Why in news?
On 1 July 2025 the Union Cabinet approved the Employment Linked Incentive (ELI) Scheme to generate more than 3.5 crore jobs over two years. The scheme aims to boost formal employment, especially for first‑time workers, and strengthen social security.
Key features
- Outlay: ₹99,446 crore for two years (from 1 August 2025 to 31 July 2027). The scheme is part of a broader skilling and employment package announced in the Union Budget 2024‑25.
- Two‑part structure:
- Part A – Incentive to first‑time employees:
- Targets new employees registered with the Employees’ Provident Fund Organisation (EPFO). Eligible workers (earning up to ₹1 lakh per month and with EPF wages up to ₹15,000) receive a one‑month wage incentive (max ₹15,000) in two instalments.
- The first instalment is paid after six months of continuous service and completion of a financial‑literacy programme. The second instalment is paid after 12 months and is deposited in a savings instrument to instil long‑term saving habits.
- This part is expected to benefit about 1.92 crore first‑time employees.
- Part B – Support to employers:
- Incentivises employers to create additional jobs in all sectors, with a focus on manufacturing. Employers receive incentives for workers with salaries up to ₹1 lakh.
- Benefit per new employee per month: ₹1,000 for those earning up to ₹10,000; ₹2,000 for those earning ₹10,001–₹20,000; and ₹3,000 for those earning above ₹20,000 (up to ₹1 lakh).
- The incentive is payable for two years; for the manufacturing sector it extends to the third and fourth years.
- Eligible establishments must be EPFO‑registered and should hire at least two additional employees (for firms with fewer than 50 employees) or five additional employees (for firms with 50 or more employees) and retain them for six months.
- This part aims to create around 2.6 crore jobs.
- Part A – Incentive to first‑time employees:
- Payment mechanism: Incentives are transferred via Direct Benefit Transfer (DBT) using the Aadhaar‑based payment system, ensuring transparency and reducing leakage.
- Financial literacy component: The scheme requires first‑time employees to complete a basic financial‑education module to receive the second instalment, promoting responsible money management.
Expected benefits
- Creates new formal jobs, reducing under‑employment and informal work.
- Encourages employers to expand operations and hire more workers, particularly in labour‑intensive manufacturing.
- Boosts social security coverage and inculcates savings habits among new entrants to the workforce.
- Supports the government’s objective of accelerating economic growth through employment generation.