Loss of Earning Capacity Calculator

What Is Loss of Earning Capacity (Disability) Compensation?

Loss of earning capacity compensation is a type of compensation intended to make good the loss of earning power that arises where a person’s bodily integrity is damaged as a result of a tort or an accident. Under Turkish law, the heads of damage that may be claimed in connection with bodily harm are regulated in Article 54 of the Turkish Code of Obligations. Foremost among these heads are losses arising from the reduction or complete loss of working capacity, together with future economic losses that are likely to occur. Where a person can no longer work at full productivity as they did before the accident, this difference is assessed as temporary or permanent (continuing) loss of earning capacity.

The basic rationale of the compensation is to place the injured party, as far as possible, in the economic position they would have been in had the accident never occurred. In other words, the aim is not to enrich the injured party but to make good the real loss in their earning power. For this reason, the calculation is based on concrete data such as the disability rate, the person’s income, their age and their remaining life expectancy.

Legal Basis and Related Concepts

The legal basis of loss of earning capacity compensation lies in the provisions on tort and strict liability. In traffic accidents, the Highway Traffic Law and the liability of the vehicle operator come into play; in work accidents, the occupational health and safety legislation together with the employer’s fault; and in damage arising from healthcare practices, the framework of service fault or malpractice applies. The common point in all these situations is that the person has suffered a reduction in earning power because of bodily harm.

Some of the key concepts in the calculation are as follows:

• Disability rate: This is the expression, as a percentage, of the person’s bodily loss and is determined by a competent health board report or by the Council of Forensic Medicine, in accordance with the disability/impairment schedules in force.
• Remaining life expectancy: This is the period the person is statistically expected to live and is established according to the current life tables.
• Active and passive periods: The active period refers to the period during which the person actually works and earns income, while the passive period refers to the period after working age; both periods may be included in the calculation.
• Income basis: Where the person has no documented income, the calculation is, as a rule, made on the basis of the minimum wage.

How Is Loss of Earning Capacity Compensation Calculated?

In judicial practice, loss of earning capacity compensation is generally determined by the actuarial (expert) calculation method. The framework of the calculation rests on the following elements: the person’s income, the finalised disability rate, their age on the date of the accident and the corresponding remaining life expectancy, and the state of fault. In broad terms, the approach is to multiply the person’s annual earnings by the disability rate and to sum this annual loss, discounted to present value, over the period during which the person could work and the period thereafter.

The tool on this page provides an approximate result using values such as the person’s monthly income, disability rate, age and, where applicable, fault/deduction rate. This result is useful for the parties to grasp their situation and form a preliminary idea; however, it is not a definitive claim value. In an actual case, the calculation is carried out by an expert taking into account the current life tables, interest/discount rates, the distinction between active and passive periods and the relevant rules of the Turkish Code of Obligations.

The Main Factors Affecting the Calculation

• Disability rate: The higher the rate, the higher the compensation; it is therefore decisive that the report is prepared correctly and in accordance with the current schedule.
• Age: For younger injured parties, the remaining life expectancy and working period are longer, so the compensation is generally higher.
• Income level: A high, documentable income increases the compensation; where income cannot be documented, the minimum wage is taken as the basis.
• State of fault: Where the injured party is also at fault, the compensation is reduced by that proportion.
• Temporary–permanent distinction: Where there is no permanent loss after recovery, no permanent loss of earning capacity arises; only the temporary period and treatment expenses come into play.

Points to Watch Out For

The most critical step in loss of earning capacity cases is the correct determination of the disability rate. Obtaining the rate from a competent health board acting in accordance with the current legislation and, where necessary, clarifying it with a Council of Forensic Medicine report, directly affects the outcome. In addition, compensation claims are subject to limitation periods; the periods that run from the moment the tort and the tortfeasor become known must not be missed. In traffic accidents, the time limits for applying to the insurance company and for bringing an action must also be monitored separately.

Another important matter is the correct separation of the heads of compensation. Loss of earning capacity (pecuniary compensation), treatment expenses, carer expenses and non-pecuniary (moral) compensation are distinct heads; claiming each of them fully and separately in the statement of claim prevents loss of rights.

Common Mistakes

• Proceeding with a missing or out-of-date disability report: Reports prepared according to the wrong schedule cause the rate, and therefore the compensation, to come out incorrectly.
• Settling for temporary incapacity only and overlooking the permanent loss: Where there is permanent disability, permanent loss of earning capacity must be claimed alongside the temporary period.
• Making a high claim without documenting income: Undocumented income may be reduced to the minimum wage; recording income is important.
• Disregarding the fault rate: The injured party’s fault is a ground for reduction; the state of fault should be assessed from the outset for a realistic expectation.
• Missing the limitation period: Once the period has expired, the right may become unenforceable.

A Short Example Scenario

Let us consider a 35-year-old person who is injured in a traffic accident and is found to have a 20% permanent loss of earning capacity. Assume this person’s monthly income is documented. In an approximate calculation, the person’s annual earnings are multiplied by the disability rate, and the loss occurring over the remaining working age and the period thereafter is then discounted to present value and summed. If the person bears 25% contributory fault in the accident, the amount found is reduced by that proportion. This example is intended only to illustrate the method; the actual amount may vary with the current life table, the interest/discount rate and the expert’s assessment.

Conclusion

Loss of earning capacity compensation is an important safeguard in terms of the legal redress of the loss in earning power suffered by a person who has sustained bodily harm. The calculation tool above may be used to grasp the logic of the process and to form an approximate forecast. However, because of matters such as the determination of the disability rate, the correct assertion of the heads of compensation and limitation periods, it is strongly recommended that you obtain legal support from a lawyer for your specific case.