Understanding loss of earnings and career loss claims

If you have been injured because of someone else’s negligence, a key component of your compensation may be loss of earnings. This covers the income you have lost because your injury has prevented you from working—whether entirely, partially, temporarily or permanently.

A loss of earnings claim seeks to financially restore you to the position you would have been in if your injury had never happened. It typically includes:

• Past losses: Income you have already missed due to time off work up to the date your claim concludes.
• Future losses: Projected income you will miss going forward if you are unable to return to work or if your earning capacity is reduced.

Calculating Past Loss of Earnings

The basic formula to calculate your loss of earnings is:

“But For” Earnings – “Residual” Earnings = Loss of Earnings

What Are “But For” Earnings?

“But For” earnings represent the income you would have earned since the accident had you not sustained your injuries (or “but for” your injuries).  This is typically based on your earnings before the accident—usually assessed over 3 to 6 months prior.

To prove “but for” earnings, you will need evidence such as:

• Payslips
• Bank statements
• Tax returns or company accounts (for self-employed individuals)

These earnings are then projected over the period from your accident until you return to your pre-injury earning capacity or, if you have not recovered by the time your claim concludes, up to that date.

What Are “Residual” Earnings?

“Residual” earnings refer to any income you have earned since your accident despite your injuries. This could be zero if you have not been able to work at all, or it could be a reduced amount if you have returned to limited hours, lighter duties, or a different role.

Your reduced ability to work must be supported by expert medical evidence. Proof of “residual” earnings also requires the same documents as “but for” earnings (payslips, tax returns, etc.) for the post-accident period.

Calculating Future Loss of Earnings

If you have not returned to your pre-injury earning capacity when your claim concludes, you will also receive compensation for future loss of earnings.

The same “but for” vs “residual” earnings principle applies, but with adjustments using Ogden Tables. These actuarial guidelines account for factors such as:

• Inflation
• Interest rates
• Life expectancy
• Employment potential
• Disability or reduced work capacity

The Ogden Tables ensure the compensation reflects the fact that you are receiving money now for losses you will suffer in the future.

Career Loss Claims

If your injuries mean you will never be able to return to your pre-injury career, future loss of earnings calculations become more complex.

Establishing “But For” Earnings in Career Loss Claims

Simply projecting your pre-accident earnings forward may not reflect your true career potential, which could include promotions or pay increases. It is therefore important to build a realistic future career trajectory which is supported with evidence such as:

• Employment records including performance reviews and appraisals
• Witness statements from previous or existing colleagues about your performance and potential
• Expert reports from employment consultants (in complex cases)

Without strong evidence, defendant insurers or the court might reject claims for future promotions or opportunities as unrealistic. Sometimes, a “loss of chance” percentage deduction is applied to future earnings to reflect the uncertainty of achieving every promotion or pay rise.

Assessing “Residual” Earnings

Your working capacity as a result of your injuries must be carefully evaluated, with expert medical evidence playing a vital role. Even if you cannot return to your old career, you might still be able to work in a different role or industry. For example, if you have a long-term or permanent psychiatric injury, you may not ever be fit to return to your pre-accident career as, say, an investment banker, but you may eventually be fit to return to employment in a less stressful environment.

Determining the income from this “residual” earning capacity can be tricky, especially if it is outside your previous field. Useful resources include:

• ASHE (Annual Survey of Hours and Earnings)
• Compensation guides from recruitment companies
• Expert reports from employment consultants (in complex cases)

Using these, your “residual” earning trajectory is projected. The future loss is calculated by deducting “residual” earnings from your “but for” earnings, with adjustments via the Ogden Tables.

Why Legal Support Matters

As you can see, loss of earnings and career loss claims can become highly complex. Gathering the right evidence, working with medical and employment experts, and performing the detailed calculations require specialist knowledge.

A solicitor can guide you through this process, ensuring your claim fully reflects your losses and potential future income.