Quantifying your contribution to the workforce.
It’s not uncommon that a victim of medical negligence will experience difficulties in trying to return to work in any capacity, let alone the same job.
The strain of an injury, or the mental trauma inflicted, can often cause the victim to lose wages, now, and into the future.
The past and future economic loss head of damage aims to protect the victim from a loss of earnings. It bridges the gap between what they used to earn, what they earn now, and what they will earn 20 years into the future.
Simply put, future economic loss covers a person's reduced income or lost opportunities.
More specifically, it can cover things like:
These are the types of things not accounted for in most government and private insurance
schemes.
Schemes like the NDIS or Private Accident Insurance.
These schemes will pay the immediate out-of- pocket expenses, but not pay for loss of earnings.
The law will, as much as reasonably possible, try to put the injured person back into the position they most likely would’ve been in before the accident, which includes considering their future potential.
And just how you calculate these future losses can be a complicated exercise.
See, if you asked yourself 10, 15, 25 years ago where you’d be today, you’d probably have no idea.
But that’s precisely what this head of damage is asking you to do – predict every wage-earning movement from the date of the incident until the expected time of retirement.
It might seem impossible. But in just 15 minutes you will be able to do it.
Below we’re going to step you through the same process a lawyer would take to help you calculate your economic loss - considering your future first, and then the past.
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Quantifying your Future Economic Loss
For the majority of claimants, future economic loss will be the most significant head of damage they receive. So whilst this section might seem confusing or complicated, it’s not that difficult if you follow a template.
All heads of damage after this will be an easier step towards the quantum threshold of $150,000.
Future Economic Loss
EXAMPLE: SASHA
Sasha was a mother of one who experienced surgical negligence.
After Sasha became a victim of surgical negligence, she found it impossible to maintain her hours at work. She had to halve her hours – from 40 to 20 – which, naturally, halved her income from $850 to $425.
Her doctor told her she would never be able to return to the 40 hours per week in her current job. Below, we will use this example to step you through the first section.
It’s not uncommon that victims of medical negligence experience a decline in their ability to work. The first step is calculating this.
To do this, you’ll need to use the following equation to work out your reduction in income:
Regular Weekly
Income (Before the Incident)
-
Current Weekly
Income (After the Incident)
=
Reduction in weekly income
EXAMPLE: SASHA
Sasha was a marketer on $850 per week. After her incident, her wage was halved. This meant a reduction of $425.
Sasha's reduction in weekly income
$850
-
$425
=
$425.00
Note how many years until you expect to retire. To calculate this, use the following equation:
Age of retirement
-
Age on date of incident
=
Years until retirement
EXAMPLE: SASHA
Sasha was 35 years old and expected to retire at the average age of 65. This means she had 30 years of expected reduced income.
Sasha's reduction in weekly income
65
x
35
=
30 years
Locate the 5% multiplier for that number of years using Vincent's Discount Tables (page 3).
To work out the 5% multiplier, simply locate number of years you answered in Q2, and look at the number to the right of it. This will be your 5% multiplier.
EXAMPLE: SASHA
Sasha had noted 30 years until her retirement, so looking down the 5% column she found the number that corresponds to that is 822.
Sasha's 5% multiplier on her years until retirement
822
Now, we use your answers from Q1 & Q3 to calculate what we call a ‘future loss of earnings’. This is just one step before your future economic loss.
$ Reduction in Wages
(Q1)
x
5% Multiplier of Years until Retirement (Q3)
=
$ Future loss of earnings
EXAMPLE: SASHA
Sasha’s weekly reduction in income was $425, and her 5% multiplier was 855.
Sasha's future loss of earnings
$425
x
822
=
$363,375
The last step is adding a global ‘award’ or ‘buffer’.
A global award or buffer is essentially a ‘generalised figure’ that accounts for contingencies, such as needing to retire even earlier than expected due to the injuries, or loss of promotion and subsequent pay rises in the future.
Predicting that can be difficult, so to make matters easier, we’ll let you know that this figure is generally between $20,000 and $50,000.
If you want to be more precise, you can estimate a global award by looking at:
EXAMPLE: SASHA
In Sasha’s case, she had progressed through the ranks in her work quite successfully. It was likely she would’ve moved up the ranks further in the future, or moved to a larger company. To account for this, Sasha could apply a global buffer of $40,000 to account for the lost opportunities.
Sasha's global buffer
$40,000
The final step is to use your answers from Q4 and Q5 to calculate your total future economic loss.
Future loss of earnings
+
Global Buffer
=
Future economic loss
EXAMPLE: SASHA
Sasha’s future loss of earnings was $363,375 and her global buffer was $40,000, therefor:
Sasha's future economic loss
$363,375
+
$40,000
=
$403,375
You should note this number on your own Schedule of Damages table to keep track of where you’re at.
A schedule of damages is the document a lawyer gives to insurers that summarises the losses their client has experienced.
Future Loss of Superannuation
We’ve covered your losses up until retirement, but what about losses after retirement?
Expenses don’t just stop once you retire - if anything, they can get worse.
That’s why (in compensation), superannuation is accounted for, and quite easy to work out. To calculate future losses, we need to look at the future superannuation rate.
As of 2019, the rate of superannuation that an employer has to pay is 9.5% of your wages.
By 2025, this rate will increase to 12%.
For this reason, we will work off the 12% for calculating your future loss of superannuation.
All you need to do is multiply your future economic loss from Q6 by 12%, and you’ll have your future loss of superannuation.
12%
x
Future Economic
Loss (Q6)
=
Future Loss of Superannuation
EXAMPLE: SASHA
Sasha’s future economic loss was $403,375. Therefor:
Sasha's future loss of superannuation
12%
x
$403,375
=
$48,405
Now that you have that, you can add it to your schedule of damages.
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Quantifying your Past Economic Loss
Now that we’ve covered what you are predicted to lose in the future, let’s look at what you’ve already lost since the accident.
We call this period, between the accident and now, the ‘past’.
‘Past’ refers to the period between the medical negligence occurring and the current date.
For this reason, calculating your past economic losses will be much easier than the previous
section - predicting the future losses.
Work out how many hours of work you’ve missed out on because of the incident.
Multiply your number of missed hours by your current hourly rate.
Number of lost hours
+
$ Current hourly rate
=
$ Past Lost Income
Add an estimation for a reduction in benefits (a potential pay rise or promotion that was meant to take place, etc.)
$ Lost Income
+
$ Estimation of Lost Benefits
=
$ Past Economic Loss
EXAMPLE: SASHA
In Sasha’s example, we know that she has been losing $450 a week (half of her income). Let’s say that’s been going on for 12 months now (52 weeks), and that every month she would earn a $100 bonus for meeting her targets.
We would determine her past economic loss by calculating:
$450 x 52
+
$100 x 12
=
$24,600
You can now add this number to your schedule of damages.
Interest on Past Economic Loss
We can’t forget that there was a potential to earn interest on the past economic loss.
The law in QLD takes this into account, allowing you to be compensated for it. To work out what amount you should be compensated for, follow these steps:
Check the Reserve Bank of Australia Interest Rate here.
Divide the current interest rate by two.
Multiply your answer by your past economic loss calculation from Q3. The complete calculation will look like this:
Half of the RBA
Interest Rate
x
Past economic loss
=
Interest on past economic loss
EXAMPLE: SASHA
For Sasha, the current Reserve Bank of Australia interest rate is 0.75 and her past economic loss was $24,600. Therefor:
0.75% ÷ 2
x
$24,600
=
$95.25
You can now add this number to your schedule of damages.
Superannuation on Past Economic Loss
The final step in this head of damage is calculating your past loss of superannuation, much like we calculated your future loss.
To do this, we apply the same formula. However, we will use the current standard rate of 9.5% instead of the future 12%.
You should replace the 9.5% with the rate your employer has been paying if it’s higher than this base rate.
All you need to do is multiply your past economic loss from Q3 by 9.5% (unless your employer has been making larger contributions). The calculation will look like this:
9.5%
x
Past Economic Loss
=
Past Loss of Superannuation
EXAMPLE: SASHA
Sasha’s past economic loss was $24,600, therefor:
Sasha's past loss of superannuation
9.5%
x
$24,600
=
$2337
You can now add this number to your schedule of damages.
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Putting it all together.
Now you can add this to your schedule of damages.
It’s recommended, at this point, to add up your damages so far to see if you’ve reached the
$150,000 quantum threshold.
Below is Sasha’s example.
By doing this, you can check if you can surpass the remainder of this workbook and start working out how you’re going to hold your doctor accountable.
If you haven’t passed the threshold yet, don’t worry. There are three more heads of damage to cover.
Let’s jump into our second head of damage - gratuitous care.
Next article: What is gratuitous care and how is it calculated?