Employment Linked Incentive (ELI) Scheme

On July 2025, the Union Cabinet approved the Employment Linked Incentive (ELI) Scheme with a financial outlay of ?99,446 crore to generate over 3.5 crore jobs across India, with special emphasis on first-time employees and job creation in the manufacturing sector.

Employment Linked Incentive (ELI) Scheme

Objectives and Strategic Vision

• Addressing Structural Labour Market Challenges
  • Targeting low formalisation of the labour force.
  • Combating sluggish employment growth in the manufacturing sector.
  • Providing structured incentives for youth integration into formal workforce.
• Doubling as Social Security and Financial Inclusion Reform
  • Incentivising EPFO registration and continuous employment.
  • Encouraging financial literacy among first-time employees.
  • Ensuring savings through mandatory financial deposits.

Key features:

• Part A – Incentives for First-Time Employees
  • Coverage: First-time EPFO-registered employees with salaries up to ?1 lakh/month.
  • Incentive: One month’s EPF wage (up to ?15,000), disbursed in two instalments:
  • After 6 months of continuous service.
  • After 12 months + financial literacy completion.
  • Savings Link: Partial amount deposited in a savings instrument for long-term planning.
  • Targeted Beneficiaries: 1.92 crore workers.
• Part B – Incentives for Employers to Create and Retain Jobs
  • Employer Incentive (per new hire per month):
    • ?1,000 (salary up to ?10,000),
    • ?2,000 (?10,001–?20,000),
    • ?3,000 (?20,001–?1 lakh).
• Minimum hiring thresholds:
  • • At least 2 new employees (staff <50),
    • At least 5 new employees (staff ?50).
  • Duration: 2 years (all sectors), 4 years (manufacturing sector).
  • Projected Impact: Creation of 2.6 crore jobs.

Implementation Mechanism

• Disbursement Channels

• • Direct Benefit Transfer (DBT)-based approach to ensure transparency.
  • ABPS (Aadhaar-based) for employee incentives.
  • PAN-linked accounts for employer reimbursements.

• Compliance and Accountability
  • Incentives linked to employee retention and continuous employment for minimum 6–12 months.
  • EPFO and financial literacy as eligibility markers.

Broader Implications

• Formalisation of Labour Market
  • Integration of informal workers into social security mechanisms.
  • Long-term impact on EPF coverage and financial inclusion.
• Sectoral Focus and Economic Multiplier
  • Prioritisation of manufacturing aligns with India’s production-led growth strategy.
  • Encourages MSMEs and startups to expand workforce in a cost-effective manner.
• Concerns Raised
  • Trade unions (e.g., CITU) flagged potential misuse and inadequate accountability for employers.
  • Risk of substitution effect – replacing existing workers to avail incentives.