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When pursuing a personal injury compensation claim, one of the most significant elements of financial recovery is loss of earnings. This is particularly relevant for those who have had to take time off work—whether employed or self-employed—due to injuries sustained in an accident caused by another party’s negligence. The article provides a detailed explanation of how loss of earnings compensation is assessed, the evidence required to support a claim, and the types of additional financial losses that may be included.

Key Areas of Compensation

1. Loss of Earnings: Net Income Recovery

The primary claim following an injury-related absence is for loss of net wages—income after deductions for tax, National Insurance, and pension contributions. This applies to both employed and self-employed individuals, provided the loss is supported by evidence.

• For employed claimants, this usually means producing payslips for the three months prior to the accident. In cases where earnings fluctuate, up to 12 months of payslips may be requested.
• For self-employed claimants, HMRC tax returns, profit and loss accounts, and customer receipts are necessary to establish historical income and the impact of the injury on their ability to work.

2. Loss of Overtime and Bonuses

Loss of earnings isn’t limited to base salary. Claimants may also seek compensation for:

• Missed overtime pay, especially where overtime was regular or expected.
• Bonuses—including discretionary ones—if they were performance or attendance-based and the injury caused ineligibility.
• Seasonal or irregular pay increases, such as Christmas bonuses or productivity-linked earnings.

3. Missed Promotions

In some circumstances, an injury may result in the loss of a promotional opportunity. If a claimant was a strong candidate for a promotion, they could not pursue due to their absence, and if the promotion would have led to a higher salary, they may be entitled to compensation for that difference.

Sick Pay Considerations

Claimants often ask whether they can recover sick pay. The answer is nuanced:

• Statutory Sick Pay (SSP) and contractual sick pay received during time off will generally be deducted from the final compensation award, as they are considered income already received.
• The deduction ensures that claimants are compensated only for actual loss, avoiding duplication of payments.

Future Loss of Earnings

In more serious cases, a claimant may be entitled to compensation for future loss of earnings, especially if they:

• Have been medically deemed unfit to return to their pre-accident job.
• Can return to work but in a reduced capacity (e.g. fewer hours, lighter duties).
• Face early retirement or career change due to physical limitations.

Compensation for future losses is calculated based on:

• Projected earnings up to retirement age.
• Expert medical and occupational evidence.
• Adjustments for the claimant’s reduced employability.

For example, a disabled individual earning 20–40% less post-accident may receive substantial compensation covering decades of lost income.

Disadvantage in the Labour Market

If a claimant is not fully disabled but has a visible or functional impairment (e.g. a lost eye, restricted mobility), they may be less competitive in the job market.

This is recognised through a Smith v Manchester Award, also known as a disadvantage in the labour market award. This compensates for:

• Future job search difficulty.
• Decreased likelihood of securing equivalent employment.

The typical award is equivalent to three to four years’ worth of net earnings, reflecting the claimant’s reduced prospects over time.

Required Documentation

To support a claim for loss of earnings, solicitors require clear and comprehensive documentation, including:

• Payslips (3–12 months pre-accident).
• Tax returns and HMRC records for self-employed claimants.
• Employment contracts.
• Sick pay records (both statutory and contractual).
• Medical reports confirming the duration and impact of injury.
• Occupational assessments for long-term capacity evaluations.

Claimants are also advised to maintain a detailed log of all absences, even for part-days related to medical appointments or treatments.

Compensation for loss of earnings is a critical part of personal injury claims, often accounting for a large proportion of the total settlement. Ensuring that all income streams are properly documented and evidenced is essential.

Key points:

• Losses must be proven with formal evidence.
• Compensation may cover past, present, and future earnings.
• Claimants may be entitled to additional awards for missed bonuses, promotion prospects, and reduced employability.
• Always consult a qualified personal injury solicitor early in the process.

If you have suffered an injury and are unsure of what you can claim, contact IMD Solicitors to review your case. With the correct legal support, you can ensure that your financial losses are accurately assessed and fully recovered.

This article guide is for general information only and does not constitute legal or professional advice. This article was created on 28/07/2025. Please note that the law may have changed since this article was published.

Call us now to discuss your case 0330 107 0107 or email us at info@imd.co.uk.