Employment Linked Incentive (ELI) Scheme

02.07.2025

Employment Linked Incentive (ELI) Scheme

Context

To address unemployment and promote formal jobs, the government launched the Employment Linked Incentive (ELI) Scheme with large financial support and implementation from August 2025.

About the News

• The government unveiled this initiative as part of the Union Budget 2024–25 to boost job creation through targeted incentives
• The ELI Scheme aims to encourage formal employment, especially in the manufacturing sector.
• It is similar in spirit to the Production Linked Incentive (PLI) scheme.
• It targets 1.92 crore first-time employees entering formal jobs.
   

Key Characteristics of the Scheme

• Eligibility: Only for first-time employees with salaries up to ₹1 lakh/month, registered under EPFO.
   → Encourages shift from informal to formal employment.
• Timeline: Scheme will run from 1st August 2025 to 31st July 2027.
   → A fixed two-year incentive window.
• Direct Wage Support: Employees may receive ₹15,000 as initial financial assistance in installments.
   → Helps ease the cost of starting formal work.
• EPFO Contribution Support: Government pays both employer and employee’s EPF share for 4 years.
   → Reduces long-term burden on employers.
• Hiring Incentive for Employers: Firms hiring at ₹1 lakh/month will get ₹3,000 per hire.
   → Encourages businesses to expand their workforce.
• Additional Programs: Skill training and internship schemes support workforce readiness.
   → Prepares youth for the formal job market.
   

Significance of the Scheme

1. The scheme goes beyond wage support, aiming to formalise employment and enhance workforce skills across sectors.
2. It mandates EPFO registration, bringing informal workers into formal employment and the social security framework.
3. Financial literacy promotion under the scheme supports long-term inclusion and economic empowerment of low-income workers.
4. Industry associations view the scheme positively, calling it a step toward inclusive and structured labour market reforms.
5. Experts suggest it marks a shift toward employment models that link incentives with formal workforce participation.

Challenges

• Identification of First-Time Employees: Tracking prior informal employment is tough.
   → Example: A contract worker with no EPF record may appear eligible.
• Implementation in Small Enterprises: Smaller firms may not register with EPFO.
   → Example: MSMEs in rural areas avoiding formal processes.
• Budget Utilisation Monitoring: Ensuring ₹99,000 crore is used efficiently is complex.
   → Example: Risk of duplicate benefit claims or fraud.
• Job Retention: Employees may leave after incentives end.
   → Example: Workers might switch jobs after getting wage support.

Way Forward

• Use Aadhaar-linked EPFO verification for transparent implementation.
   → Example: A single EPF number helps avoid duplicate benefit claims.
• Awareness Drives for MSMEs on registration and compliance benefits.
   → Example: Conduct EPFO registration workshops in tier-2 cities.
• Third-party audit of disbursements for better accountability.
   → Example: Independent agencies can check whether companies actually hired.
• Link skilling with ELI hiring through local employment exchanges.
   → Example: Trained interns from Skill India directly hired under ELI.
   

Conclusion

The ELI Scheme is a timely initiative to strengthen India’s formal job ecosystem. With proper implementation and monitoring, it can create secure jobs and empower first-time workers across sectors.