Multiplier-multiplicand: the basic method
Net annual earnings (the multiplicand) multiplied by a discounted number of years (the multiplier) gives the lump sum. The multiplier is drawn from the Ogden Tables 8th edition and reflects the years remaining to retirement, discounted for accelerated receipt at the prescribed rate. Adjustments are made for contingencies other than mortality — employment, illness, and other risks.
The discount rate
Set by the Lord Chancellor under section 1 of the Damages Act 1996. The current rate for England and Wales is +0.5% (effective 11 January 2025) and was previously -0.25%. A positive rate produces a smaller lump sum because the claimant is assumed to invest and earn a return.
Residual earning capacity
If the worker can return to some form of work — even at a lower level — that residual capacity is deducted. Where the worker can no longer do the pre-accident job but could do something less remunerative, the multiplier and multiplicand are applied to the differential.
Smith v Manchester awards
Where the worker has returned to the same job but is now at greater disadvantage on the open labour market, a Smith v Manchester lump sum compensates for that disadvantage. Awards typically range from £5,000 to £50,000+, calibrated to the worker's age and reliance on a single specialised skill.
Periodical Payment Orders
For the most catastrophic injuries, future losses can be paid as an annual index-linked Periodical Payment Order (PPO) under section 2 of the Damages Act 1996. PPOs remove the investment risk and run for life. Most catastrophic claims now settle on a hybrid lump-sum-plus-PPO basis.
Are future earnings calculated gross or net?
Net — after income tax, National Insurance, and pension contributions. The court is restoring the worker to the position they would have been in financially.
Does the 25% success fee apply to future loss?
No. The statutory cap on no-win-no-fee success fees applies only to general damages and past financial losses. Future loss is ring-fenced.
Can future loss be revisited later?
Generally no — damages are awarded once and for all. PPOs are the exception, paying annually for life. Provisional damages under section 32A of the Senior Courts Act 1981 are also possible where there is a chance of serious deterioration.
If an injury ends a career you particularly valued, you may also be able to claim for loss of congenial employment.
Browse every plain-English guide in the work accident guides hub, or read the main guide to how a claim works.
This guide is for general information only and does not constitute legal advice. Every claim turns on its own facts. For advice about your specific situation, speak to a regulated solicitor. You can find one through the Find a Solicitor service (Law Society) or through APIL.