Wage differentials present among various groups and various sectors of the economy. The primary motivation of this paper is to investigate the structure of wage inequality and employment in India with 61st round (2004–05) household survey unit level data on employment and unemployment conducted by the National Sample Survey Organisation (NSSO). The study accounts comprehensively different dimensions of wage inequality as observed in the Indian labour market by using Gini inequality index. In analysing the structure of wage inequality we have considered three major sectors, the public sector, private formal sector and informal sector. Wage inequality in the private formal sector is higher than the inequality even in the informal sector. The wage differentials in India are higher in rural as compared to urban areas, and are higher among women than among men workers. The wage gap by gender is the highest in the public sector. Simple decompositions of wage inequality by sectors reveal that the significant part of wage inequality is accounted for by inequality among individuals between rather than within sectors for every type of working people. By estimating wage regression model it is observed that education explains more the expected wage and wage differences in the Indian labour market.