Cabinet Unveils Ambitious ELI Scheme to Boost Job Creation and Formalise Workforce

NEW DELHI: The Union Cabinet, led by Prime Minister Narendra Modi, has today given its approval to the Employment Linked Incentive (ELI) Scheme, a landmark initiative designed to significantly bolster job creation, enhance employability, and extend social security across all sectors, with a particular strategic focus on the burgeoning manufacturing sector.

The ELI Scheme, a central component of the Prime Minister’s five-scheme package for youth employment and skilling outlined in the Union Budget 2024-25, carries a substantial outlay of Rs 99,446 Crore. Its overarching goal is to catalyse the creation of over 3.5 Crore jobs nationwide within the next two years, specifically targeting employment generated between August 1, 2025, and July 31, 2027. A substantial 1.92 Crore of these anticipated beneficiaries are expected to be first-time entrants into the workforce.

The scheme operates through a dual-pronged approach, offering distinct incentives for both new employees and their employers.

For first-time employees registered with the EPFO, Part A of the scheme provides a one-month EPF wage, capped at Rs 15,000. This incentive will be disbursed in two instalments: the first after six months of service and the second after 12 months, contingent on the employee’s completion of a financial literacy program. To encourage responsible financial habits, a portion of this incentive will be held in a savings instrument or deposit account for a fixed period, accessible to the employee at a later date. This segment of the scheme is anticipated to benefit approximately 1.92 crore individuals.

Part B of the scheme is dedicated to supporting employers in generating additional employment across all sectors, with a pronounced emphasis on the manufacturing domain. Employers will receive incentives for employees earning up to Rs 1 lakh per month. The government will provide up to Rs 3,000 per month for two years for each additional employee whose sustained employment lasts for at least six months. Critically, for the manufacturing sector, these incentives will be extended for an additional two years, covering the third and fourth years of employment, underscoring the government’s commitment to industrial growth.

To qualify for these employer incentives, establishments registered with EPFO are required to hire at least two additional employees (for those with fewer than 50 existing employees) or five additional employees (for those with 50 or more employees), ensuring these new hires are sustained for a minimum of six months. The incentive structure for employers varies based on the EPF wage of the additional employee: up to Rs 1,000 per month for an EPF wage of up to Rs 10,000; Rs 2,000 per month for wages between Rs 10,000 and Rs 20,000; and Rs 3,000 per month for wages exceeding Rs 20,000 (up to Rs 1 lakh). This part of the scheme is expected to incentivise employers the create nearly 2.60 crore additional employment opportunities.

All payments to first-time employees under Part A will be directly transferred using the Aadhaar Bridge Payment System (ABPS), ensuring transparency and efficiency. Payments to employers under Part B will be directly credited to their PAN-linked accounts.

Beyond immediate job creation, the ELI Scheme aims to foster a more formalised workforce in India by expanding social security coverage to crores of young men and women. This comprehensive approach is set to not only inject dynamism into the job market but also provide a safety net and long-term security for a significant segment of the country’s youth.