Fatal accident claims: Calculating compensation for loss of income when someone dies as a result of negligence

Loss of earnings claims can feel complex and daunting, particularly at a time when families are already under enormous strain. This article explains, in straightforward terms, how income and earnings are assessed, and the different ways a person’s financial contribution may be taken into account when calculating compensation.

Bear in mind that lost earnings considered in this article are just one part of the overall compensation which might be recoverable in a claim following negligence. There are many other potential heads of loss which can be claimed in addition, which are explored further on our dedicated fatal claims page here.

In England and Wales, the law allows certain relatives (known as “dependants”) to claim compensation where they were financially dependent on the deceased. Rather than focusing only on what the person earned at the time of death, the law looks more widely at what financial support they would have provided to their family over time, had they lived.

Every family’s circumstances are different. There is no single formula that applies to all cases, and calculations must reflect the reality of how your loved one supported you and your family.

An experienced solicitor will ensure the financial impact is fully explored and that your claim does not underestimate the true impact of your loss.

A loss of earnings or financial dependency claim is not about what the deceased personally lost. Instead, it looks at:

• the financial benefit the deceased would have provided to their dependants; and
• how the dependants’ financial position has changed as a result of the death.

Dependants may include a spouse, civil partner, cohabiting partner, children and, in some cases, other close family members.

Loss of earnings calculations can be far more nuanced than simply looking at a payslip.
Depending on the circumstances, income may include:

• salary or wages, whether full time or part time;
• overtime or bonuses;
• self employed income, including profits drawn from a business;
• company director remuneration, including dividends;
• pension contributions or anticipated pension benefits;
• benefits in kind, such as a company car, private healthcare or accommodation;
• irregular or fluctuating income, averaged over time where appropriate.

The law recognises that most people’s earnings would not remain static. A fair claim may therefore need to take into account:

• expected career progression, promotions or pay rises;
• anticipated changes in working hours;
• movement into higher paid roles;
• long term earning patterns within a profession or trade;
• retirement plans and ‘winding down’;
• inflation and economic factors.

The calculation period will depend on the circumstances, but will take account of:

• the period which the deceased would otherwise have worked for;
• the period during which a spouse or partner would reasonably have relied on their income;
• the years during which children (if any) would have been financially dependent.

Adjustments are made to reflect real-life factors such as age, life expectancy, tax and National Insurance, personal expenditure and contingencies such as job changes. Pre-existing or unrelated health conditions that may have impacted earning potential must be accounted for.

A loss of earnings claim can still be brought even if the deceased was not employed when they died. For example:

• someone who was between jobs, on sick leave, on parental leave;
• someone who expected to return to work after illness, caring responsibilities;
• someone training or studying, with a clear future earning trajectory;
• a person who had retired, but still provided financial support or services;
• someone detained in prison.

In these cases, the focus is on likely future earning capacity, rather than current income alone.

Loss of earnings claims need to be supported by evidence. Your solicitor will help you gather, analyse and present this evidence carefully and sensitively.

Common sources of evidence include:

• employment and tax records;
• business accounts;
• pension information;
• bank statements;
• DWP / benefits records;
• witness evidence from family members.

In more complex claims, it is also common to instruct forensic accountants or actuaries to provide expert evidence in the case. Their role is to help build a fair and evidence based picture of the financial support your loved one would have provided over time. This may include analysing employment or business records, considering future career progression, pension provision and inflation, and applying recognised methods to calculate long term losses. Independent experts bring clarity and objectivity to what can otherwise be a difficult and sensitive assessment, helping to ensure that the compensation sought properly reflects the true financial impact of your loss.

Where the deceased provided valuable unpaid services, these can also form part of the claim. Examples include:

• childcare;
• domestic tasks;
• caring for a disabled or elderly family member;
• DIY, home maintenance or transport.

The law allows a monetary value to be placed on these contributions, based on the cost of replacing them, and is known as a services dependency claim.

Services dependency claims won’t be considered in detail in this article but it is important to recognise that these unpaid contributions can be included in a claim, and can attract significant compensation awards.

A loss of earnings claim is often a significant part of a compensation claim following the death of a loved one. It should take into account far more than salary alone, including future earning potential, pensions, benefits and other business income.

While nothing can undo the loss you have suffered, ensuring that the full financial impact is properly recognised can be incredibly valuable, both in monetary terms and with the peace of mind it can bring.

In addition to financial security, investigating a negligence claim can also help establish what went wrong and ensure that those responsible are held accountable.

We understand that contemplating legal action at such a difficult time can feel overwhelming. If you would like advice on whether a loss of earnings or dependency claim may be available, our specialist team is happy to talk things through with you on a free, confidential and no obligation basis.