Select Page

# Nebraska Workers’ Compensation Refresher: Calculating Average Weekly Wage for Indemnity Benefits Purposes

by | Jan 8, 2016

As many employers know, a big part of analyzing their exposure to a particular work-related accident is determining how much the employer will have to pay in weekly disability benefits. This amount, or rate, is determined by the injured employee’s average weekly wage (“AWW”). The following outlines the general law regarding how AWW is calculated for purposes of Temporary Total Disability, Permanent Partial Disability (where the employee averages more than 40 hours per week), and Permanent Partial Disability (where the employee averages less than 40 hours per week). Please note that the AWW is not the amount of weekly benefits paid, but rather the determining variable used in the weekly rate calculation.

Calculation of AWW for Temporary Total Disability Purposes:

For purposes of calculating temporary total disability, the employer multiplies the gross hours worked by the employee during the 26 weeks preceding the accident by the hourly rate of pay earned at the time the hours were worked. This provides the employee’s gross wages. Once gross wages are calculated, that number is divided by 26 (or the number of weeks worked by the employee prior to the injury) to determine the AWW. Note that any weeks where the employee’s hours were “abnormally low” are excluded from this calculation. For example, if there are two abnormally low weeks, those hours are excluded from the gross wages calculation and gross wages would be divided by 24 (rather than 26). For purposes of Temporary Total Disability benefits, the AWW calculation applies regardless of whether the employee works more than 40 hours per week or less than 40 hours per week. As seen below, this is not necessarily the case with Permanent Partial Disability Benefits.

Calculation of AWW for Permanent Partial Disability Purposes (where the employee averages more than 40 hours per week):

In situation where the employee averages more than 40 hours per week during the 26 weeks prior to the accident, the AWW calculation uses the “actual wages” earned by the employee. What this means is that, to calculate AWW, you multiply the gross hours worked by the hourly rate of pay earned (at the time the hours were worked) to determine the employee’s gross wages. Gross wages are divided by 26 (or the number of weeks worked by the employee prior to the injury) to calculate the AWW.

Calculation of AWW for Permanent Partial Disability Purposes (where the employee averages less than 40 hours per week):

A trickier issue is presented when an employee averages less than 40 hours per week. Although the Nebraska Supreme Court has not specifically addressed the issue, Neb. Rev. Stat § 48-121(4) requires that the hourly rate of pay must be multiplied by 40. Accordingly, when the employee’s rate of pay remained constant, one would simply multiply the hourly rate of pay by 40 to obtain the employee’s AWW for permanent partial disability benefits. Notice, this is a different concept than the “actual wages” figure used above.

The calculation is made more difficult when the employee’s rate of pay was not constant in the 26 weeks prior to the injury. In these situations, we recommend using an “average hourly rate.” The “average hourly rate” is calculated by dividing the total wages earned in the 26 weeks by the total number of hours worked during the same period. Then—to determine the AWW for Permanent Partial Disability Purposes—one would multiply the “average hourly rate” by 40. The resulting figure is the employee’s AWW.

As seen above, although a simple concept, an employee’s AWW can be tricky to calculate and can vary depending on the facts, circumstances, and type of indemnity. For information or questions regarding the calculation of an employee’s AWW, please contact Nebraska Workers’ Compensation attorney Michael Sands at msands@baylorevnen.com or by phone at 402.475.1075.