---
title: "Gender Pay Equity Audits in India: Employer Obligations Under the Code on Wages"
date: 2026-10-31
author: "Rohitaashv Sinha"
url: https://ksandk.com/labour-employment/gender-pay-equity-audit-code-on-wages/
---

# Gender Pay Equity Audits in India: Employer Obligations Under the Code on Wages

Posted On - 31 October, 2026 • By - Rohitaashv Sinha

![Gender pay equity in India represented by balanced scales with equal wages for male and female workers, alongside legal compliance documents, a gavel, and an Indian government backdrop.](https://ksandk.com/wp-content/uploads/Balanced-Scales_-Equal-Pay-in-India-1.png)

## Introduction

Equal remuneration and non-discrimination in compensation are important aspects of employment law and workplace governance in India. The Code on Wages, 2019 (“Code”) establishes a statutory framework prohibiting gender-based discrimination in wages for employees performing the same work or work of a similar nature for the same employer. It also prohibits discrimination on the ground of sex in recruitment and [conditions of employment](https://ksandk.com/labour-employment/standing-orders-industrial-relations-code-2020/) for the same or similar work, subject to restrictions imposed by law.

With the implementation of the Code, employers must pay closer attention to how compensation is determined, how salary structures are designed and whether differences in remuneration can be supported by objective and consistently applied criteria.

While the Code does not impose a general obligation on employers to disclose individual salary details to all employees or conduct a prescribed annual gender pay audit, organisations should consider adopting transparent compensation practices and periodic internal pay equity reviews as part of their employment governance framework.

A structured approach to job evaluation, salary band design, compensation decisions and record maintenance can help employers identify unexplained disparities, address potential discrimination and demonstrate compliance with applicable legal requirements.

## Legal Framework Governing Equal Remuneration

Section 3 of the Code on Wages prohibits discrimination on the ground of gender in matters relating to wages between employees working for the same employer and performing the same work or work of a similar nature.

Section 3(2) further provides that:

- An employer cannot reduce the rate of wages of an employee for the purpose of complying with the principle of equal remuneration; and
- An employer cannot discriminate on the ground of sex while recruiting employees for the same work or work of a similar nature, or in their conditions of employment, except where the employment of women in such work is prohibited or restricted under applicable law.

The Code defines “same work or work of a similar nature” under Section 2(v). It refers to work requiring the same skill, effort, experience and responsibility when performed under similar working conditions, where any differences between the requirements for employees of different genders are not of practical importance in relation to the terms and conditions of employment. Consequently, an employer cannot determine pay parity merely by comparing job titles or designations. The actual responsibilities, skills required, working conditions and nature of the work must be considered.

Where a dispute arises regarding whether two roles involve the same work or work of a similar nature, Section 4 provides that the matter shall be decided by the authority notified by the appropriate Government. The statutory framework therefore requires employers to ensure that compensation decisions are not influenced by gender where employees perform the same or similar work.

## 2. Identifying Potential Sources of Gender-Based Pay Discrimination

Pay disparities may arise at different stages of the employment relationship. Although not every difference in compensation amounts to unlawful discrimination, employers should examine whether their compensation policies and practices result in unequal treatment on the ground of gender.

Areas requiring particular attention include:

- Recruitment and candidate selection;
- Initial salary fixation and negotiation;
- Basic pay, allowances and other compensation components;
- Annual increments and salary revisions;
- Performance-linked incentives and bonuses;
- Promotions and changes in responsibilities;
- Transfers and changes in employment conditions; and
- Access to compensation-related benefits and opportunities.

For example, employees with different designations may perform substantially similar functions, while employees holding identical designations may have materially different responsibilities.

Accordingly, the statutory comparison should be based on the actual nature of the work rather than job titles alone. Employers should also distinguish between legitimate compensation differences and differences that may be attributable to [gender-based discrimination](https://ksandk.com/labour-employment/posh-compliance-calendar-in-india/).

Factors such as relevant experience, qualifications, specialised skills, additional responsibilities, performance and working conditions may be relevant to compensation decisions. However, these factors should be objectively identifiable, genuinely connected with the role and applied consistently. An employer should not rely on subjective assessments or inconsistent managerial discretion to justify compensation differences that may otherwise indicate unequal treatment.

Previous salary history should also be approached cautiously. While the Code does not impose a general prohibition on considering an employee’s previous remuneration, relying exclusively on historical salary differences may perpetuate existing disparities. Employers should establish compensation based on the requirements of the role and their own objective salary-setting criteria.

## Designing Objective and Defensible Pay Structures

A structured salary framework can help employers maintain consistency in compensation decisions and identify unexplained disparities. A defensible pay structure should begin with the requirements of the role rather than the identity, gender or negotiating position of the individual employee.

Employers may consider developing a job architecture based on the following parameters:

- Job family and functional area;
- Designation and organisational grade;
- Core duties and responsibilities;
- Required qualifications and technical skills;
- Relevant professional experience;
- Decision-making authority;
- Supervisory and managerial responsibilities;
- [Working conditions](https://ksandk.com/labour-employment/inter-state-migrant-workers-osh-code-2020/), shifts and travel requirements;
- Geographical and market considerations; and
- Minimum, midpoint and maximum remuneration within the applicable salary band.

The organisation should establish clear criteria governing entry into a salary band, progression within the band and eligibility for movement to the next grade. These criteria should be applied consistently during recruitment, annual salary revisions, promotions, transfers and employee retention exercises.

### Illustrative Pay Band Structure

The following is an illustrative framework demonstrating how an organisation may structure compensation across different job levels.

| Grade | Role characteristics | Illustrative differentiators |
| --- | --- | --- |
| Grade 1 | Routine work performed under supervision | Relevant experience, shift requirements and verified skill certifications |
| Grade 2 | Independent technical or operational responsibilities | Experience, specialised skills and additional operational responsibilities |
| Grade 3 | Professional role involving project ownership | Technical expertise, complexity of work and measurable performance |
| Grade 4 | Managerial role involving significant decision-making authority | Business responsibility, team size, specialised expertise and performance |

The above framework is illustrative and does not prescribe legally recognised salary grades or permissible exceptions under the Code. Employers should document the methodology used to determine salary bands and ensure that the criteria are consistently applied across comparable roles.

### Distinguishing Wages from Other Compensation Components

Employers should also distinguish between the statutory [definition of wages](https://ksandk.com/labour-employment/layoff-retrenchment-closure-industrial-relations-code-2020/) and the broader compensation package offered to employees. Section 2(y) of the Code defines wages to include basic pay, dearness allowance and retaining allowance, subject to specified exclusions and the statutory 50% add-back mechanism.

Importantly, the second proviso to Section 2(y) provides that, for the purpose of equal wages to all genders and payment of wages, certain excluded components must also be taken into account. These include:

- Conveyance allowance or travelling concession;
- House rent allowance;
- Remuneration payable under an award, settlement or order of a court or Tribunal; and
- Overtime allowance.

Accordingly, employers should not limit their assessment of equal remuneration to basic salary alone. They should examine the applicable statutory wage computation and relevant compensation components when evaluating pay differences.

## 4. Pay Transparency and Confidentiality of Employee Compensation

The Code on Wages does not prescribe a general requirement for employers to disclose every employee’s individual salary or complete compensation details to other employees.

However, this does not mean that employers have no transparency-related obligations. Section 50(2) requires employers to display a notice at a prominent place in the establishment containing, among other particulars, category-wise wage rates of employees, the wage period, the date and time of payment of wages, and the name and address of the jurisdictional Inspector-cum-Facilitator.

This statutory requirement should be distinguished from broader organisational pay transparency initiatives. Employers may improve transparency in compensation decisions through the following practices:

1. Publishing salary ranges in job advertisements, where appropriate;
2. Informing candidates about the relevant job grade and compensation band;
3. Explaining the objective criteria used to determine an employee’s position within a salary band;
4. Establishing clearly documented criteria for annual increments and promotions;
5. Recording the reasons for deviations from established salary bands; and
6. Providing employees with appropriate channels to raise compensation-related concerns without retaliation.

At the same time, employers should protect individual compensation information through appropriate access controls and confidentiality safeguards. The objective should be to make the process of determining remuneration understandable and consistent without unnecessarily disclosing personal salary information.

## Conducting Internal Gender Pay Equity Audits

Although the Code does not prescribe a standalone annual gender pay audit, conducting periodic internal reviews is a useful governance measure for identifying potential disparities and assessing whether compensation practices are consistent with Section 3. A gender pay equity audit should go beyond comparing the average salaries of male and female employees across an organisation.

An organisation-wide comparison may help identify broad pay gaps, but it may not establish whether employees performing the same work or work of a similar nature are receiving unequal remuneration. A more meaningful review should examine employees performing comparable work and assess whether any differences in compensation can be objectively explained.

### Key Areas to Examine During a Pay Equity Audit

Employers may consider examining the following information:

- Job families, designations and organisational grades;
- Actual duties and responsibilities performed;
- Basic salary, allowances and other relevant compensation components;
- Initial salary fixation and recruitment records;
- Qualifications, skills and relevant professional experience;
- Performance ratings and appraisal outcomes;
- Annual increments and promotion decisions;
- Location, shift requirements and working conditions;
- Career breaks, transfers and return-to-work salary revisions; and
- Retention-related increments and other special compensation adjustments.

The review should also examine fixed and variable compensation.

Gender-based disparities may not be limited to basic salary. Differences may also arise in access to performance incentives, overtime opportunities, high-value assignments, promotions and other compensation-linked benefits. Where disparities are identified, employers should examine the underlying reasons rather than relying solely on aggregate salary comparisons. The methodology adopted, employee groups compared, factors considered, exceptions identified and corrective actions recommended should be appropriately documented.

## Record Maintenance and Employer Compliance

Documentation is important in demonstrating how compensation decisions are made and whether the employer has followed a consistent and non-discriminatory approach. Section 50 of the Code requires employers to maintain prescribed registers containing details relating to persons employed, muster rolls, wages and other relevant particulars. The provision also requires employers to issue wage slips to employees and display specified wage-related information at a prominent place in the establishment, subject to the statutory exceptions.

Under Rule 51 of the Wages (Central) Rules, 2026, employers covered by the Central Rules are required to maintain prescribed registers, including:

- Employee Register in Form I;
- Register of Wages, Overtime, Advances, Fines and Deductions for Damage and Loss in Form IV; and
- Attendance Register-cum-Muster Roll in Form IX.

The registers may be maintained electronically or physically and must be preserved for five years from the date of the last entry. Employers governed by the relevant State framework should also examine the applicable State rules and record-maintenance requirements.

In addition to the prescribed statutory records, employers should consider maintaining the following internal documentation to support their compensation decisions:

- Job descriptions and job evaluation records;
- Internal salary bands and compensation policies;
- Recruitment advertisements and candidate evaluation records;
- Offer letters and salary fixation worksheets;
- Performance appraisal and increment records;
- Promotion and transfer documentation;
- Approval records for compensation exceptions; and
- Internal pay equity audit reports and corrective action records.

These documents can help establish not only the remuneration paid to an employee but also the basis on which the employee was placed within a particular salary band.

### Consequences of Non-Compliance

Section 54(2) of the Code provides that non-maintenance or improper maintenance of prescribed records is punishable with a fine which may extend to ₹10,000. Section 54(1) separately provides penalties for payment of amounts lower than those due under the Code and for contraventions of other provisions.

Employers should therefore ensure that statutory records are complete, accurate and maintained in the prescribed manner. The absence of adequate documentation may also make it difficult for an organisation to substantiate legitimate differences in compensation during an investigation or dispute.

## Corrective Measures Where Pay Disparities Are Identified

Where an internal review identifies a pay disparity that cannot be adequately explained by objective and relevant factors, the employer should investigate its underlying cause and determine the appropriate corrective measures.

Depending on the circumstances, corrective action may involve:

- Revising the compensation of affected employees;
- Reviewing and restructuring existing salary bands;
- Correcting inconsistent grade allocations;
- Examining recruitment and initial salary fixation practices;
- Reviewing performance evaluation and increment criteria;
- Addressing unequal access to performance-linked opportunities; and
- Strengthening approval procedures for exceptional compensation decisions.

The employer should retain the relevant records and document the reasons for the corrective action undertaken. Importantly, Section 3(2)(i) prohibits reducing an employee’s rate of wages for the purpose of complying with the principle of equal remuneration. Accordingly, corrective action should focus on addressing the underlying disparity rather than reducing the remuneration of a better-paid employee merely to achieve statistical parity.

Where the disparity arises from repeated reliance on previous salary, inconsistent managerial approvals or unequal access to career opportunities, employers should address those underlying processes as well.

## Conclusion

The Code on Wages, 2019 establishes an important statutory framework for preventing gender-based discrimination in remuneration, recruitment and conditions of employment involving the same work or work of a similar nature.

For employers, compliance requires more than adopting a general equal remuneration policy. Organisations should develop objective job evaluation systems, establish consistent salary structures, document compensation decisions and periodically examine whether unexplained gender-based disparities exist.

Although the Code does not mandate universal disclosure of individual salaries or a prescribed annual gender pay audit, transparent compensation practices and internal pay equity reviews can strengthen employment governance and help identify potential compliance risks.

A structured, evidence-based approach to remuneration can therefore assist employers in meeting their statutory obligations while promoting consistency, accountability and fairness in workplace compensation practices.

## Frequently Asked Questions

### 1. Does the Code on Wages, 2019 require employers to conduct annual gender pay equity audits?

No. The Code on Wages does not prescribe a mandatory annual gender pay audit. However, periodic internal pay equity reviews can help employers identify unexplained gender-based pay disparities and strengthen compliance.

### 2. What does the Code on Wages say about equal pay for men and women?

Section 3 of the Code prohibits gender-based discrimination in wages between employees performing the same work or work of a similar nature for the same employer.

### 3. What should employers examine during a gender pay equity audit?

Employers should review factors such as job responsibilities, salary and allowances, qualifications, experience, performance ratings, increments, promotions, working conditions, and variable compensation to identify unexplained pay differences.

### 4. What are the penalties for non-compliance with wage record requirements?

Under Section 54(2) of the Code, failure to maintain or improperly maintaining prescribed records may attract a fine of up to ₹10,000. Employers should therefore maintain accurate wage, employee, attendance, and other prescribed records.

*Last Updated on 31 October, 2026*

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