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Understanding the Average Weekly Wage Calculation in Colorado Workers’ Compensation

Workers’ compensation is designed to cushion employees who suffer work-related injuries or illnesses. In Colorado, understanding the Average Weekly Wage (AWW) calculation is essential for both employers and employees. In this blog post, our experts at The Law Offices of W. Dan Mahoney, P.C. will break down the aspects of AWW calculation and shed light on the key factors that influence this crucial component of workers’ compensation benefits.

Average Weekly Wage in CO

What is the Average Weekly Wage?

The Average Weekly Wage is the foundation upon which many workers’ compensation benefits are determined. It represents the average earnings of an injured employee over a specified period, usually the 12-16 weeks preceding the date of injury. Accurate AWW calculation is pivotal as it directly impacts the compensation an injured worker receives during their recovery.

Factors Influencing AWW Calculation

Some of the factors influencing AWW calculation include;

  • Wage components: The AWW includes various components of an employee’s income. This includes regular wages, overtime pay, bonuses, and certain fringe benefits. It is crucial to consider all forms of compensation to arrive at a comprehensive and fair assessment.
  • Part-time and seasonal employment: Colorado law recognizes that not all employees work a standard 40-hour week or maintain consistent year-round employment. In part-time or seasonal employment cases, adjustments may be necessary to ensure a realistic reflection of the injured worker’s earning capacity.
  • Multiple jobs: Some individuals work multiple jobs to make ends meet. The AWW calculation should encompass all sources of income to provide an accurate representation of the injured worker’s overall financial standing.

Calculating Average Weekly Wage

The AWW is generally calculated using the following formula:

AWW =  Total Earnings

        Number of Weeks Worked

Challenges in AWW Determination

Challenges in Average Weekly Wage (AWW) determination can arise due to various factors. This makes it essential for both parties to handle this process with care. Here are some common challenges associated with AWW determination:

  • Inconsistent work hours: Employees with irregular work schedules may find it challenging to establish a consistent AWW. Industries with fluctuating work hours may struggle to determine an accurate representation of an employee’s average earnings.
  • Overtime and bonuses: Determining how to incorporate overtime and bonuses into the AWW calculation can be complex. While regular wages are typically straightforward, additional compensation elements like overtime pay and bonuses may not be consistent.

Impact on Benefits

The calculation of the Average Weekly Wage (AWW) in Colorado’s workers’ compensation system directly impacts the benefits that an injured worker may receive during their recovery. Here is how;

  • On temporary disability benefits: Temporary disability benefits are often calculated as a percentage of the AWW. In Colorado, the formula typically involves taking two-thirds of the AWW. Therefore, a higher AWW generally results in higher temporary disability benefits.
  • On permanent disability benefits: Compensation for permanent impairment is another area where the AWW plays a crucial role. If an injured worker sustains a permanent injury or impairment as a result of a work-related incident, the benefits they receive may also be based on a percentage of their AWW. The severity of the impairment and its impact on the employee’s ability to work is considered in determining the appropriate compensation, but the AWW sets the foundation for these calculations.
  • On death benefits: In cases where the injury leads to death, death benefits may be provided to dependents. The AWW is a key factor in calculating the amount of these benefits. Dependents may receive a portion of the deceased worker’s AWW to help compensate for the financial loss resulting from the worker’s death.

Let Us Help You Today

As advocates for injured workers in Colorado, our team at The Law Offices of W. Dan Mahoney, P.C. is committed to ensuring that every client receives fair and just compensation based on a thorough and accurate assessment of their Average Weekly Wage. Get in touch with us today to schedule your consultation.