How Variable Pay Can Be Analysed in Personal Injury Loss of Earnings Claims

Variable pay can form part of an employee’s overall remuneration. In a personal injury or clinical negligence claim, the treatment of bonuses, commission, overtime, performance-related payments and similar income may therefore be relevant when assessing alleged loss of earnings.

Unlike a fixed salary, variable pay can change from one period to another. A financial assessment may consequently need to consider the claimant’s historical remuneration, the basis on which variable payments were made and the evidence available about potential future earnings.

The appropriate approach will depend on the circumstances of the individual claim and the evidence available.

What Is Variable Pay?

Variable pay generally refers to remuneration that can change depending on factors such as individual performance, sales, hours worked, employer arrangements or other conditions.

It can include:

• Performance-related bonuses
• Sales commission
• Overtime payments
• Profit-related payments
• Annual or discretionary bonuses
• Other variable elements of employment income

Not every variable payment will necessarily be relevant to a loss of earnings calculation. Its treatment may depend on the nature of the payment, the claimant’s employment arrangements and the evidence concerning the income that might otherwise have been received.

Why Variable Pay Can Require Closer Analysis

A fixed annual salary can often be identified from an employment contract or payroll records. Variable remuneration may require a wider review of historical information.

For example, the amount received may have differed between years because of:

• Changes in performance
• Changes in working hours
• Employer bonus arrangements
• Changes in commission rates
• Business or market conditions
• Promotion or changes in responsibilities
• Periods of absence or reduced working hours

A calculation based on a single unusually high or low payment may not necessarily represent the broader earnings pattern.

Historical remuneration can provide evidence for the analysis, but it does not automatically establish what the claimant would have earned in the future.

Evidence That Might Be Relevant

The analysis of variable pay may involve reviewing a range of employment and financial records.

Depending on the circumstances, these may include:

• Employment contracts
• Payslips
• P60s and other tax records
• Payroll records
• Bonus statements
• Commission statements
• Employer correspondence
• Bonus scheme documentation
• Commission agreements
• Records showing changes in role or remuneration
• Previous years’ earnings information

The precise evidence required will depend on the nature of the variable payment and the issues being considered.

Analysing Historical Bonus Payments

Bonuses may vary substantially between years. A review may therefore consider the claimant’s payment history rather than relying on a single year’s bonus.

Relevant questions may include:

• How frequently was a bonus paid?
• Was the bonus contractual or discretionary?
• How was the amount determined?
• Did the claimant receive similar payments in previous years?
• Did the bonus depend on individual or business performance?
• Did the claimant’s role or remuneration arrangements change?

The answers may help establish the nature and historical pattern of the payment.

This does not necessarily mean that an average of previous bonuses should be used. The appropriate treatment will depend on the available evidence and the circumstances of the claim.

Commission-Based Earnings

Commission can present different considerations from a fixed salary.

A salesperson, for example, may receive a basic salary together with commission linked to sales. The amount of commission may depend on sales achieved, commission rates, territory, targets or other factors.

A financial analysis may therefore need to distinguish between:

1. Basic contractual earnings
2. Historical commission received
3. The basis on which commission was calculated
4. Changes in the commission arrangement
5. Evidence relevant to potential future commission

Where commission arrangements changed over time, those changes may also be relevant to the analysis.

Overtime and Additional Hours

Overtime payments may also contribute to historical earnings.

However, the existence of overtime in previous years does not necessarily establish that the same level of overtime would have continued indefinitely.

Relevant evidence may include:

• Historical overtime records
• Working patterns
• Employment contracts
• Payroll records
• Employer records
• Evidence concerning the availability of overtime
• Changes in the claimant’s role or working arrangements

The analysis may therefore need to distinguish between regular and occasional overtime.

Considering Changes in Remuneration

Variable pay arrangements can change during employment.

A claimant may have received one form of bonus before a promotion and a different arrangement afterwards. Commission rates may also have changed, or an employer may have introduced a new incentive scheme.

Such changes can be relevant when considering whether historical remuneration provides a suitable basis for assessing potential future earnings.

The evidence should therefore be considered in its employment context rather than treating every historical payment as equivalent.

Variable Pay and Future Loss of Earnings

Future loss calculations involve an assessment of what the claimant’s financial position might have been in the absence of the injury.

Variable pay can make this assessment more complex because future payments cannot necessarily be known with certainty.

A financial analysis may therefore consider evidence such as:

• The claimant’s previous earnings pattern
• Employment and remuneration arrangements
• Career progression
• Historical bonus or commission payments
• Changes in the claimant’s role
• Available evidence concerning future remuneration

The analysis should distinguish between evidence of historical earnings and assumptions about future earnings.

Where the evidence permits more than one reasonable scenario, the basis for the approach adopted may need to be explained.

Avoiding Reliance on an Isolated Payment

One unusually large bonus or commission payment may not necessarily provide a reliable indication of future remuneration.

Equally, an unusually low payment may have resulted from circumstances that do not reflect the claimant’s broader employment history.

A review may therefore consider the wider earnings pattern and the circumstances surrounding significant changes.

This can be particularly relevant where the claimant’s earnings increased shortly before the injury or where there had been a recent change in role, promotion or remuneration structure.

Variable Pay for Senior Employees and Directors

Variable remuneration can also arise in senior employment positions and directorships.

Depending on the circumstances, remuneration may include:

• Salary
• Annual bonuses
• Performance incentives
• Profit-related payments
• Share-related remuneration
• Commission
• Other contractual or discretionary benefits

The financial evidence may require closer examination where remuneration is structured across several different components.

For directors or owner-managers, the distinction between employment income and income connected with the business may also require consideration. The appropriate analysis will depend on the individual’s role, remuneration structure and the evidence available.

Reviewing an Opposing Variable Pay Calculation

Where an opposing expert has included variable remuneration in a loss of earnings calculation, the underlying assumptions can be examined alongside the supporting evidence.

Questions may include:

Historical Earnings

• What periods of variable pay have been considered?
• Are the figures supported by payroll or other records?
• Have unusually high or low payments been identified?
• Has the historical pattern been accurately described?

Payment Arrangements

• Was the payment contractual or discretionary?
• What factors determined the amount?
• Did the payment arrangements change over time?
• Is there evidence concerning the claimant’s entitlement or eligibility?

Future Earnings

• What assumptions have been made about future variable pay?
• What evidence supports those assumptions?
• Have changes in employment, role or remuneration been considered?
• Is the treatment consistent with the wider loss of earnings calculation?

These questions may help distinguish differences arising from factual assumptions from differences arising from the calculation methodology.

The Role of a Forensic Accountant

A forensic accountant may be instructed in a personal injury or clinical negligence claim to examine financial records and undertake analysis concerning alleged financial loss.

Where variable remuneration is relevant, the work may include reviewing historical earnings, remuneration arrangements and supporting financial evidence.

If an opposing expert report has already been prepared, the scope of the review may also include consideration of the assumptions and methodology used to address variable pay.

The precise scope of any expert analysis will depend on the instructions, evidence and issues arising in the individual claim.

For further information about financial analysis in personal injury claims, see the loss of earnings service and the resources section.

Conclusion

Variable pay can introduce additional considerations into a personal injury loss of earnings calculation. Bonuses, commission, overtime and other variable remuneration may have different payment arrangements and may change over time.

A careful analysis may therefore consider the claimant’s historical earnings, the terms and operation of the relevant remuneration arrangements and the evidence concerning potential future income.

The treatment of variable pay will depend on the facts and evidence of the individual claim. Historical payments may provide useful evidence, but they do not necessarily establish the level of future earnings that would otherwise have been received.

Disclaimer: This article provides general information about the financial analysis of variable pay in personal injury claims. It is not legal or financial advice, and the appropriate approach will depend on the evidence and circumstances of each individual case. Last Reviewed: October 2026