Lost Wages Calculation in Personal Injury Cases: Complete Guide

Lost wages and lost earning capacity often represent a significant portion of a personal injury settlement. Whether you missed a few weeks of work or face permanent career changes, understanding how to calculate and document income losses ensures you receive full compensation.

Types of Income Losses

Past Lost Wages

Income you've already lost due to your injury:

• Regular wages or salary
• Overtime pay you would have earned
• Bonuses and commissions missed
• Vacation and sick time used for recovery
• Tips and gratuities (for service workers)
• Employer-provided benefits lost during absence

Future Lost Wages

Income you'll lose during continued recovery:

• Wages during remaining treatment period
• Part-time income if you can't return full-time immediately
• Reduced hours during rehabilitation

Lost Earning Capacity

Long-term or permanent reduction in ability to earn:

• Inability to return to previous job
• Career change to lower-paying work
• Reduced promotion potential
• Early retirement due to disability
• Permanent disability affecting any employment

Calculating Past Lost Wages

For Salaried Employees

Formula: Annual Salary ÷ 52 weeks ÷ 5 days = Daily Rate

Multiply daily rate by work days missed.

Example:

• Annual salary: $78,000
• Weekly rate: $78,000 ÷ 52 = $1,500
• Daily rate: $1,500 ÷ 5 = $300
• Days missed: 45
• Lost wages: $300 × 45 = $13,500

For Hourly Employees

Formula: Hourly Rate × Average Weekly Hours × Weeks Missed

Example:

• Hourly rate: $22
• Average weekly hours: 40
• Weeks missed: 8
• Lost wages: $22 × 40 × 8 = $7,040

Include overtime if you regularly worked extra hours. Document your typical overtime with pay stubs.

For Commission-Based Workers

Calculate average earnings over a reasonable period (usually 12 months) to establish your typical income.

Example:

• Previous 12 months earnings: $96,000
• Monthly average: $8,000
• Months missed: 3
• Lost wages: $8,000 × 3 = $24,000

For Self-Employed Individuals

Self-employment income is harder to calculate but absolutely claimable. Use:

• Tax returns (most reliable)
• Profit and loss statements
• Contracts or invoices from the period
• Client correspondence showing lost opportunities

You may need an accountant's statement to establish typical earnings.

Vacation and Sick Time

If you used paid leave for your injury, you can still claim it:

• Calculate the monetary value of used PTO
• You would have had this time for other purposes
• Document the value based on your pay rate

Calculating Future Lost Earning Capacity

This is more complex and often requires expert testimony for significant claims.

Factors Considered

• Age: How many working years remain?
• Education and skills: What alternatives exist?
• Pre-injury earnings: Established baseline
• Career trajectory: Expected promotions and raises
• Physical limitations: What can you still do?
• Job availability: What positions are realistic?

Simple Calculation Example

Scenario: Construction worker (age 45) can no longer do physical labor due to back injury. Must transition to office work.

• Previous annual income: $75,000
• Expected income in new career: $45,000
• Annual loss: $30,000
• Working years remaining: 20
• Simple calculation: $30,000 × 20 = $600,000

Note: Actual calculations use "present value" formulas that account for inflation and interest rates. An economist can provide proper calculations for significant claims.

When You Need Expert Testimony

For substantial lost earning capacity claims, you may need:

• Vocational expert: Assesses your ability to work and available jobs
• Economist: Calculates present value of future losses
• Medical expert: Documents your permanent restrictions

Documentation Requirements

Essential Documents

• Pay stubs: From before and after the accident (3-6 months minimum)
• Tax returns: 2-3 years for income history
• W-2s or 1099s: Annual income verification
• Employer letter: Confirming dates of absence and your position/salary
• Doctor's note: Stating you couldn't work and for how long

For Bonuses and Commissions

• Records of past bonuses received
• Commission structure documentation
• Sales records or performance metrics
• Employer statement on bonus eligibility

For Self-Employment

• Complete tax returns with Schedule C
• Bank statements showing deposits
• Contracts and invoices
• Client communications about cancelled work
• Accountant statement on average income

Special Situations

Unemployed at Time of Accident

You may still have a lost wage claim if you can prove:

• You were actively seeking employment
• You had job offers or interviews
• You had a history of employment
• You were starting a new job soon

Stay-at-Home Parents

While you didn't earn wages, your household services have value:

• Childcare costs if you can't care for children
• Housekeeping costs for tasks you can't perform
• Calculate based on what hiring these services would cost

Students

If the injury delays graduation or career entry:

• Additional tuition and education costs
• Delayed entry into workforce
• Lost summer internships or part-time work

Seasonal Workers

If you work seasonally (landscaping, tourism, etc.):

• Calculate annual income based on full seasons
• Document typical seasonal earnings
• Show how injury affected peak earning periods

Common Challenges

Insurance Company Tactics

Expect pushback on lost wage claims:

• "You could have returned to work sooner"
• "Your income history is inconsistent"
• "You were about to be laid off anyway"
• "You're exaggerating your limitations"

Strong documentation counters these arguments.

Pre-Existing Employment Issues

Be prepared to explain:

• Recent job changes
• Periods of unemployment
• Declining income trends
• Performance issues

Partial Disability

If you can work part-time or in a limited capacity:

• Document what you can and cannot do
• Get medical restrictions in writing
• Show the difference between pre and post-injury capabilities

Lost Wages and Your Settlement

Lost wages impact your settlement in two ways:

1. Direct recovery: You receive the actual amount of documented losses
2. Multiplier effect: They're part of economic damages used to calculate pain and suffering

Thorough lost wage documentation can significantly increase your total settlement.

Calculate Your Settlement

Use our settlement calculator to see how your lost wages factor into your total claim. Enter your economic damages including medical bills and lost income, and the calculator will estimate your total recovery including pain and suffering.

Conclusion

Lost wages can be a substantial part of your personal injury settlement. Whether you're dealing with a few weeks of missed work or permanent career impacts, thorough documentation and accurate calculation ensure you receive full compensation.

For complex situations—self-employment, career changes, or long-term disability—consider consulting with a personal injury attorney who can engage economists and vocational experts to maximize your recovery.