments
- Lifelong follow-up care if injury requires it
Not covered: medical care for unrelated conditions, experimental treatments not approved by utilization review, treatment from an out-of-network provider without authorization (if your employer uses an MPN).
Settlement — converting weekly checks to a lump sum
At some point in most cases, the carrier will offer to settle: a lump sum (or structured payout) in exchange for closing the claim. Settlement amounts come from a formula that includes:
- Remaining TD owed
- Projected PD value
- Expected lifetime medical costs (especially if there’s permanent impairment)
- State-specific adjustments and discounts
Settlement is irreversible. Once you sign, future medical care for the injury usually comes out of the settlement amount, not the carrier’s pocket. See our settlement guide (coming soon) for how to evaluate an offer.
How to estimate what you’re owed
For a quick personal estimate:
- Calculate your AWW from the 52 weeks before injury
- Multiply by 0.667 — that’s your weekly TD benefit (cap at state max)
- Multiply that by the number of weeks you’ve been or will be off
- Add expected medical costs (carrier pays directly)
- Add a placeholder for PD — depends entirely on the rating
These numbers come into focus as the case develops. Until your doctor assigns an impairment rating, the PD number is speculative. For accurate forecasting, consult a workers’ comp attorney — they review cases like yours regularly and can ballpark a realistic settlement value.
Common questions
Can I get paid for the day of the injury?
Yes, but as regular wages from your employer (you were on the clock). WC wage replacement starts after the waiting period.
What if I have a second job?
Most states include the second-job wage in your AWW calculation if the carrier knew you had concurrent employment. Tell your adjuster early so they get the math right.
What if my pay was inconsistent?
States have rules for averaging variable income (seasonal, commission-based). Document everything — bank deposits, 1099s, W-2s — and let the calculator work it out.
Bottom line
Workers’ comp pays medical care plus roughly two-thirds of your wage, tax-free, until you recover — capped at your state’s weekly maximum. Permanent impairment adds a lump sum or weekly payment that’s often the biggest part of the eventual settlement. The system is formulaic, but each number — your AWW, your impairment rating, the disputed causation — is fightable, which is why so many WC claims end up with attorney representation.