Cabinet approves Rs 1.07 lakh cr Employment Linked Incentive scheme to create 3.5 cr jobs in 2 years

The central government on Tuesday approved an Employment Linked Incentive scheme with an outlay of Rs 1.07 lakh crore to create 3.5 crore jobs over the next two years through social security schemes run by the retirement fund body EPFO.

The ELI scheme to support job generation, enhance employability and social security across all sectors, with special focus on the manufacturing sector, was approved by the Union Cabinet in a meeting, chaired by Prime Minister Narendra Modi, Information & Broadcasting Minister Ashwini Vaishnaw said.

The scheme aims to incentivise the creation of more than 3.5 crore jobs in the country over two years, an official statement said.

The scheme will provide incentives to employees as well as employers to boost job creation.

Under the scheme, while the first-time employees will get one month's wage (up to Rs 15,000), the employers will be given incentives for a period of two years for generating additional employment, with extended benefits for another two years for the manufacturing sector.

The ELI scheme was announced in the Union Budget 2024-25 as part of the package of five schemes to facilitate employment, skilling and other opportunities for 4.1 crore youth with a total budget outlay of Rs 2 lakh crore.

The ELI scheme aims to incentivise the creation of more than 3.5 crore jobs in the country over a period of 2 years, it stated.

Out of these, 1.92 crore beneficiaries will be first timers, entering the workforce. The benefits of the scheme would be applicable to jobs created between August 1, 2025, and July 31, 2027.

The plan consists of two parts, with Part A focused on first timers (employees) and Part B focused on employers.

Targeting first-time employees registered with EPFO, this Part A will offer a one-month wage up to Rs 15,000 in two instalments.

Employees with salaries up to Rs 1 lakh will be eligible. The first instalment will be payable after 6 months of service, and the second instalment after 12 months of service and completion of a financial literacy programme by the employee.

"To encourage the habit of saving, a portion of the incentive will be kept in a savings instrument or deposit account for a fixed period and can be withdrawn by the employee at a later date. Part A will benefit around 1.92 crore first-time employees," the statement said.

Part B of the scheme will cover the generation of additional employment in all sectors, with a special focus on the manufacturing sector.

The employers will get incentives with respect to employees with salaries up to Rs 1 lakh.

The government will incentivise employers, up to Rs 3,000 per month, for two years, for each additional employee with sustained employment for at least six months. For the manufacturing sector, incentives will be extended to the 3rd and 4th years as well.

Establishments, which are registered with EPFO, will be required to hire at least two additional employees (for employers with less than 50 employees) or five additional employees (for employers with 50 or more employees) on a sustained basis for at least six months.

The benefit to the employer (per additional employment per month) will be up to Rs 1,000 for employees with a monthly wage of Rs 10,000, while this will be Rs 2,000 for employees with wages of more than Rs 10,000 and up to Rs 20,000.

Employees with wages up to Rs 10,000 will get a proportional incentive.

The benefit will be Rs 3,000 per month to the employers for employees with a wage of more than Rs 20,000 (up to a salary of Rs 1 lakh/month).

Part B (for employers) is expected to incentivise employers for the creation of additional employment for nearly 2.60 crore persons.

All payments to the first-time employees under part A of the scheme will be made through the DBT (Direct Benefit Transfer) mode using the Aadhar Bridge Payment System (ABPS).

Payments to employers under Part B will be made directly into their PAN-linked Accounts.

With the ELI scheme, the government intends to catalyse job creation in all sectors, particularly in the manufacturing sector, besides incentivising youth joining the workforce for the first time.

An important outcome of the scheme will also be the formalisation of the country’s workforce by extending social security coverage for crores of young men and women.

CII Director General Chandrajit Banerjee said, "ELI is a significant step towards boosting employment and formalising India's workforce. The ELI scheme opens doors for first-time job seekers, empowering them to contribute meaningfully to India's growth story. It empowers employers to expand their workforce and gives a decisive push to India's labour-intensive sectors".

FICCI President Harsha Vardhan Agarwal said that FICCI welcomes the ELI scheme as a transformative initiative aligned with the vision of Viksit Bharat.

The three-pronged approach, supporting first-time employment, manufacturing job creation, and employer incentives, promises to generate over two crore jobs in two years, he stated.

This scheme embodies the principles of productivity and participation, particularly benefiting MSMEs and young workers, he opined.