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Workers Compensation Payments Policy

All North Carolina State Government employees are covered under the North Carolina Workers' Compensation Act. This act provides for benefits in case of accident or injury while on the job. Generally, amounts received under a worker's compensation plan are not subject to inclusion in the employee's gross income for income and social security tax purposes.

Under the State's workmen's compensation policy an employee receives medical benefits and a weekly benefit equal to 66 2/3% of the employee's average weekly earnings up to a maximum established by the Industrial Commission each year. In addition, after the employee has gone on worker's compensation leave, the weekly benefit may be supplemented by the use of partially earned sick or vacation leave in accordance with a schedule published by the Office of State Personnel each year.

IRS Code Section 104(a)(1) excludes from gross income amounts which are received by an employee under a workers compensation act, or under a statute in the nature of a workers compensation act which provides compensation to employees for personal injuries or sickness incurred in the course of employment. This section also applies to compensation which is paid under a workers compensation act to the survivor or survivors of a deceased employee. This section does not apply to a retirement pension or annuity to the extent that it is determined by reference to the employees age or length of service, or the employees prior contribution, even though the employee's retirement is occasioned by an occupational injury or sickness nor to amounts received as compensation for an occupational injury or sickness to the extent that they are in excess of the amount provided in the applicable worker's compensation act.

There is no tax consequence to the recipient or reporting responsibility to the payer for amounts received under the State's worker's compensation plan, supplemental amounts received from earned leave or compensatory time is subject to State and Federal Tax Withholding and Social Security. In addition, sick and vacation leave taken during the waiting period required by G.S 97-28 are subject to all regular withholdings.