Do Commissions and Bonuses Count for Average Weekly Wages?

The number used to calculate workers’ compensation benefits is rarely as simple as a base salary divided by fifty-two. For workers who earn commissions, bonuses, overtime, or other variable compensation, the gap between a wage calculation that includes those earnings and one that does not can mean hundreds of dollars per week in benefits. NC workers’ comp weekly benefits are based on a figure called the average weekly wage, and how that figure is calculated determines everything that follows: temporary disability payments, permanent disability ratings, and any settlement negotiations down the road.

What the Average Weekly Wage Actually Measures

The average weekly wage is the foundation for nearly every dollar amount in a North Carolina workers’ compensation claim. Temporary total disability benefits are paid at two-thirds of the average weekly wage, subject to a state maximum. Permanent partial disability benefits are calculated using the same figure. Getting this number right at the outset of a claim affects every payment that follows.

North Carolina General Statute 97-2(5) sets out the methods for calculating average weekly wage, and the statute is more flexible than most workers expect. It does not default to a simple base salary calculation. It is designed to capture the worker’s actual earning pattern, which is exactly why commissions, bonuses, and overtime are relevant.

How North Carolina Calculates Average Weekly Wage

The statute provides five methods for calculating average weekly wage, applied in order of preference depending on which one fairly reflects the worker’s actual earnings. Whether your weekly benefit is based on a recent pay snapshot or a broader average depends on which method applies to your specific situation.

• The 52-week method: total earnings over the 52 weeks preceding the injury, divided by 52. This is the default method when the worker has been employed for a full year and the earnings pattern is reasonably consistent.
• The shortened period method: when a worker has been employed for less than 52 weeks, the calculation uses the actual number of weeks worked, provided the result is fair to both parties.
• The similar employee method: if neither of the above produces a fair result, such as for a worker employed for a very short time, the average weekly wage of a similar employee in the same grade, doing the same type of work, in the same or a similar location, can be used.
• The earning capacity method: when exceptional circumstances make the other methods unfair, the Industrial Commission can determine an average weekly wage that most nearly approximates the amount the injured worker would be earning were it not for the injury.
• The full-time equivalent method: for apprentices, trainees, or workers in similar circumstances, the wage may be calculated based on what a comparable full-time worker would earn.

The Industrial Commission has discretion in selecting which method applies, and that discretion is exactly where disputes over commission and bonus income tend to arise.

Are Commissions Included in Workers’ Compensation Wage Calculations?

Yes, commissions are generally included in the average weekly wage calculation when they represent actual earnings the worker received as part of their compensation for employment. North Carolina courts have consistently held that the average weekly wage should reflect the worker’s true earnings, not an artificially reduced figure that excludes a significant portion of how they were actually paid.

For a salesperson whose income is split between a modest base salary and substantial commissions, calculating the average weekly wage using only the base salary would dramatically understate their actual earnings and, correspondingly, their workers’ compensation benefits. The 52-week method captures commission income because it looks at total earnings over the relevant period, which naturally includes commission payments received during that time.

The practical challenge with commission income is volatility. A worker whose commissions vary significantly from month to month, or whose income includes a large one-time commission from an unusually large sale, presents a calculation problem. The 52-week average smooths out this volatility by looking at the full year, but it can still produce results that either overstate or understate the worker’s typical earning pattern depending on timing.

Do You Pay Workers’ Comp on Bonuses?

This is really two separate questions: whether bonus income is included in the average weekly wage calculation, and whether the employer’s workers’ compensation insurance premium is calculated using bonus payments. For the purposes of calculating an injured worker’s benefits, bonuses that are part of regular compensation, rather than purely discretionary gifts unrelated to job performance, are generally included in the average weekly wage.

The distinction that matters legally is whether the bonus is tied to the employment relationship and represents compensation for work performed, versus a true gift with no connection to job performance or tenure. A year-end performance bonus, a production bonus tied to meeting specific targets, and a signing bonus paid as compensation for accepting employment are all generally treated as wages for average weekly wage purposes. A genuinely discretionary holiday gift unconnected to performance presents a closer question, though North Carolina courts have tended to construe the definition of wages broadly in favor of including compensation-related payments.

Types of Variable Compensation and How They Are Typically Treated

• Sales commissions: generally included as part of average weekly wage
• Performance bonuses tied to metrics or targets: generally included
• Signing bonuses: generally included if connected to the employment relationship
• Overtime pay: generally included, since it reflects actual hours worked and compensation received
• Tips: includable, though documentation can be more challenging without formal employer records
• Per diem and expense reimbursements: generally excluded, since these represent reimbursement for costs rather than compensation for labor
• Employer-provided benefits like health insurance: generally excluded from the wage calculation

The average weekly wage calculation is intended to be comprehensive of a worker’s actual compensation, and disputes over what should or should not be included are common enough that they represent one of the more frequently litigated procedural issues in North Carolina workers’ compensation claims.

Why Accurate Wage Calculations Matter So Much

A small error in the average weekly wage calculation compounds significantly over the life of a claim. Consider a worker earning a $600 weekly base salary plus an average of $400 per week in commissions, for a true average weekly wage of $1,000. If the insurer calculates benefits using only the base salary, the worker’s temporary total disability rate would be calculated on $600 instead of $1,000, producing a weekly benefit of $400 instead of $667, a difference of $267 per week.

Over a claim lasting six months, that miscalculation costs the worker more than $6,900 in underpaid benefits. Over a claim involving permanent disability, where the average weekly wage also factors into the calculation of permanent partial disability payments, the cumulative effect of an inaccurate wage figure can be substantial.

Here’s something worth knowing: insurers do not always calculate the average weekly wage correctly on the first attempt, and they are not necessarily incentivized to use the method most favorable to the worker when multiple methods could reasonably apply. A worker who accepts the insurer’s initial wage calculation without independent review may be accepting a lower benefit rate than the law actually requires. Requesting the documentation behind the wage calculation, and having it reviewed, is a reasonable and often financially significant step.

Disputing an Incorrect Average Weekly Wage Calculation

If a worker believes their average weekly wage has been calculated incorrectly, North Carolina law provides a process for challenging it. The worker can request a hearing before the Industrial Commission, presenting evidence of their actual earnings, including pay stubs, tax records, commission statements, and employer payroll records, to establish the correct figure.

Timing matters in these disputes. Challenging an incorrect wage calculation early in a claim is generally more efficient than waiting until significant benefits have already been paid at an incorrect rate, though corrections and back payments can still be pursued later in the process when an error is identified after the fact.

Getting the Number Right From the Start

The average weekly wage is not a minor administrative detail in a workers’ compensation claim. It is the figure that everything else is built on. A worker whose compensation includes commissions, bonuses, or substantial overtime has a meaningfully different earning picture than their base salary alone suggests, and North Carolina law is designed to capture that fuller picture rather than rely on a number that understates actual income.

Workers going through this process for the first time often assume the wage calculation is a straightforward administrative step that does not warrant scrutiny. In practice, it is one of the most consequential numbers in the entire claim, and errors, though more commonly in the direction of understating wages, can persist throughout the life of a claim if they are not caught and corrected.

For workers in the Charlotte area whose income includes commissions, bonuses, or significant overtime, reviewing the average weekly wage figure used in your claim is worth doing with a workers’ compensation attorney who understands how the statute’s five calculation methods apply to variable income. Our team can review payroll records and identify whether the figure being used reflects your actual earning history.