Last updated on November 20th, 2021 at 08:46 am
When seeking compensation for injuries received as a consequence of negligence by one or more third parties, compensation tends to be split into two different sections, general and special damages. In this article we will be looking at special damages which relate to loss of income and future loss of income. In some circumstances there can be a crossover between general and special damages with regards to loss of earnings. However, on the whole loss of earnings tends to be covered by special damages.
The best way to define special damages is actual out-of-pocket expenses/income both current and going forward. In theory these can take in medical expenses, transportation expenses and very often some of the largest compensation claims revolve around loss of income and loss of earning capacity going forward. We’ll now cover the various aspects of loss of income and how this might impact any compensation award.
Many people fall into the trap of assuming that compensation for lost earnings, as opposed to future loss of earnings, simply relates to actual income lost. We will look at two different scenarios, one where the claimant is able to return to work and another where they are unable to return to their previous employment. The potential compensation claims for these two scenarios can vary widely for a number of reasons.
Eventual return to work
While the majority of personal injury compensation claims revolve around injuries which allow the claimant to return to work, the timescale can vary widely. So, for those eventually returning to work the various elements of compensation applicable can include:-
Loss of basic income
If for example you earned a net £2000 a month and you were forced to take five months off work as a consequence of injuries received, then your lost income would be £10,000. This would be the net income assuming that all taxes had been paid and using terms dictated in the claimant’s contract of employment. However, this might be just the tip of the iceberg when it comes to compensation.
Loss of overtime income
While it will vary from industry to industry, many businesses will offer a degree of overtime to their employees on a regular basis. As a consequence, if you can prove that over a relatively recent period of time your average overtime income was £200 a month, then potentially over a five-month period that would be an extra £1000. It is starting to add up already!
Loss of pension income
It will depend upon the specifics of the claimant’s terms of employment but there may be a situation where pension contributions are impacted while not able to work. As a consequence, if it can be proven that the claimant was left out of pocket with regards to pension contributions/future pension income then this would certainly come into the realm of loss of earnings compensation.
Standard employment contracts of today will include an array of public and discretionary holidays for each employee. It stands to reason, if you are forced to use your holiday days as a consequence of your injuries then you should be compensated. The level of compensation will depend upon the period of absence and the rate of pay at the time.
All employment contracts will identify how salaries are paid when employees are off sick. For example, some may pay full wages for the first six weeks then half pay for a period and thereafter a gradual reduction. If the income of the claimant is impacted in any way by the way in which their employer treats sick days, then quite simply they should be reimbursed to a no loss situation.
Lost perks and benefits
While not necessarily commonplace, some companies offer a range of perks to their employees such as for example discounts with retail stores. If the claimant is unable to fully utilise these perks, as they may have done in years gone by, then there is an argument for further compensation. In reality it should be fairly easy to demonstrate the use of employment perks when calculating financial loss.
It will depend upon the type of employment which the claimant holds/held but many companies offer financial perks in the shape of commissions/bonuses. Obviously, if the employee is unable to fulfil their duties for a period of time and falls short of commission/bonus benchmarks, there could be a sizeable loss of earnings. Therefore, it will come as no surprise to learn that this would also be considered in the overall compensation claim.
The situation regarding claimants who are self-employed and unable to work for a period of time is a little more complicated. It should be fairly easy to calculate the average loss of earnings over a period of time when the claimant was unable to work. The potential damage to their business and reputation going forward, as a consequence of not been able to fulfil existing and potential future contracts, is not so easy to calculate. It is advisable to use the services of an accountant to arrive at a “fair and honest” figure.
So, the situation is complicated enough when it comes to those who will eventually return to work but what of those who are not able to return?
Claimants unable to return to work
Unfortunately, we come across many situations where those pursuing personal injury claims are unable to return to work. This could be a consequence of physical or mental injuries which are covered in general damages. You will no doubt have read about some huge personal injury compensation payments in the past. Many of these will involve claimants who were unable to return to work in any shape or form.
Aside from the issues covered above, there are other factors to take into consideration which can lead to significant compensation payments.
Future loss of earnings
The first thing to say with future loss of earnings is that these are only applicable if the claimant is physically/mentally unable to return to work. If for some reason they were to choose not to return then this is a whole different scenario and not one which would lead to additional compensation. However, future loss of earnings might include:-
Loss of income over standard/industry working life
If the claimant had for example 20 years to go until they would have retired from their employment then this period would be reflected in future loss of earnings. It should also be possible to claim for standard salary inflation over the period which may be for example 2%. So for somebody earning £20,000 a year, year one would see a loss of £20,000, year two a loss of £20,400 (previous year +2%) and year three a loss of £20,808 (previous year +2%). This would be replicated for the 20 year period which the claimant could have reasonably expected to remain in employment.
Loss of potential earnings
It is fairly easy to calculate the loss of standard future earnings but there will be scenarios where it is reasonable to take into account loss of additional potential earnings. The best way to demonstrate this principle is to highlight an actual case. In 2008 former Manchester United youth player Ben Collet was the victim of a tackle which quite literally ended his career. He successfully proved negligence and was awarded £4.3 million for loss of potential earnings.
In this case it is important to note that this figure was as much a reflection of his potential as it was his income at the time. Youth players tend to be on relatively low wages, at least within the football industry, even if they have significant potential. On the flipside of the coin, former Chelsea defender Paul Elliott was injured in a tackle with Liverpool’s Dean Saunders in 1992 and forced to retire at the age of 30. He pursued a claim for damages against Dean Saunders but ultimately this claim was unsuccessful and no award was made.
Loss of self-employed earnings
As we touched on above, the situation with regards to a self-employed claimant who is unable to return to work is very different. While ultimately impossible to predict with any great confidence what they may or may not have done in the future, the past can often be a basis for future assumptions. Aside from loss of earnings, there would be loss of reputation, loss of business value and ultimately an inability to pass the business on to their children.
As with a short-term interruption in self-employed earnings, where the claimant is unable to return to work it is important to take professional advice. As the claimants accountant should be well aware of their historic earnings and potential for the future, their input could prove pivotal in court.
When considering loss of earnings as a consequence of time off work, many people automatically assume this will just take in loss of basic salary. The reality is that there are many other factors to take into consideration which can significantly increase any compensation award.
It may seem as though the courts are on the side of the claimant but this is not necessarily the case. All judgements will be based on the facts and professional evidence as opposed to the often emotive side of life changing injuries. This is where there is often friction between assumed moral liabilities and actual legal liabilities. However, if you are able to backup your compensation claim for loss of earnings the courts will certainly consider this.