At minimum, employers must pay 80% of an employee's gross earnings for their first week off work. This payment is to compensate the employee for lost earnings, and is based on the gross earnings that were earned in the 7 days before the date of incapacity.

Step 1: Determine gross earnings

'Gross earnings' for the purposes of ACC includes all earnings that are subject to PAYE:

Ordinary time.
Overtime.
Taxable allowances.
Taxable bonuses.
Income from other employment.

The following are not included:

Parental leave payments.
Student allowances.
Share-purchase benefits.
Dividends.
Redundancy payments.
Retiring allowances.
Schedular payments.
Income-tested payments.
Veterans' pension.
NZ superannuation.
Other pension.

Step 2: Calculate the compensation payment

Using the above as a guide, find out the employee's 'pre-injury earnings'. This is the gross earnings in the 7 days immediately prior to the date of injury, not including the date of injury itself.

Examples

80% of lost earnings in the first week will not necessarily be the same as 80% of the total earnings from the 7 days before the date of the employee's injury. For example, if the injury meant the employee was unable to work for 2 or 3 days, and they could work the remainder of the week, at least a portion of their income would have been earned in the previous week.

Example 1

Roberta has an accidental injury at work late on a Thursday afternoon and continues working until the end of her shift. The next day (Friday) the injury is worse, so Roberta visits her doctor. She receives a medical certificate stating that she is unfit for work for 14 days starting immediately (from Friday).

Roberta will be entitled to first-week compensation for the following days:

WEEKDAY	DAY	TREATMENT
Friday	1	Absent due to injury on the day that incapacity began.
Saturday	2	Not a working day.
Sunday	3	Not a working day.
Monday	4	Absent due to injury.
Tuesday	5	Absent due to injury.
Wednesday	6	Absent due to injury.
Thursday	7	Absent due to injury.

Roberta earned $1,000 in the 7 days before the Friday on which she was unable to work so her employer must pay her 80% ($800) for the first week. From Friday (day 8) ACC will start making weekly payments to Roberta.

Example 2

Ihaia has an accidental injury at work late on a Monday afternoon and continues working until the end of his shift. The next day (Tuesday) the injury is worse, so Ihaia visits his doctor. He receives a medical certificate stating that he is unfit for work for 4 days starting immediately (from Tuesday). Ihaia returns to work on the following Monday, but is again absent due to the injury on the following day (Tuesday).

Ihaia will be entitled to first-week compensation for the following days:

WEEKDAY	DAY	TREATMENT
Tuesday	1	Absent due to injury on the day that incapacity began.
Wednesday	2	Absent due to injury.
Thursday	3	Absent due to injury.
Friday	4	Absent due to injury.
Saturday	5	Not a working day.
Sunday	6	Not a working day.
Monday	7	Worked.
Tuesday	8	Absent due to injury. ACC pays compensation for lost earnings due to the injury.

Ihaia earned $1,000 in the 7 days before the Tuesday on which he was unable to work. He was absent due to injury for 4 working days during the first week. Ihaia receives his normal pay ($200) for the day he worked during the first week following his incapacity. His lost earnings are therefore $800 ($1,000 minus $200), and his employer must pay him 80% of these lost earnings ($640).

When Ihaia is absent due to injury after the first week following his first day of incapacity, ACC (not his employer) will pay him 80% of lost earnings, provided he has supplied a medical certificate to ACC stating that he is unfit for work due to the injury that caused his incapacity the previous week.

Calculating & paying compensation payments

Table of contents

What kind of injury?