Why India Needs Pay Transparency and Pay Equity Laws

As one of the fastest-growing economies globally, India is witnessing significant changes in its labor market. With globalization, increased workforce mobility, and changing employee expectations, the call for fair and transparent pay practices has never been stronger.

Nonetheless, despite existing laws addressing equal pay and discrimination, India still lacks comprehensive pay transparency and equity regulations that can drive substantial change.

This article investigates:

1. The current state of legal frameworks—what exists and why it’s flawed

2. How Indian companies are responding—voluntarily or reactively

3. Needed changes—legal and corporate reforms

4. Strategies for companies to prepare for this trend—the benefits of early adoption

Let’s delve deeper.

1. The Current Legal Landscape: Existing Frameworks & Their Shortcomings

India has some laws that address equal pay and discrimination, but these fall short of ensuring true pay transparency and equity.

Key Existing Laws on Pay and Equity

• The Equal Remuneration Act, 1976 – While it mandates equal pay for equal work for men and women, enforcement is weak.

• The Code on Wages, 2019 – Broadens the definition of wage discrimination but does not require pay transparency.

• The Companies Act, 2013 – Mandates listed companies disclose median employee salary and CEO pay ratio but not pay gap reporting.

Why These Laws Falter

• Lack of Mandatory Pay Transparency – Companies aren’t required to reveal salary ranges or equity data.

• Absence of Gender Pay Gap Reporting – Unlike the EU and UK, India doesn’t enforce gender pay audits.

• Weak Enforcement – Many instances of pay discrimination go unreported due to fear of repercussions and lack of awareness.

• Limited Focus – Current laws target mainly gender, neglecting caste, disability, LGBTQ+, and other disparities.

Bottom Line: These laws lack enforcement strength—pay gaps persist, leaving employees unaware of pay fairness.

2. Current Approaches by Indian Companies: Voluntary vs. Compliance-Driven

Given the absence of required pay transparency regulations, Indian companies are adopting two primary approaches:

1. Proactive Companies: Leading with Voluntary Transparency

A few forward-thinking organizations, particularly multinational corporations (MNCs) and large IT firms, are voluntarily implementing pay equity measures:

• Conducting pay audits to unveil gender and role-based pay gaps

• Internally publishing salary bands for pay equity

• Employing AI-driven compensation analysis to eliminate bias

• Establishing diversity pay equity initiatives

Example: Tech giants like Google and Microsoft in India have implemented clear salary bands and conduct regular pay equity audits.

2. Traditional Companies: Reactive & Compliance-Driven

Many Indian companies, especially family-run businesses, small and medium enterprises, and traditional sectors, are taking a wait-and-see approach, characterized by:

• Opaque Practices – Employees lack transparency in salary determination.

• Negotiation-Driven Pay – Salaries are influenced by negotiation rather than structured approaches.

• Gender Bias – On average, women earn 27% less than men (Monster Salary Index).

Example: A 2022 study by Oxfam India highlighted that women are consistently paid less than men across industries, especially in rural and informal sectors.

The Gig Economy & Startups: Variability in Practices

Startups and gig platforms display inconsistent pay practices, some promoting fair, skills-based compensation, others taking advantage of secrecy to drive down wages.

Challenge: Without clear pay transparency laws, gig workers face challenges in addressing unfair pay.

Risk: Companies not addressing pay transparency may suffer from higher employee turnover, damaged reputation, and regulatory risks.

3. Necessary Changes: Reform Roadmap

Legal & Policy Reforms Required in India

1. Mandatory Pay Gap Reporting – Companies with over 250 employees should report annually on gender pay gaps, following the EU and UK.

2. Transparency in Salary Bands – Employers should publish salary ranges in job advertisements to counter pay secrecy.

3. Intersectional Pay Equity – Beyond gender, laws should address caste, disability, LGBTQ+, and socio-economic biases.

4. Independent Pay Audits – Regular third-party audits should be mandated for large companies.

5. Stronger Enforcement Mechanisms – Implement protections for whistleblowers to report pay discrimination safely.

Global Benchmark: The EU Pay Transparency Directive (2026) requires pay gap disclosures and salary structure transparency, offering a potential model for India.

4. Preparing & Leveraging the Pay Transparency Trend

By adopting pay transparency early, companies can gain a competitive advantage.

Here are some steps:

1. Conduct Internal Pay Equity Audits

   • Evaluate pay differences across gender, roles, and experience.

   • Address unexplained pay disparities proactively.

2. Implement Standardized Compensation Frameworks

   • Define clear salary bands to ensure consistency.

   • Use data-driven pay structures over individual negotiation.

3. Train Managers on Pay Communication

   • Enable HR and managers to discuss salary decisions transparently.

   • Promote open conversations about pay and career progression.

4. Utilize Pay Transparency as an Employer Branding Tool

   • Companies that disclose pay bands attract more applicants and retain talent.

   • Transparency fosters trust and boosts employee satisfaction.

Example: Studies indicate that organizations embracing pay transparency enjoy reduced turnover and enhanced employee engagement.

Conclusion: Urgency for Pay Transparency in India

India stands at a crucial point—choosing to lead in pay equity or conform to future global compliance pressures.

• Regulators should establish pay transparency laws to promote fair pay.

• Companies ought to act swiftly, not merely awaiting mandates, to safeguard against future changes.

• Employees must advocate for fair pay—transparency leads to equitable wages and workplaces.

As global standards move toward comprehensive pay transparency, India must stay ahead. The shift isn’t hypothetical but an impending reality. Savvy companies will lead the charge before regulations catch up