In Michigan, a workers’ comp settlement — legally called a redemption — is calculated by converting your weekly wage-loss rate into an annual figure, multiplying it by an estimated number of future years, and adding estimated future medical costs. There is no fixed formula; the final number is negotiated based on several core factors. Understanding how a workers’ comp settlement is calculated in Michigan helps injured employees know what to expect before entering negotiations.
- Average weekly wage (AWW): The first step in how a workers’ comp settlement is calculated is your AWW, using your highest-earning 39 weeks out of the 52 weeks before your injury, divided by 39, under MCL 418.371. This includes overtime and bonuses.
- Weekly benefit rate: Equal to 80% of your after-tax average weekly wage under MCL 418.313, subject to an annual statewide maximum.
- Annualized wage-loss exposure: Weekly benefit rate × 52 = annual exposure. Insurers then estimate 1 to 5+ years of future benefits depending on injury severity, return-to-work prospects, and how many working years remain before retirement.
- Future medical expenses: Estimated cost of anticipated surgery, physical therapy, prescriptions, and long-term care related to the injury.
- Permanent disability: A permanent injury increases redemption value beyond the basic wage-loss and medical formula.
- Return-to-work capacity: Employees unable to return to any job typically see higher redemption value than those able to transition to lighter work.
- No pain and suffering: Unlike a personal injury lawsuit, redemptions never include compensation for pain and suffering — only wage replacement, medical care, and vocational rehabilitation.
Formula To Calculate A Workers’ Comp Settlement
Step 1: Find the average weekly wage (AWW)
Total earnings from your highest-paid 39 weeks (of the 52 weeks before your injury) ÷ 39 = AWW (MCL 418.371)
Step 2: Find the weekly benefit rate
AWW × 80% (after-tax) = Weekly Benefit Rate (MCL 418.313), (subject to the state’s annual maximum weekly rate)
Step 3: Annualize and project future value
Weekly Benefit Rate × 52 = Annual Wage-Loss Exposure
Annual Wage-Loss Exposure × Estimated Future Years = Wage-Loss Redemption Value
Step 4: Add future medical costs
Wage-Loss Redemption Value + Estimated Future Medical Expenses = Total Redemption Value
Example calculation (using round numbers, not case-specific):
The following shows how a workers’ comp settlement is calculated in practice, using a sample weekly benefit rate of $600:
$600 × 52 = $31,200 annual wage-loss exposure
$31,200 × 3 estimated years = $93,600 wage-loss redemption value
Add $15,000 in estimated future medical costs = $108,600 total redemption estimate
What Is Maximum Medical Improvement (MMI), and Why Does It Matter for a Redemption?
MMI is the point at which a doctor determines an injury has stabilized and is unlikely to improve further. This matters for how a workers’ comp settlement is calculated, since it’s usually best to wait until MMI before settling — your doctor can then assess the full, permanent impact of the injury, rather than risk undervaluing future medical needs.
How Does A Redemption Work?
A redemption must be approved by a workers’ compensation magistrate, who will only approve it if it serves the purpose of the act, is just and proper, is in the injured employee’s best interests, and is voluntarily agreed to by all parties (MCL 418.836). This approval step only happens once a workers’ comp settlement is calculated and both sides have agreed on a number. Once approved, the redemption is final — you cannot reopen the claim later even if your condition worsens.
What Insurance Company Tactics Can Reduce a Redemption Amount?
Several insurance company tactics can distort how a workers’ comp settlement is calculated, reducing the final number below what you may actually be owed.
- Independent medical examinations (IMEs): Insurers can require an exam under MCL 418.385. Despite the name, these doctors are hired and paid by the insurance company and are frequently used to minimize future medical exposure.
- Post-injury wage earning capacity (PIWEC) assessments: Under MCL 418.301(8) and 418.401(6), insurers may argue you have wage-earning capacity you’re not exercising, using “phantom wages” from jobs you’re deemed capable of doing to offset your weekly benefit — even if no such job is actually secured.
What Happens If My Michigan Workers’ Comp Settlement Is Calculated Wrong?
Once a magistrate approves a redemption, there is generally a 15-day appeal period before payment is made. During this window, either side can challenge the redemption for a legal reason or other good cause — though this period can be waived if both sides agree. Outside that window, the redemption is final: once approved under MCL 418.835, the claim is closed, and it cannot be reopened later even if the injury worsens. This is exactly why the 15-day window matters, and why you should never accept a redemption figure without an independent legal review before signing.
If the dispute is about an underlying benefit calculation rather than the redemption itself — for example, an incorrect weekly wage-loss rate before redemption is even on the table — that’s addressed through the standard dispute process: filing an Application for Mediation or Hearing on Form WC-104, which assigns a magistrate to review the medical evidence and determine the correct payment.
How Much Are Attorney Fees on a Redemption?
- If benefits are disputed: 20% of the first $100,000 and 15% of the remainder of any redemption.
- If benefits are currently being paid: 15% of the redemption.
- If benefits are disputed and then later paid voluntarily, or won at trial: 30% of what is obtained or 30% of past-due benefits.
- All attorney fees are contingency-based — no fee is owed unless additional benefits are recovered.
Once your workers’ comp settlement is calculated, fees are assessed against the final redemption amount, not the initial estimate.
Available workers’ comp benefits
Access to medical care is one of the most important benefits under workers’ comp. It covers all related, reasonable, and necessary medical treatment. This includes items like attendant care, mileage reimbursement, and even vehicle or home modifications. Employees are permitted to select their own doctor after 28 days.
Vocational rehabilitation is an option when a return to work seems unlikely. It can help with education, retraining, and finding a new job.
Employees who are unable to work should get paid lost wages. The amount is based upon 80% of their after-tax average weekly wage. It includes money for overtime, discontinued fringe benefits, and even second jobs that cannot be performed anymore.
These benefits form the basis for how a workers’ comp settlement is calculated, since lost wages and medical costs are the two components negotiated into a lump sum.
Is A Redemption A Good Option For A Person On Workers’ Comp?
Many of our clients prefer to settle their workplace injury claim because it gives them freedom to do medical and vocational rehabilitation on their own terms. They don’t have to worry about the insurance company dragging its feet to approve something. Once a workers’ comp settlement is calculated, it also lets them cash out and find a new job without waiting on ongoing weekly checks. Even the fear of suddenly being cut off is a big motivator.
Injured while on-the-job in Michigan? Contact our lawyers now
If you were injured while on the job in Michigan and have questions about how your workers’ comp settlement is calculated, call now (855) 221-2667 or fill out our contact form for a free consultation. There is absolutely no cost or obligation. Our attorneys are here for you.
Our attorneys have been exclusively helping injured employees in the state for more than 40 years. Our attorneys can help you better understand Michigan work comp laws and what happens after someone has been hurt on the job.
To see what our own clients have to say about the caring, compassion, and communication they received from us, you can read in their own words about their experience here on our testimonials page from clients we have helped.
We never charges a fee to evaluate a potential case. Our law firm has represented injured and disabled employees exclusively for more than 40 years. Call (855) 221-2667 for a free consultation today.
Related information:
Average Workers’ Comp Settlement Amount in Michigan For 2025
