Employment Linked Incentive Scheme, Objectives, Features, Eligibility, Components

Employment Linked Incentive Scheme (ELI Scheme) is a landmark initiative approved by the Union Cabinet under the leadership of Prime Minister Shri Narendra Modi. Announced as a major employment-generating reform in the Union Budget 2024–25, the scheme is designed to enhance job creation, employability, and social security across India, with a particular emphasis on the manufacturing sector.

The Employment Linked Incentive Scheme not only rewards first-time employees but also provides financial incentives to employers hiring additional workers.

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What is Employment Linked Incentive Scheme?

The Employment Linked Incentive Scheme is a centrally sponsored scheme that seeks to provide incentives to employers for generating new employment and to first-time employees for entering the formal workforce. With a financial outlay of ₹99,446 crore, the scheme aims to create more than 3.5 crore jobs over a period of two years, from August 1, 2025, to July 31, 2027.

It is part of a broader employment, skilling, and entrepreneurship package targeting 4.1 crore youth, with a total budget allocation of ₹2 lakh crore. The ELI Scheme promotes job formalisation and improves access to social security by ensuring EPFO registration and Aadhar-based identification.

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Employment Linked Incentive Scheme Overview
Component	Details
Scheme Name	Employment Linked Incentive Scheme (ELI Scheme)
Announced In	Union Budget 2024–25
Approved By	Union Cabinet chaired by Prime Minister Narendra Modi
Total Outlay	₹99,446 Crore
Implementation Period	August 1, 2025 – July 31, 2027
Target Job Creation	Over 3.5 Crore Jobs
Target First-Time Employees	1.92 Crore Beneficiaries
Eligibility (Employees)	EPFO-registered, salary up to ₹1 Lakh/month, Aadhaar-seeded UAN
Eligibility (Employers)	EPFO-registered establishments, hire 2–5 additional employees, sustained for ≥6 months
Scheme Structure	Two Parts: Part A (Employees), Part B (Employers)
Part A – Employees’ Benefit	One-month EPF wage up to ₹15,000 in two instalments via DBT
Part A – Payment Conditions	1st installment after 6 months; 2nd after 12 months + completion of financial literacy program
Part B – Employers’ Incentive	Up to ₹3,000/month per additional employee for 2 years (4 years for the manufacturing sector)
EPF Wage-Based Incentives	– Up to ₹10,000: ₹1,000/month – ₹10,001–₹20,000: ₹2,000/month – ₹20,001–₹1,00,000: ₹3,000/month
Disbursement Mechanism	– Employees: Direct Benefit Transfer (DBT) via Aadhaar-Based Payment System (ABPS) – Employers: PAN-linked account transfers
Special Focus	Manufacturing sector – Extended incentives for 3rd and 4th years
Associated Benefits	Formalisation of workforce, increased social security coverage, and financial literacy
Part of PM Package	Included in PM’s 5-scheme package for 4.1 Crore youth with total ₹2 Lakh Crore allocation

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Objectives of the ELI Scheme

The ELI Scheme primarily seeks to:

Create more than 3.5 crore jobs between August 1, 2025, and July 31, 2027.
Bring 1.92 crore first-time employees into the formal workforce.
Incentivize employers, particularly in the manufacturing sector, to create additional jobs.
Extend social security coverage and encourage financial literacy among new employees.
Promote inclusive and sustainable employment growth in India.

Key Features of Employment Linked Incentive Scheme

Some of the major Employment Linked Incentive Scheme features include:

First-time employees registered with EPFO will receive one month’s EPF wage, up to ₹15,000, in two installments.
Employers will receive monthly incentives of up to ₹3,000 for each new hire retained for at least six months.
Incentives will be extended for four years in the manufacturing sector, and for two years in other sectors.
The incentive structure is based on EPF wage slabs, ranging from ₹1,000 to ₹3,000 per employee per month.
Disbursement through Direct Benefit Transfer (DBT) using Aadhaar Bridge Payment System (ABPS) for employees and PAN-linked accounts for employers.

Components of the ELI Scheme

The Employment Linked Incentive Scheme is a two-part structure, tailored to address both supply and demand in the labour market and to target different beneficiaries:

Part A – Incentives to First-Time Employees

Applicable to individuals registering with the Employees’ Provident Fund Organisation (EPFO) for the first time.
Eligible employees must have a salary of up to ₹1 lakh/month.
Employees will receive one month’s EPF wage (maximum ₹15,000) in two installments:
- First installment: After 6 months of continued service.
- Second installment: After 12 months and successful completion of a financial literacy program.
Part of the amount will be deposited in a savings instrument to promote financial discipline.

Estimated beneficiaries under Part A: 1.92 crore first-time employees.

Part B – Incentives to Employers

Employers hiring at least 2 additional employees (if the current workforce < 50) or 5 additional employees (if the workforce ≥ 50) are eligible.
Incentive eligibility applies to employees with salaries up to ₹1 lakh/month who are retained for at least 6 months.
Financial incentives to employers:
- ₹1,000/month for EPF wage up to ₹10,000
- ₹2,000/month for EPF wage between ₹10,001–₹20,000
- ₹3,000/month for EPF wage above ₹20,000 and up to ₹1 lakh
Special focus on the manufacturing sector: Incentives extended to the 3rd and 4th year.

Estimated employment generated under Part B: 2.60 crore additional jobs.

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Who is Eligible for the ELI Scheme?

To be eligible for the Employment Linked Incentive Scheme, the following conditions must be met:

For Employees

Must be a first-time worker registered with EPFO.
Should have a salary not exceeding ₹1 lakh per month.
Must complete 6 and 12 months of continuous service.
Aadhaar and bank accounts must be seeded with UAN (Universal Account Number).

For Employers

Establishments must be registered with EPFO.
Should employ the required number of additional workers.
Must ensure employees stay in service for a minimum of six months.
Employers from all sectors are eligible, with extended incentives for the manufacturing sector.

How to Apply For Employment Linked Incentive Scheme

To apply for the Employment Linked Incentive Scheme, eligible employers and first-time employees must:

Register under EPFO with proper Aadhaar-PAN linkage.
Maintain employment for a minimum of 6 months to qualify for each installment of the incentive.
Employers must track employee data, payroll, and EPF contributions accurately for verification.

The payment mechanism is digital:

For employees: Payments through Direct Benefit Transfer (DBT) via Aadhaar-Based Payment System (ABPS).
For employers: Direct credit to PAN-linked bank accounts.

Economic and Social Impact Through ELI Scheme

The ELI Scheme is balanced to make a lasting impact by:

Facilitating the transition from informal to formal employment.
Strengthening the manufacturing sector, which holds immense potential for mass employment.
Enhancing financial inclusion and literacy among first-time job seekers.
Offering incentives to employers that may stimulate further private-sector growth and entrepreneurial hiring.

Criticism and Industry Response

While industry experts have praised the scheme as a bold step toward boosting job creation, some trade unions have criticised it. Organisations like the Centre of Indian Trade Unions (CITU) have raised concerns, alleging that the scheme may disproportionately benefit employers at the cost of public funds. Nonetheless, government officials have repeated that the scheme’s intent is youth empowerment and economic strengthening.

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Conclusion

The Employment Linked Incentive Scheme stands as a pivotal strategy to address India’s employment challenges. By providing dual incentives to both first-time employees and employers, the scheme is expected to accelerate job creation, foster formal workforce participation, and lay the foundation for a skilled, secure, and future-ready labor market. With its robust design and inclusive focus, the ELI Scheme is more than just a policy—it’s a blueprint for India’s economic and social transformation.

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Employment Linked Incentive Scheme FAQs

It is a government initiative offering financial support to both employers and first-time employees to boost formal job creation.

Employment-linked incentive schemes are government programs designed to promote job creation by rewarding employers and supporting new workers.

First-time EPFO-registered employees earning up to ₹1 lakh/month and employers hiring additional staff as per EPFO norms are eligible for the ELI Scheme.

Employees must register with EPFO and link Aadhaar; employers must maintain required additional hires and apply via EPFO-linked portals for benefits.

Employers get ₹1,000–₹3,000/month per new hire, and employees get up to ₹15,000 in two installments after sustained employment and a financial literacy program.

Key features include support for first-time employees, extended employer incentives in manufacturing, DBT payments, and EPFO-based eligibility tracking.

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Employment Linked Incentive Scheme, Objectives, Features, Eligibility, Components

What is Employment Linked Incentive Scheme?

Objectives of the ELI Scheme

Key Features of Employment Linked Incentive Scheme

Components of the ELI Scheme

Part A – Incentives to First-Time Employees

Part B – Incentives to Employers

Who is Eligible for the ELI Scheme?

For Employees

For Employers

How to Apply For Employment Linked Incentive Scheme

Economic and Social Impact Through ELI Scheme

Criticism and Industry Response

Conclusion

Employment Linked Incentive Scheme FAQs

What is Employment Linked Incentive Scheme?

What are employment-linked incentive schemes?

Who is eligible for the ELI scheme?

Employment linked incentive scheme how to apply?