Cabinet approves Employment-Linked Incentive scheme to support formal job generation

Part A of the scheme focuses on first-time employees by providing them a wage subsidy of up to one month’s wage, up to a maximum amount of Rs 15,000, while Part B of the scheme has incentives for employers to create additional employment. Out of the total 3.5 crore employees expected to benefit from the scheme, around 1.92 crore persons are seen to be first-timers entering the workforce.

Targeting first-time employees registered with the Employees’ Provident Fund Organisation (EPFO), Part A will offer one-month EPF 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 six months of service and the second instalment will be payable 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a portion of the incentive will be kept in a savings instrument of deposit account for a fixed period and can be withdrawn by the employee at a later date,” the statement said.

Part B of the scheme is for generating additional employment in all sectors, with a special focus on the manufacturing sector. The employers will get incentives for 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 third and fourth years as well,” the statement said.

For EPF wage slab of additional employee up to Rs 10,000, an incentive of Rs 1,000 will be given to the employer; for wage slab of over Rs 10,000 and up to Rs 20,000, a benefit of Rs 2,000 will be given; and for wage over Rs 20,000 (up to salary of Rs 1 lakh/month), an incentive of Rs 3,000 will be provided.

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, it said.

All payments to the first-time employees under Part A of the scheme will be made through Direct Benefit Transfer (DBT) mode. Payments to the employers under Part B will be made directly into their PAN-linked accounts. The duration of the scheme will be for two years from August 1, 2025 to July 31, 2027.

The ELI scheme was first announced by Finance Minister Nirmala Sitharaman in Budget 2024-25 as part of the Prime Minister’s Package for Employment and Skilling that had a Budget outlay of Rs 2 lakh crore.