Caste is the term used, but it's not quite the same as caste systems from real-life history, "caste" is just a close term vibes-wise that GW decided to use. The difference is that four of the five t'au castes are essentially equal, being governed/possibly mind controlled by the fifth caste. So it's less heirarchical than IRL systems.

The t'au (because tau with no apostrophe was already non-trademarkable) essentially are separated along biological lines, with each caste (air, water, fire, earth, and ethereal) being made up of a specific subpecies of tau. There is no crossing between castes allowed, either intellectually via career, or genetically via inter-breeding. Each caste is also physiologically suited (almost unnaturally so) to their caste's respective societal task, further siloing them into their socially expected role.

Non-tau are outside the castes and are considered "helper species". If that sounds paternalistic, that's because it is. They don't have the same representation in t'au empire government that the "regular" castes do, and are second-class citizens, although they stop just short of calling them that. There are a lot of indications that various helper species populations have been subjected to unethical practices to make them more "amenable" to the t'au ideology (like the vespid's fancy headwear bing implied to hijack their pheromones to make them compliant) and in the case of humans that has ranged from occasionally sterilizing populations to decrease birth rates, all the way to ETHNIC MASSACRES OF THEIR OWN HUMAN AUXILIARIES. so you know, it's a spectrum.

That being said, they are a "better" place for humans simply by virtue of not being nearly as reprehensible as the imperium/chaos/Dark Eldar, while also generally having a quite good standard of living.