Calculating Lost Wages
UPDATED: April 8, 2020
It’s all about you. We want to help you make the right legal decisions.
We strive to help you make confident law decisions. Finding trusted and reliable legal advice should be easy. This doesn't influence our content. Our opinions are our own.
- When someone causes an injury or some other harm that keeps you from working, you can sue to collect your lost wages
- Lost wages include your hourly rate — whether that's based on a salary, self-employment, or an hourly job — as well as lost benefits and opportunities
- A long-term or permanent injury may require you to calculate the loss of potential future earnings
If you are including lost wages damages in your injury claim or lawsuit, you will need to know what factors are used to calculate the value of the earnings you lost while recovering. When you assess the value of a lost wages claim, you must be able to provide documentation proving your injury, your pay, and your normal work hours to show a clear and accurate picture of the earnings you missed while injured.
In this article, you'll see what must be included in your lost wages claim and how to determine your lost wages for different types of jobs.
Before Calculating Lost Wages Damages
Before you do anything, seek medical help.
After suffering an injury, you need to make sure to have it treated. Not only is it important for your health and safety, but it's also important for your personal injury claim.
You need to substantiate your injury claim with good medical documentation, and one way to do that is to see a physician or other healthcare provider and have a full examination.
Be sure that if the doctor tells you to take time off from work, you don't leave his or her office without a physician's medical form in your hand authorizing you to stay home from your job for the time necessary to recover from your injuries.
You will need to keep your employer informed about your injury, your medical treatment, and the time you may miss. Lost wages claims are difficult to prove if you are not authorized to miss work, so make sure you take all the necessary steps with your doctor and your employer to demonstrate the time off is necessary to your recovery.
When you Might Need to Calculate Lost Wages
When someone else's negligence harms you, you may be able to sue them for their negligence. The guiding principle of civil lawsuits is to make the wronged party "whole." This means that the person who was hurt has been paid back so they are as well off as they would have been if the harm had never occurred (or as close to this as possible).
Naturally, then, if you missed work because of the harm you suffered, part of what it would take to make you whole is payment for that missed work. You only missed work and the wages you'd have earned because of the harm, so whoever caused the harm should have to make up those wages.
Most commonly, lost wages are part of personal injury claims. They may also need to be calculated in any suit about harm that caused you to miss work, though.
What is Included in Lost Wages
Lost wages may include more than just the amount you would have earned at work during the time you missed. You are also entitled to the cost of whatever benefits you would have accrued during the time you were unable to work.
Keep in mind that in most states, your lost wages are your gross earnings, not your net earnings. Some states only reimburse net wages, but regardless, you should present your gross earnings. The insurance company will tell you if they only reimburse net wages.
Also note that if your injury was a result of an accident on the job and you are making a workers compensation claim, it varies from state to state whether you will be reimbursed for gross wages, a percentage of gross wages, or net wages. If you are a federal employee, you can learn more about workers' compensation from the Department of Labor.
How to Calculate Lost Wages
You may not have been asked to "show your work" since your last math class, but when you're suing for lost wages as part of a lawsuit, you're going to want to show your work.
To prove lost wages, you'll first need to gather all the appropriate documentation to support your claim. You will need a letter from your employer indicating how much time you took off, what your hourly rate of pay or your monthly or annual salary is, how many hours a week you work, and whether or not you typically work overtime.
With this information and the details concerning the injury, you or your attorney should be able to present a clear and detailed breakdown of how much you're asking for and how that amount was reached.
How are lost wages calculated for hourly workers?
If you're paid on an hourly basis, you can calculate your claim once you acquire the necessary documentation from your employer.
- Determine the number of hours you missed from work. If you work regular hours, simply provide documentation that shows your normal work schedule. If your hours vary, you can calculate an average based on your last two or three months of work.
- Determine the number of overtime hours that you missed. Overtime is typically not guaranteed, so you will need to provide documentation that shows you regularly worked overtime before your injury. Again, going back two or three months will be sufficient. If you were recently promised overtime by your boss, provide evidence of that conversation.
- Multiply the number of hours you missed by your hourly rate.
- Multiply the overtime hours you missed by 1.5 times your hourly rate.
- Add the values for regular hours missed and overtime hours missed to arrive at the total lost wages calculation.
How are benefits accounted for in lost wage calculations?
Remember that your benefits are included in the wages that you lost when you were unable to work. In addition, you can include all other job-related payments that you could reasonably have expected had you not missed work.
If you were due for an increase in pay or a promotion, make sure your employer notes this, including how much more it would have paid and when it was to take effect.
Any lost commissions on sales that you did not earn because of the time missed should be included in your calculations.
Bonuses that you were paid in the past and were on track to receive before your injury are also valid for inclusion in lost wages.
You should also include any lost fringe benefits, as well as any lost contributions or potential contributions to pensions or retirement accounts.
How do lost wage calculations account for salary?
If you are a salaried employee rather than hourly, you will need to calculate your lost wages somewhat differently.
- Divide your annual salary by the number of hours you work to get the amount you earn per hour. An employee who works 40 hours a week would work 2,080 hours a year.
- Calculate the number of hours you missed by multiplying the days you were out of work by eight (typical workdays for salaried employees are eight hours, even if you work more).
- Multiply those two figures to calculate your lost wages.
How are lost wages accounted for when you're self-employed?
Calculating your lost wages when you're self-employed can be more difficult. If you've had consistent self-employment income for several years, you may be able to show your average yearly income on tax records.
If, however, you are just starting a new venture or were expecting to make significantly more than your tax records indicate, you will have to prove your lost wages some other way. You can demonstrate your lost income by showing contracts, orders, or appointments that give some indication of what you would have earned if you had been able to work.
What else is included in calculating lost wages?
If you were unable to return to the same job, or your job was eliminated and you were forced to take a lower-paying job, you can claim the difference in pay between your old and new job in addition to your lost wages.
You can also include the money lost while you searched for a different job if you were unable to return to your old position.
If you are never able to return to work due to a serious injury, you will need to calculate lost earning potential based on your age, your employment and pay history, your job skills, and your quality of life before the accident.
If your injury temporarily or permanently altered your earning potential, that should also be factored into the damages you seek to recover.
Bringing it All Together
We've seen that when someone else's actions cause you to miss work, you can attempt to recover the wages you lost. Lost wages include not only what you would have been paid had you been able to work, but also lost benefits and lost opportunities. If you were due for a raise or a bonus, that should also be included in your calculation of damages.
How you calculate your lost wages will vary depending on how you earn your income. Salaried employees calculate differently than hourly employees; self-employed people have to calculate and prove their lost income in different ways.
It's important to remember that the calculations you make on lost wages and everything else in your claim are estimates of potential compensation. It may seem like a lot to ask for, but lost wage calculations and lost earning potential are meant to represent a potentially permanent change in your earning capacity.
Another important thing to remember is that settlement is likely, so you're better off using a higher estimate with room to negotiate than asking for the absolute minimum. You can look at a sample personal injury claim to see how lost wages fit into the overall claim.
Did we answer your questions about calculating lost wages? Is there anything else you need to know about personal injuries and how they impact past and future earnings?
Contacting a personal injury lawyer is the best way to ensure your lost wages calculations are accurate, fair, and well supported by documentation. You can find more answers; ask your specific question; or begin your search for a local, experienced attorney by following this link.