EMPLOYMENT LINKED INCENTIVE SCHEME from Vajirao & Reddy Institute

EMPLOYMENT LINKED INCENTIVE SCHEME

• The Employment Linked Incentive (ELI) Scheme was approved by the Union Cabinet on 1st July 2025.
• The scheme aims to promote employment generation, enhance employability, and improve social security across all sectors.
• It places special emphasis on boosting employment in the manufacturing sector.
• The ELI Scheme is part of the Prime Minister’s package of five flagship schemes announced in the Union Budget 2024–25 to benefit India’s youth.
• The scheme has a total financial outlay of ? 99,446 Crore.
• It will cover jobs created between 01 August 2025 and 31 July 2027.
• The government targets the creation of over 3.5 Crore jobs under the scheme within two years.

• The scheme aims to support the creation of formal employment across sectors.
• It seeks to improve employability through financial incentives and skilling
• One of its key objectives is to extend EPFO-linked social security coverage to a larger section of the workforce.
• The scheme also intends to formalize the labour force and promote long-term savings among workers.
• It aims to catalyse employment growth in the manufacturing sector, which is seen as a high-potential area for job creation.

• Part A targets first-time employees who are newly registered with the Employees' Provident Fund Organisation (EPFO).
• Employees with a monthly salary of up to ? 1 lakh are eligible to receive incentives.
• Each eligible employee will receive an incentive equivalent to one month's wage, up to a maximum of ? 15,000, disbursed in two installments.
  • The first installment will be given after 6 months of continuous service.
  • The second installment will be paid after 12 months of service and successful completion of a financial literacy programme.
• A portion of the incentive will be held in a savings deposit account to promote the habit of saving. This amount will be withdrawable by the employee after a specified period.
• All payments under Part A will be made through Direct Benefit Transfer (DBT) using the Aadhar Bridge Payment System (ABPS).
• The government expects that around 92 Crore first-time employees will benefit under this component

• Part B of the scheme provides financial incentives to employers for creating additional employment.
• The scheme covers employers in all sectors, with extended benefits for employers in the manufacturing sector.
• To qualify, employers must be registered with the EPFO.
• Employers with fewer than 50 employees are required to hire at least 2 additional employees to be eligible for the scheme.
• Employers with 50 or more employees must hire at least 5 additional employees on a sustained basis for at least 6 months.
• The scheme provides monthly incentives based on the EPF wage of the new employee as follows:

• The incentive will be paid for a period of two years for all sectors.
• For the manufacturing sector, the incentive period will be extended to the third and fourth years as well.
• Payments to employers will be made directly into their PAN-linked bank accounts.
• Part B is expected to support the generation of 6 Crore additional jobs.

• The ELI Scheme provides direct financial benefits to first-time workers as well as employers creating new jobs.
• It places a strong focus on the manufacturing sector, offering extended incentives to encourage job growth in this critical area.
• The scheme aims to formalize the workforce by bringing more workers under EPFO coverage, thereby enhancing social security.
• It incorporates elements of financial literacy and savings, contributing to the long-term financial well-being of young employees.
• The design of the scheme is inclusive, targeting both small and large employers across sectors.

• The scheme is projected to create over 3.5 Crore jobs in the country within two years.
• It is expected to benefit 92 Crore first-time entrants into the formal workforce.
• The ELI Scheme will help formalize employment, increasing the number of workers covered under EPFO and other social security benefits.
• It will contribute to financial inclusion through DBT transfers and mandatory financial literacy training.
• The manufacturing sector is likely to see significant employment growth due to the extended benefits provided under the scheme.