Essentially all employers in California need to purchase workers’ compensation insurance and provide it to all of their employees, including part-time, seasonal, and full-time workers. The benefits of workers’ compensation are used to cover medical costs incurred by the employee’s on-the-job accident. An extended disability could warrant a portion of the claimant’s regular wages being provided for each week of work missed. The question that many workers have, though, is whether or not workers’ compensation will consider the overtime pay they usually receive.
In California, workers’ compensation premiums are paid based on a percentage of an employer’s total payroll. States that use a payroll percentage system do factor overtime pay into workers’ compensation benefits, but possibly not how you might expect.
More Overtime Means Higher Premiums
Your employer has to pay larger workers’ compensation insurance premiums the more they pay their employees. In many situations, this payment calculation disincentivizes employers from allowing employees from using too much overtime since that will raise their monthly operating costs. In some areas, employers can even take a percentage of an employee’s wages to help cover workers’ compensation costs. More overtime in such a situation could mean employees pay more for the monthly premiums than before.
Understanding the Average Weekly Wage (AWW) Calculation
If you’re injured and unable to work, your wage-loss benefits aren’t based on your premium calculation — they’re based on your Average Weekly Wage (AWW), which is calculated separately under California Labor Code §§ 4453–4454:
AWW = Total Eligible Earnings ÷ Number of Weeks in the Base Period
For most employees, the base period is the 52 weeks before the injury (or the actual period worked, if shorter). Eligible earnings can include your regular wages, regularly scheduled overtime, bonuses, commissions, tips, and the value of in-kind compensation such as housing, meals, or a company vehicle. If your employer knew about a second job, those earnings can be included too (Labor Code § 4453(c)(4)).
Your weekly Temporary Disability (TD) benefit is generally two-thirds (66.67%) of your AWW, subject to the state’s annual minimum and maximum. For 2026, that range is $264.61 to $1,764.11 per week.
Example: If your AWW is $1,800 (including your regular overtime), your weekly TD benefit would be $1,800 × 66.67% = $1,200.06 — well under the 2026 cap, so you’d receive the full two-thirds rate.
FAQs
Does Workers’ Compensation In California Include Overtime Pay?
Not usually. Workers’ compensation benefits are calculated using your average weekly wage, which generally reflects your regular pay rather than the extra income from overtime hours.
When Is Overtime Pay Factored Into My Workers’ Comp Benefits?
If you are regularly scheduled and expected to work more than 8 hours a day or 40 hours a week as a standard part of your job, that overtime may be included in your average weekly wage calculation. Occasional or voluntary overtime typically is not.
Why Do Employers Pay Higher Workers’ Comp Premiums For Overtime Hours?
In California, workers’ compensation premiums are based on a percentage of an employer’s total payroll, which includes overtime wages. This means the more overtime an employer pays out, the higher their insurance premiums, even though it doesn’t automatically raise an injured worker’s benefit amount.
What Should I Do If My Workers’ Comp Benefits Don’t Reflect My Actual Earnings?
If you believe your average weekly wage was miscalculated or your regular overtime wasn’t properly factored in, you should speak with a workers’ compensation attorney who can review your pay records and help correct the claim. If your benefits were underpaid because eligible wages were left out, California Labor Code § 5814 allows for penalties on top of the back pay owed — so it’s worth having the calculation reviewed even if the shortfall seems small.
Can Workers’ Compensation Overpay Me, and What Happens If It Does?
Yes. If your AWW was calculated using incorrect wage data — for example, if overtime was double-counted or your base period included a temporary pay spike — you may be overpaid. Insurance carriers can seek repayment of an overpayment, sometimes by reducing future benefit checks. If you receive a notice of overpayment, don’t ignore it: an attorney can review whether the original calculation was even correct before you agree to any repayment plan.
Is My Workers’ Comp Benefit Prorated If I Work Part-Time or a Variable Schedule?
It can be. For hourly employees with irregular hours, California typically averages your earnings over the base period rather than using a single pay stub. Salaried employees are generally calculated by dividing annual salary by 52. If your schedule fluctuated significantly before your injury, the AWW calculation gets more complicated — and more prone to error — which is why it’s worth having an attorney verify the math.
Does That Mean You Get Better Pay Benefits, Though?
Paying more for workers’ compensation due to overtime hours does not necessarily mean that a worker who files a claim will get better benefits, though. Workers’ compensation benefits will provide your average weekly wages or salary, often without any consideration of the overtime hours you work. Your overtime hours might be factored into your pay benefits – which only activate after missing a week or more of work – if you are routinely scheduled and expected to work more than 40 hours in a workweek or 8 hours in a shift. Otherwise, your pay benefits will likely not be adjusted for the overtime pay you often earn.
Do you have more questions about overtime pay and how it is factored into workers’ compensation in California? Get answers and legal guidance from Wax & Wax, A Law Corporation in Santa Clarita. Our attorneys can also assist you with a denied workers’ comp claim if you filed for benefits but had your application rejected. Call (818) 247-1001 today.
