The Punjab and Haryana High Court has held that tips regularly earned by a person working in the hospitality industry must be counted as part of their income when compensation is assessed under the Motor Vehicles Act. It does not matter that the tips are paid by customers and not by the employer as part of a fixed salary.

Justice Mandeep Pannu dismissed an appeal by United India Insurance Company. The Motor Accident Claims Tribunal, Chandigarh, had assessed the monthly income of an injured waiter at ₹12,000: his salary of ₹8,000 plus ₹4,000 in tips. The Court observed:

“The fact that persons employed as waiters in restaurants and clubs receive tips from customers is a recognised feature of employment in the hospitality industry. Such receipts, where established by evidence and shown to be regularly earned, cannot be excluded from the assessment of income merely on the ground that they are not paid by the employer as a fixed component of salary. The relevant consideration for determining the income of the injured is his actual and regular earnings and not merely the amount reflected in the salary certificate.”

The claimant worked as a waiter at Score Club. He suffered 100% permanent disability in a road accident. In its award dated 24.03.2017, the Tribunal awarded him ₹38,77,360 and held the insurer liable to pay.

The insurer argued that his income should have been taken as ₹8,000, the figure in his salary certificate and the amount a club employee had deposed to. It contended that “the amount received by way of tips is voluntary in nature and cannot be treated as a fixed component of income”, and that adding it had made the award excessive.

The claimant contended that receipt of about ₹4,000 a month in tips was established by the evidence and was not disputed. He said tips are “a regular source of earnings” for people working in hospitality.

The Court framed the question as “whether the amount received by the injured towards tips, over and above his fixed monthly salary, could be taken into consideration while assessing his monthly income for the purpose of determining compensation.”

It relied on two High Court decisions, Oriental Insurance Co. Ltd. v. Milly Das Gupta (Delhi High Court, 2015): The Court said this decision upheld the inclusion of tips, holding that “earning of tips by persons employed in the hospitality industry is a usual feature and constitutes a part of their regular earnings”.

The Court held that these decisions “squarely” supported the Tribunal's view, and added, “In the present case, the injured was admittedly employed as a waiter and the receipt of ₹4,000/- per month towards tips, in addition to his salary of ₹8,000/-, has not been disputed by the appellant by bringing any cogent material on record. The mere fact that the tips were received from customers and were not part of the fixed salary paid by the employer would not be sufficient to exclude the same from his monthly earnings.”

The Court also pointed to the claimant's 100% permanent disability. It observed that “the consequences of such disability upon his future life and earning capacity assume considerable significance”.

Finding no illegality or perversity in the Tribunal's assessment, the Court dismissed the appeal and upheld the award.

Mr. Harsh Aggarwal, Advocate and Mr. Parit Aggarwal, Advocate for the appellant

Mr. Arun Takhi, Advocate for respondent No.1-claimant