Kamal Ghorui
Making pay visible may expose disparities, but without understanding how value is created and captured, it risks solving the symptom—not the system.
Calls for salary transparency are growing louder in India’s corporate discourse. From LinkedIn debates to boardroom conversations, the argument is straightforward: if everyone knows what everyone earns, inequity will be harder to hide.
It’s an appealing idea. But it is also incomplete.
In markets like the US and parts of Europe, pay transparency laws—such as mandated salary bands in job postings—have been introduced to address gender and racial pay gaps, including wage disparities in cross-border labour mobility. Early evidence suggests modest gains. But importing that model into India without accounting for structural and cultural differences risks solving the wrong problem—or creating new ones.
AI-generated image
To begin with, compensation in India is far from a single number. The “cost-to-company” (CTC) framework bundles together fixed pay, performance-linked bonuses, retention payouts and, increasingly, employee stock ownership plans (ESOPs). According to executive compensation surveys by Deloitte, a substantial share of senior leadership pay is no longer fixed; variable and equity-linked components can together account for more than half of total compensation.
This complexity matters. Transparency without standardisation can mislead. Two employees with identical CTCs may have entirely different financial realities—one receiving predictable cash, the other dependent on performance metrics or illiquid stock options. Publishing salary numbers without disaggregating these components risks fuelling confusion rather than clarity.
More importantly, transparency interacts with incentives in ways that are often overlooked.
One unintended consequence observed in more transparent pay environments is wage compression. When organisations are required to justify pay differences publicly, they tend to narrow salary bands to avoid internal friction. While this may reduce extreme disparities, it can also blunt differentiation. High performers may find their upside capped—not because their contribution is undervalued, but because explaining outlier compensation becomes administratively and culturally costly. The result is not always fairness, but safer, flatter pay structures.
For a country like India—where productivity varies widely across sectors and individuals—this is not a trivial concern. The ability to reward outsized performance remains a key driver of competitiveness, particularly in technology, consulting and financial services.
There is also a behavioural dimension that policy frameworks often underestimate.
Salary transparency assumes that individuals interpret compensation data rationally. In reality, especially in India, income is deeply intertwined with social identity and status. Public knowledge of salaries can amplify peer comparison, workplace tension and even attrition—effects that do not necessarily align with improved productivity or fairness.
Consider also the implications for India’s startup ecosystem.
Over the past decade, wealth creation in new-age companies has been driven less by salaries and more by equity ownership. ESOPs have enabled employees to participate in enterprise value creation, albeit with risk and delayed liquidity. If transparency norms push employees to prioritise higher fixed salaries over uncertain equity—because the former is easier to compare and defend—the long-term consequence affects wealth creation, not just compensation preference. That, in turn, could weaken a key mechanism for broad-based wealth creation in the innovation economy.
None of this is an argument against transparency per se. Rather, it is a case for sequencing and design.
If India is to move towards greater pay openness, three preconditions are critical.
First, standardisation. Compensation disclosures must clearly separate fixed pay, variable components and equity, enabling meaningful comparisons.
Second, literacy. Employees need a stronger understanding of how different pay components work—particularly ESOPs, which remain widely misunderstood in terms of vesting, taxation and liquidity.
Third, institutional safeguards. Transparent systems must be supported by robust performance evaluation frameworks, so that differentiated pay—where justified—can still be defended.
Without these, transparency risks becoming a blunt instrument—one that reveals disparities without equipping stakeholders to interpret or address them.
But the deeper issue runs beyond salaries altogether.
India’s inequality is not just a function of *who earns more—it is shaped by who captures value*, and how directly they access the market. Two individuals may contribute similar intellectual output, yet experience very different economic outcomes. One may be compensated through a fixed salary, insulated from upside. Another may be closer to value realisation—through equity, profit participation or direct market access.
In many cases, value does not flow directly from creator to market. It is routed through layers—organisations, investors and intermediaries—that determine how that value is priced and distributed. Salaries are merely one endpoint in that chain.
Transparency can make pay visible. It does not make these structures visible.
*Salary transparency debates are about fairness in pay. But real inequality is about access to value.*
Without understanding how value itself is created, owned and distributed, making salaries public risks addressing the symptom while leaving the system intact.
The instinct to make pay visible is rooted in a legitimate concern about fairness. But visibility alone does not guarantee equity. In a labour market as diverse and structurally complex as India’s, poorly designed transparency could just as easily flatten incentives, distort comparisons and shift attention away from the deeper question.
The real policy challenge is not simply whether salaries should be transparent. It is whether individuals and institutions understand how value flows through the system in the first place.
Because until that changes, making pay visible may shift perceptions of fairness—but it will do little to change who actually captures the value being created.
END OF ARTICLE
