How to Calculate Loss of Earnings for a Personal Injury Claim?

Besides causing a lot of pain and suffering, an injury or illness can leave you unable to work for weeks, months or even years. If the harm was caused by someone else’s negligence, you could be entitled to make a personal injury claim.

This guide will explain how to calculate loss of earnings in personal injury claims, what you could include in your claim and answer other frequently asked questions about the claims process.

Our team of friendly legal advisers are also here to answer any further questions you may have and offer you a free case assessment. To discuss your claim, please call 0800 470 0474 today or use our contact form to request a call back.

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Table of Contents

• What is loss of earnings?
• What can be included in a claim for loss of earnings?
• How do I know if I have a valid personal injury claim?
• What is the standard approach to calculating loss of earnings?
  • The Multiplicand
  • The Multiplier
• Are there other approaches?
• What if I am self-employed?
• What evidence do I need to support my claim?
• What happens if I receive sick pay?
• Can I also claim state benefits?
• What else could be included in a personal injury compensation claim?
• How much could my claim be worth?
• Can a wrongful death claim include loss of earnings?
• What is the time limit for making a loss of earnings claim?
• How much will my claim cost?

What is loss of earnings?

In a personal injury claim, loss of earnings is part of the compensation awarded for financial losses and expenses, known as special damages. Besides lost earnings, this can also include private medical treatments, travel expenses, care costs, medical aids or home adaptations.

In case of catastrophic injuries, such as brain damage, spinal cord injuries or amputations, loss of earnings can be the most substantial part of a compensation payment.

Loss of earnings is typically broken down into two main categories:

• Past loss of earnings – This covers the income you have missed out on from the date of the injury up to the date your claim is settled or goes to trial because of time off work during recovery.
• Future loss of earnings – This part of the compensation covers the income you are expected to lose if your injury affects your ability to work long-term. This could involve reduced working hours, a lower-paying role or total loss of earning capacity.

What can be included in a claim for loss of earnings?

A claim for loss of earnings aims to compensate you for all past and future income losses that result from your inability to work due to injury or illness. This could include:

• The net pay you missed because you were unable to work or worked reduced hours
• Loss of overtime pay if you regularly worked overtime before your injury
• Lost bonuses or commissions that you would have earned had you not been injured
• Loss of tips and employment benefits, such as car allowance, health insurance or housing allowance
• Lost holiday days or sick days if you used them to recover from your injury
• Loss of contributions to your pension scheme
• Lost promotions or career advancements
• Lost profits, contracts and business opportunities if you are self-employed
• Any other lost opportunities and benefits that you have missed out on due to your injury

Your solicitor will carefully assess both your past and future losses in order to calculate a compensation amount that accurately reflects your full loss of earnings.

How do I know if I have a valid personal injury claim?

If you suffer an injury or illness, it is often difficult to know whether another party may be responsible for it. The easiest way to determine this is through a free consultation with an expert personal injury solicitor. They will investigate your case and determine whether:

• Someone else (the defendant) owed you a legal duty of care
• They breached this duty and caused an accident or hazardous conditions
• Your injury or illness is a direct result of their negligence
• You are within the legal time limit to make a claim, which is usually three years

If all these apply to your case, you will likely be able to proceed with a personal injury claim for loss of earnings compensation.

It is essential to remember that you can proceed with a claim whether you are a full-time employee, a contractor, an agency worker, a temporary worker, or on a zero-hours contract.

What is the standard approach to calculating loss of earnings?

Calculating past loss of earnings in a claim is generally straightforward and involves the following steps:

• Determine the exact period you were unable to work due to the injury (in days, weeks, or months).
• Calculate your average monthly net income before the injury, including bonuses, overtime, and other earnings – this will typically be done by using the payslips and tax returns from the three months before the accident.
• Multiply your daily net income by the number of days you were unable to work to calculate your past financial losses.
• Deduct any income received during your time off, such as Statutory Sick Pay or partial wages.

Calculating future loss of earnings is the more complex part of the claim. The standard approach relies on the Multiplier-Multiplicand method and the Ogden Tables.

The Multiplicand

This is the estimated annual net financial loss from the date of settlement onwards. Several factors are considered to calculate it:

• Your pre-injury earnings
• Expected wage growth or career progression
• Future employment benefits like bonuses and pension contributions
• Your current or post-injury earnings (if any)

The difference between what you would have earned without the injury and what you now earn is the annual Multiplicand.

The Multiplier

The Multiplier is a figure that reflects the number of years over which you are likely to suffer lost earnings because of your injury. It is calculated by using the Ogden Tables, which take into account factors such as:

• Your age and life expectancy
• Your expected working life (usually until retirement)
• The discount rate, which accounts for the interest you could earn on a lump-sum payment
• Your health and risk factors
• Employment risks, such as job security and the risk of redundancy

Your compensation for future loss of earnings will be:

Future loss = Multiplicand × Multiplier.

The Multiplicand-Multiplier method works relatively well in the case of an adult who had steady earnings before the injury and a clear career path.

However, things are much more complex if the claimant is a child with permanent disabilities or someone with an inconsistent work history. In such cases, calculating future loss of earnings for personal injury may need input from various specialists, such as:

• Forensic accountants
• Employment experts
• Medical and vocational specialists

Are there other approaches?

In some cases, the Multiplier × Multiplicand method may not be suitable for calculating future loss of earnings. In such cases, the claimant may be awarded a Smith award, a Blamire award or a combination of both.

A Blamire award is a lump-sum payment granted when it is too tricky or speculative to calculate future loss of earnings using the standard approach. It may apply when:

• The claimant is very young or has no employment history
• Their work history is inconsistent
• Their future career path is uncertain
• There is insufficient evidence to make a reliable financial projection

A Smith award is given when the claimant is still able to work but is now at a disadvantage in the labour market due to their injury. This might include situations where:

• It is harder for them to compete for jobs or maintain employment
• They are currently employed or employable but face reduced opportunities
• They may lose their job and struggle to find new employment

Your solicitor will assess your unique circumstances and determine which approach is the most appropriate. Their goal will be to secure the maximum level of compensation for your lost earnings, as well as for the injury or injuries you suffered.

What if I am self-employed?

It is still very much possible to seek compensation for your lost wages even if you are self-employed. The key is providing solid evidence of your usual income and how the injury affected your ability to earn. Generally, you can do this by providing:

• Tax returns, preferably for at least the last three years (copies of SA302 forms)
• Business accounts that show your profits and losses
• Proof of future scheduled work
• Invoices and bank statements showing regular income
• Evidence of cancelled work or lost contracts
• Proof of ongoing or recurring contracts
• Statements from your accountant, clients or suppliers
• Your work diary or appointment book

Your solicitor may also consult a forensic accountant to calculate average earnings and determine a fair amount for your claim.

What evidence do I need to support my claim?

The evidence you need to claim compensation for lost earnings includes:

• Your employment contracts
• Wage slips that show your earnings for at least three months before the accident
• Payslips received during your period of absence
• Bank statements
• Tax returns
• Any other financial documents

Besides this, you also need to be able to prove the injuries you suffered, who was at fault for them and all the ways in which they affected your life. For this, you might use:

• Photos of the accident scene and your injuries
• CCTV or dash cam footage, if available
• Accident report forms
• Police reports
• Medical records and expert testimony
• Witness statements
• A diary of symptoms
• Financial documents for out-of-pocket expenses

What happens if I receive sick pay?

A general rule of thumb in personal injury claims is that you can’t be compensated twice for the same losses. For this reason, if you received Statutory Sick Pay (SSP) during recovery, this will be taken into account when calculating how much you are owed. For example:

• If your employer paid your full wages during this time, you typically won’t be able to claim lost earnings.
• If you only received statutory sick pay, you could claim the difference between your usual net earnings and what you have already received.
• If you stopped receiving SSP or took unpaid leave, you can claim the full amount of lost earnings during that time.

Can I also claim state benefits?

Yes, if you are eligible, you can also claim state benefits (such as ESA, PIP, IIDB or Universal Credit), even if you are making a claim for loss of earnings.

However, it is important to understand that any compensation award over £6,000 will affect the means-tested benefits you could receive. If you receive compensation over £16,000, you may entirely lose your eligibility for benefits.

That said, there is a way to protect both your compensation and your benefits. Your solicitor can help you set up a personal injury trust, which allows your settlement to be ring-fenced so that it is not considered when testing for benefits.

What else could be included in a personal injury compensation claim?

Besides lost wages caused by the inability to return to work after an injury, you could claim various other financial losses and expenses, such as:

• Short and long-term medical expenses
• Travel expenses to and from medical appointments
• Counselling and physical therapy
• The cost of repairing or replacing damaged property
• Care and assistance during recovery or long-term
• Home or vehicle adaptations to accommodate a disability

On top of special damages, you can also claim general damages. This compensates for the subjective losses caused by the accident, such as pain, suffering and loss of amenity. It is based on the type and severity of the injury or illness you suffered.

How much could my claim be worth?

The value of a claim for loss of income can vary significantly from person to person. There is no fixed amount, as the compensation is designed to reflect the actual financial losses you have suffered, both past and future.

Your past losses will be calculated based on the actual income lost while you were off work. For example, if you were off work for six months and your net earnings are £2,500 per month, you could claim £15,000 (minus any sick pay you may have received during recovery).

Besides loss of earnings, your claim can include other special damages, such as prescriptions and care costs. These will be added up from receipts and invoices and included in your compensation award.

The amount you could receive for general damages is calculated based on the guidelines from the Judicial College. According to our compensation calculator, this could range from £240 for minor whiplash to £493,000 for a very severe brain injury.

Can a wrongful death claim include loss of earnings?

If you lost a loved one due to someone else’s negligence, you may be able to make a wrongful death claim under the Fatal Accidents Act 1976. A significant part of a dependency claim typically relates to the loss of financial support the deceased would have provided.

As with other claims for lost earnings, a loss of financial dependency claim can include the loss of net income, pension contributions, bonuses, healthcare benefits and any other form of economic support.

The amount of compensation a dependant may receive is calculated based on the deceased’s estimated future earnings, their age, and the length of time the dependant would have relied on their financial support.

A separate claim can be made under the Law Reform (Miscellaneous Provisions) Act 1934 for the lost earnings the deceased incurred between the date of injury and their death.

What is the time limit for making a loss of earnings claim?

If you were injured in an accident at work or elsewhere, you typically have three years to start a claim under the Limitation Act 1980. A few exceptions apply:

• If an injury or illness develops gradually, the three-year time limit starts from the date it is first diagnosed and linked to negligence (the date of knowledge).
• If you were under 18 at the time of injury, the three-year period only begins to run from your 18th birthday.
• The time limit is suspended if you cannot handle legal proceedings due to an injury or condition affecting your mental ability.
• You can start a claim through the CICA within two years after a criminal assault.

How much will my claim cost?

If you have grounds to make a claim, your solicitor will represent you on a no win no fee basis. That means there will be no fees to pay upfront or if your claim fails.

Under this agreement, your solicitor is only entitled to a success fee if you make a successful personal injury claim. This fee is agreed upon from the beginning and will be deducted from your compensation award. The success fee is capped at 25% of general damages and past financial losses.

To find out if you can claim compensation for loss of earnings and other damages suffered because of an injury, call 0800 470 0474 today for a free case assessment. Alternatively, use our online claim form to request a call back.

Last edited on 1st Jul 2025

With over 15 years’ experience in the legal sector, Nicholas Tate (LLB Hons, LLM in Health Law) has extensive experience across all areas of personal injury and medical negligence claims.