Beyond Incentives

**Saparya Sood and Aditi Prakash

The passage of the Rights of Persons with Disabilities Act, 2016 (the Act) along with the attendant Rights of Persons with Disabilities Rules, 2017 (Rules) was a significant leap forward for India in its efforts to ensure equal opportunities in private work spaces to Persons with Disabilities (PwDs). In comparison to the repealed Persons with Disabilities (Equal Opportunities, Protection of Rights and Full Participation) Act, 1995, the Act has widened the scope of the definition of persons with disability to include a list of 21 specified disabilities. While previously, the repealed act mandated the government to provide incentives to both government and private sector entities to ensure that 5% of their workforce comprised PwDs, the Act now makes a distinction between the obligation of government and private entities. While government establishments are required to reserve 4% of jobs for PwDs, the private sector has no similar mandatory obligations. It is the government that is mandated to provide incentives to private establishments to ensure at least 5% of their workforce is composed of PwDs. The only mandatory obligations for private entities under the Act are to publish an equal opportunities policy, participate in special employment exchanges, and establish a grievance redressal mechanism if they have a workforce exceeding 20 employees.

In this piece, we contend that the government’s incentive scheme, both in principle and in practice, falls short as a mechanism to induce the private sector to employ PwDs. We argue for a transition to a quota-based hiring system in the private sector, akin to the mandatory provisions already in place for state-owned enterprises.

Current incentive-based regulatory framework fails to address free-market inefficiencies in employing PwDs.

In classical economic theory, regulation is often seen as a last resort measure. Opponents of mandatory quotas for employing PwDs contend that if PwDs are valuable to the workforce, employers would naturally hire them on merits – based on their skills and qualifications, rendering quotas unnecessary. This perspective assumes perfect market conditions and information symmetry, no bias or stigma, and a level playing field between all candidates, where minimal government intervention, such as incentives, are sufficient to encourage hiring. However, incentives alone (often the softest form of regulatory intervention), fail to drive meaningful corporate action for several reasons.

One issue is the information asymmetry between open-minded employers and prospective PwD employees, which disrupts the condition of perfect knowledge in a perfect market. Employers are often unable to effectively signal their openness or the accommodations they are prepared to provide, leaving potential PwD employees uncertain about applying. Although Rule 8 mandates employers to publish an equal opportunities policy – including details on the selection process for PwD candidates, available workplace facilities, and accommodations – there is no mandatory requirement for any workplace to display this information on their websites. As an alternative, employers may dispense with the requirement by merely displaying the information at the workplace, an approach that effectively renders it inaccessible to many prospective PwD candidates and undermines its intended purpose entirely. This also assumes that there is compliance by employers of such disclosure norms in their true spirit, however, flagrant flouting and non-enforcement of the Act and Rules is a dismal reality.

While some initiatives such as the SEBI Business Responsibility and Sustainability Report (BRSR) attempt to bridge the gap in information about corporate compliance, their scope remains limited. The BRSR includes questions on compliance with equal opportunities policies and accessibility standards under the law, but it applies to only a small fraction of companies.  Even within this subset, the onus lies on candidates to navigate individual policies which is both time-consuming and inefficient. 

Further, hiring decisions often stem from deeply ingrained societal biases and prejudices, rather than objective assessments of the capabilities of PwDs. Employers frequently default to assumptions about higher costs or workplace disruptions, despite evidence showing that costs of accommodations are often minimal and yield significant productivity benefits.

The government’s sole incentive scheme to encourage private players to hire PwD was launched in 2008-2009. It covered contributions to the Employees’ Provident Fund (EPF) and Employees’ State Insurance (ESI) for up to three years for each PwD employee. However, by 2016, the scheme was reported (p. 65) to have seen limited success and it was revised to be more attractive to employers. One of the key shortcomings identified was the absence of a mandate for private sector employers to hire PwDs. The Standing Committee on Social Justice and Empowerment (2020-21) report on the Assessment of Scheme for Implementation of the Rights of Persons with Disabilities Act, 2016 noted (p. 73) that no budgetary allocation had been made for this scheme since 2016-2017. As things stand, the government obligation under Section 35 of the Act to provide incentives to employers in the private sector to ensure that at least five per cent. of their work force is composed of persons with benchmark disability is unmet. 

Currently, only 11.33% of employable PwDs in India are reported to be working – a figure that is likely overstated due to significant underreporting in the national census. Given these systemic market failures, a more direct intervention is required, one that mandates inclusion rather than merely encouraging it.

Mandatory Quotas in the Private Sector –  A Necessary Step to Correct Market Failures and  Achieving Genuine Workforce Inclusion

India has already embraced affirmative action to uplift marginalised communities such as through caste and gender based quotas and the 4% reservation for PwDs in government jobs under Section 34 of the Act. Extending similar requirements to the private sector would ensure that companies are not merely encouraged, but required to employ a minimum percentage of PwDs and ensure that they are not excluded from opportunities due to systemic barriers that go beyond their qualification.

Historically, international human rights law placed primary responsibility to uphold and protect human rights. However, the discourse is increasingly shifting toward corporate accountability. There is growing consensus that corporations, as powerful social and economic actors, have the capacity to both cause and remedy human rights violations. This recognition is reflected in the UN Guiding Principles on Business and Human Rights, which affirm that businesses have a responsibility to respect human rights and to prevent, mitigate, and remedy adverse impacts with which they are involved. 

The rationale for states serving as exemplars of human rights compliance is sound, particularly when the state is a major shareholder in public companies. However, many corporations, despite lacking state ownership, especially those that are publicly listed, possess comparable resources and should be held to similar standards, including through legally binding obligations such as employment quotas to ensure equitable access and inclusion for marginalized groups.

Implementing Mandatory Quotas Effectively

For mandatory quotas to be successfully implemented, accessibility and reasonable accommodations must be prioritized as a foundational requirement. As recognised by the Supreme Court, India faces significant challenges in ensuring accessibility for PwDs. In workplaces, the lack of accessible physical and digital infrastructure is particularly crucial. However, implementing necessary modifications can be costly and time-consuming, especially for smaller private enterprises.

Some companies may face genuine constraints in meeting their obligations to employ persons with disabilities, particularly where accessibility-related infrastructure changes are required, particularly as many companies are not in compliance with  Rule 15, and would require retrofitting at significant cost. Similarly, smaller enterprises may lack the financial capacity to procure assistive technologies or make necessary modifications to their workspaces. In such cases, it is essential that government support be extended to these businesses. This could include targeted subsidies for assistive technologies, tax incentives for expenditure on accessibility renovations, or grant-based schemes to support compliance. 

The government provides some support to employers under the Act, such as Special Employment Exchanges under Section 36, which facilitate connecting persons with benchmark disabilities to job vacancies. However, the provision’s broad language and its phrasing “vacancies appointed for persons with benchmark disabilities”, implicitly presupposes the existence of a designated quota, restricting its applicability to government establishments. Moreover, the Rules further confirm this inference by confining this obligation to government establishments., excluding private companies from its scope.

At the same time, support and assistance – the carrot – must be accompanied by enforcement mechanisms – the stick. Sanctions for non-compliance, such as fines on companies that fail to meet their hiring quotas and monitoring for failure to comply are essential. For example, the Act could introduce scaled fines for failing to meet quota obligations, holding larger corporations more accountable while allowing flexibility for smaller businesses. While the current Act includes provisions for penalties in cases of non-compliance with the Act, enforcement remains weak, resulting in lax adherence to the law.

Building on these measures, it is also important to consider how other countries have structured their quota systems to balance feasibility with accountability by differentiating between businesses based on their capacity to comply. While smaller enterprises may require support and flexibility, larger and more resourceful corporations should be held to higher standards of accountability.  As of 2019, a total of 103 countries worldwide have implemented some form of quota system for PwDs, with over 70% applying these measures to both public and private sectors. Many of these countries implement scaled compliance requirements or exemptions for smaller employers having lower workforce sizes. For instance, in Brazil, private sector companies are required to fulfil quotas ranging from 2% for those with 100-200 employees to 5% for those with over 1,000 employees. Germany mandates a 5% quota for severely disabled employees in all companies with more than 20 employees, while in Japan, companies with 40 employees or more are obligated to reserve a quota of 2.5% for disabled individuals. Drawing on international models, India can also design quota-based frameworks for private sector implementation, balancing accountability with feasibility by extending such obligations to “capable” corporations. 

Conclusion

The limitations of the current incentive-based framework highlight the need for a more robust solution. Quotas in the private sector can address market inefficiencies and promote inclusion, but they must be complemented by awareness, training, and accessibility measures. Still, they provide a vital starting point for building a more inclusive workforce. 

The benefits of quotas for private enterprises extend beyond compliance – they can transform workplace culture and foster trust. Gen-Z employees, who value diversity and inclusion, are likely to feel greater pride in working for organizations that employ PwDs. For PwDs, quotas send a clear message that companies are willing to invest in creating equitable opportunities, encouraging them to seek employment where they feel valued and supported.

For employers, hiring PwDs helps overcome initial biases and fears stemming from the unknown, gradually reducing resistance to employing more PwDs in the future. Learning to meet the diverse needs of employees with disabilities also prepares organisations for long-term inclusivity. 

Over time, as PwDs thrive in the workforce, their contributions will challenge societal misconceptions about their capabilities. This ripple effect has the potential to shift public perceptions, reduce prejudice, and inspire broader systemic change toward equity and inclusion. Through consistent and sustained efforts, and cultural shifts – both societal and corporate, the ultimate goal should be a future where inclusion becomes the norm and market inefficiencies no longer exist, eliminating the need for regulatory intervention. Until then, mandatory quotas remain a crucial step in ensuring lasting change.

**Saparya Sood is a doctoral research fellow at the Max Planck Institute for Research on Collective Goods in Bonn, Germany. Her research focuses on Business and Human Rights regulation through a law and economics lens, examining how corporate accountability frameworks, such as mandatory human rights due diligence laws, shape consumer response and corporate compliance behaviour. She holds a BBA LLB from Symbiosis Law School, Pune, and an LLM in European Law and Economics as an Erasmus+ scholar from the Universities of Rotterdam, Hamburg and Vienna. Prior to academia, she worked with leading law firms in India, gaining experience in corporate governance and compliance.

**Aditi Prakash is a legal consultant at RFKN Legal, where she works at the intersection of child rights and disability rights. A graduate of National Law University, Delhi, she began her career in corporate law before transitioning to public interest work. She has previously worked with the Delhi Lokayukta as a legal researcher, contributing to public accountability and governance.

**Disclaimer: The views expressed in this blog do not necessarily align with the views of the Vidhi Centre for Legal Policy.