Employment Linked Incentive (ELI) Scheme 2025: A Catalyst for Job Creation and Economic Growth in India

Q: Q. What is the Employment Linked Incentive (ELI) Scheme 2025?

The ELI Scheme 2025 is a Government of India initiative to create over 3.5 crore formal jobs between August 1, 2025, and July 31, 2027, by providing financial incentives to first-time employees and employers, with a focus on formalization and manufacturing.

Q: Q. What is the financial outlay of the scheme?

The scheme has a budget of ₹99,446 crore, part of a larger ₹2 lakh crore package for employment, skilling, and entrepreneurship.

The Employment Linked Incentive (ELI) Scheme 2025, approved by the Union Cabinet on July 1, 2025, with a financial outlay of ₹99,446 crore, represents a transformative initiative by the Government of India to address the pressing challenges of unemployment, underemployment, and informal labor markets. Announced as part of the Union Budget 2024-25, this ambitious scheme aims to create over 3.5 crore formal jobs between August 1, 2025, and July 31, 2027, with a special focus on first-time employees and the manufacturing sector. By providing financial incentives to both employers and employees, the ELI Scheme seeks to formalize the workforce, enhance employability, and promote inclusive economic growth. This article explores the objectives, structure, eligibility, benefits, and potential impact of the ELI Scheme, positioning it as a cornerstone of India’s vision for a robust and sustainable labor market.

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Employment Linked Incentive (ELI) Scheme: Background and Context

India, with its youthful demographic dividend, faces significant employment challenges. As of 2023, over 47% of the working-age population was either unemployed, underemployed, or engaged in low-skill jobs, particularly in the informal sector. Despite initiatives like Make in India and the Production Linked Incentive (PLI) Scheme, job creation has not kept pace with economic growth. The PLI Scheme, launched in 2020 with a ₹2 lakh crore outlay, incentivized production but often led to capital-intensive investments rather than labor-intensive job creation. Similarly, corporate tax cuts in 2019 failed to translate into significant employment gains, as companies prioritized equipment over hiring. These shortcomings underscored the need for a targeted employment-focused policy, leading to the introduction of the ELI Scheme as part of a broader ₹2 lakh crore package for employment, skilling, and entrepreneurship aimed at benefiting 4.1 crore youth over five years.

Employment Linked Incentive (ELI) Scheme

The ELI Scheme addresses critical labor market issues, including low formalization, slow job growth in manufacturing, and limited incentives for first-time workforce entrants. By aligning with the Employees’ Provident Fund Organisation (EPFO) and leveraging Aadhaar-based identification, the scheme ensures transparency and accountability in its implementation, fostering a formalized and inclusive labor ecosystem.

Government launched 20000 crore-drone scheme

Employment Linked Incentive (ELI) Scheme Highlights

Scheme	Employment Linked Incentive (ELI) Scheme 2025
Financial Outlay	₹99,446 crore allocated for the Employment Linked Incentive (ELI) Scheme 2025.
Job Creation Target	Aims to create over 3.5 crore formal jobs from August 1, 2025, to July 31, 2027.
First-Time Employees	Supports 1.92 crore new EPFO registrants with a one-month wage subsidy (up to ₹15,000).
Employer Incentives	Reimburses up to ₹3,000/month for two years (four years in manufacturing) for EPFO contributions per additional hire.
Manufacturing Focus	Targets 30 lakh jobs in the manufacturing sector to boost Make in India.
Eligibility for Employees	First-time EPFO registrants with salaries up to ₹1 lakh/month qualify for subsidies.
Employer Eligibility	EPFO-registered firms hiring at least 2 (for <50 employees) or 5 (for ≥50 employees) additional workers.
Payment Mode	Incentives disbursed via Direct Benefit Transfer (DBT) using Aadhaar Bridge Payment System.
Financial Literacy	Second installment of employee subsidy requires completion of an online financial literacy course.
Inclusive Growth	Promotes youth and women’s participation, supported by initiatives like working women’s hostels and creches.

Yeshasvini scheme for women

Objectives of the Employment Linked Incentive (ELI) Scheme 2025

The Employment Linked Incentive (ELI) Scheme 2025, approved by the Government of India, is designed to address unemployment, formalize the workforce, and stimulate economic growth. The key objectives of the scheme are:Generate Formal Employment: Create over 3.5 crore formal jobs between August 1, 2025, and July 31, 2027, including 1.92 crore jobs for first-time employees, to reduce unemployment and underemployment.

Promote Workforce Formalization: Increase enrollment in the Employees’ Provident Fund Organisation (EPFO) to extend social security benefits, such as provident funds and pensions, to millions of workers, reducing reliance on informal employment.
Support First-Time Employees: Provide financial incentives, including a one-month wage subsidy (up to ₹15,000), to ease the transition of new entrants into the formal workforce and enhance their financial stability.
Incentivize Employers: Encourage businesses, particularly MSMEs and manufacturing units, to hire additional workers by reimbursing EPFO contributions (up to ₹3,000 per month for two years, extendable to four years in manufacturing).

More jobs, More support for Yuva Shakti
With the Employment Linked Incentive (ELI) Scheme, the government intends to catalyze job creation in all sectors, besides incentivizing youth joining the workforce for the first time.#ELI4ViksitBharat pic.twitter.com/LxOT20o3xk
— Ministry of Labour & Employment, GoI (@LabourMinistry) July 1, 2025

Boost Manufacturing Sector: Drive job creation in the manufacturing sector to support India’s Make in India and Atmanirbhar Bharat initiatives, fostering industrial growth and global competitiveness.
Enhance Skill Development and Financial Literacy: Promote employability and financial discipline among new employees through mandatory online financial literacy courses and savings mechanisms linked to incentives.
Foster Inclusive Growth: Increase labor force participation, especially among youth and women, by aligning with initiatives like working women’s hostels and creche facilities, ensuring equitable economic opportunities.

PM surya ghar muft bijli yojana

Structure of the ELI Scheme

The ELI Scheme is structured into two main components: Part A, which targets first-time employees, and Part B, which incentivizes employers for additional hiring. Additionally, the scheme is supported by three sub-schemes announced in the Union Budget 2024-25, each addressing specific aspects of employment generation.

Part A: Support for First-Time Employees

Part A focuses on individuals entering the formal workforce for the first time through EPFO registration. Key features include:

Eligibility: Employees with monthly salaries up to ₹1 lakh who are newly enrolled in the EPFO.
Incentive: A one-month wage subsidy, capped at ₹15,000, disbursed in two installments:The first installment is payable after six months of continuous service.
The second installment is disbursed after 12 months, contingent on the completion of an online financial literacy course.
Savings Mechanism: A portion of the incentive is deposited into a savings instrument or fixed deposit account to promote financial discipline, withdrawable at a later date.
Payment Mode: Disbursements are made via Direct Benefit Transfer (DBT) using the Aadhaar Bridge Payment System (ABPS).
Beneficiaries: Approximately 1.92 crore first-time employees are expected to benefit, with an annual target of 1 crore beneficiaries over two years.

This component aims to ease the transition for freshers, who often face a learning curve before becoming fully productive, by providing financial support and encouraging formal sector participation.

Part B: Incentives for Employers

Part B targets employers to stimulate additional hiring across all sectors, with extended benefits for the manufacturing sector. Key features include:

Eligibility:

Establishments registered with the EPFO.
Employers with fewer than 50 employees must hire at least two additional workers, while those with 50 or more employees must hire at least five.
New hires must be retained for at least six months.

Incentives:

Employers receive reimbursements of up to ₹3,000 per month for two years toward EPFO contributions for each additional employee, based on wage slabs:₹1,000 for wages up to ₹10,000.
₹2,000 for wages between ₹10,000 and ₹20,000.
₹3,000 for wages above ₹20,000 and up to ₹1 lakh.
In the manufacturing sector, incentives extend to the third and fourth years.
For employers creating over 1,000 jobs, reimbursements are made quarterly.
Payment Mode: Funds are transferred directly to PAN-linked employer accounts via DBT.
Beneficiaries: Expected to create approximately 2.6 crore jobs, with 30 lakh in manufacturing and 50 lakh across other sectors.

This component reduces hiring costs, particularly for MSMEs and large employers, making it financially viable to expand workforces.

Three Sub-Schemes

The ELI Scheme encompasses three targeted sub-schemes:

Scheme A: First-Time Employment

Provides a one-month wage subsidy (up to ₹15,000) for first-time employees across all formal sectors.
Employees must complete a financial literacy course to claim the second installment.
Employers must refund the subsidy if employment is terminated within 12 months.

Scheme B: Job Creation in Manufacturing

Incentivizes hiring in the manufacturing sector with incentives (8–24% of EPFO contributions) over four years for both employees and employers.
Targets corporate and non-corporate entities with a three-year EPFO contribution record.
Expected to benefit 30 lakh youth.

Scheme C: Support to Employers

Covers additional employment in all sectors for employees earning up to ₹1 lakh per month.

Reimburses employers up to ₹3,000 per month for two years toward EPFO contributions.
Expected to incentivize the hiring of 50 lakh persons.

Eligibility and Compliance

To avail of ELI benefits, employees and employers must meet specific requirements:

Employees:

Must be first-time EPFO registrants (for Part A and Scheme A/B).
Must have salaries up to ₹1 lakh per month.
Must complete UAN activation and Aadhaar-bank account seeding by June 30, 2025.
Must complete a financial literacy course for the second installment under Part A.

Employers:

Must be registered with the EPFO.
Must meet minimum hiring thresholds (two or five additional employees, depending on workforce size).
Must maintain new hires for at least six months.
Must refund subsidies if employment is terminated within 12 months (for Scheme A).

The Ministry of Labour and Employment will issue detailed guidelines for registration, compliance, and disbursement, with the EPFO overseeing implementation through UAN and Aadhaar linkages.

Economic and Social Impact

The ELI Scheme is poised to have far-reaching economic and social impacts:

Economic Growth: By formalizing employment, the scheme ensures stable incomes, increasing consumer spending and creating a multiplier effect. Higher demand stimulates production, leading to further job creation and increased tax revenues for public investments.
Labor Market Transformation: The scheme addresses the high prevalence of informal work (47% of the workforce in 2023) by promoting EPFO enrollment, extending social security benefits like provident funds and pensions to millions of young workers.
Manufacturing Boost: Extended incentives for the manufacturing sector align with India’s ambition to become a global manufacturing hub, enhancing competitiveness and reducing reliance on capital-intensive investments.
Youth and Women Empowerment: By targeting first-time employees and supporting initiatives like working women’s hostels and creche facilities (announced in Budget 2024-25), the scheme promotes inclusive labor force participation.
Skill Development: The mandatory financial literacy course and alignment with skilling initiatives (e.g., the ₹60,000 crore ITI upgradation scheme) enhance employability and long-term career prospects.

Challenges and Considerations

While the ELI Scheme is a bold step, its success hinges on effective implementation and addressing potential challenges:

Administrative Efficiency: The EPFO must streamline UAN activation and Aadhaar seeding processes to prevent delays in benefit disbursement.
Employer Compliance: Ensuring employers maintain hiring thresholds and refund subsidies for early terminations requires robust monitoring mechanisms.
Regional Disparities: Job creation may be concentrated in industrial hubs, necessitating targeted interventions for underdeveloped regions.
Sustainability: The two-year implementation period (2025–2027) may need extension to sustain long-term job growth.
Awareness: Effective communication is critical to ensure employers and employees, particularly in MSMEs, are aware of and can access the scheme’s benefits.

Conclusion

The Employment Linked Incentive Scheme 2025 is a game-changer for India’s labor market, addressing longstanding challenges of unemployment, informal work, and skill mismatches. With a ₹99,446 crore outlay, the scheme’s dual focus on first-time employees and employers, coupled with its emphasis on manufacturing and formalization, aligns with India’s economic aspirations under the Make in India and Atmanirbhar Bharat frameworks. By creating over 3.5 crore jobs, extending social security, and fostering skill development, the ELI Scheme lays the foundation for a resilient and inclusive labor market. If implemented efficiently, it has the potential to transform India’s employment landscape, empower its youth, and drive sustainable economic growth. As the scheme rolls out from August 1, 2025, its success will depend on robust execution, stakeholder collaboration, and continuous evaluation to ensure it delivers on its transformative promise.

Employment Linked Incentive (ELI) Scheme 2025 FAQ

Q. What is the Employment Linked Incentive (ELI) Scheme 2025?

The ELI Scheme 2025 is a Government of India initiative to create over 3.5 crore formal jobs between August 1, 2025, and July 31, 2027, by providing financial incentives to first-time employees and employers, with a focus on formalization and manufacturing.

Q. What is the financial outlay of the scheme?

The scheme has a budget of ₹99,446 crore, part of a larger ₹2 lakh crore package for employment, skilling, and entrepreneurship.

Q. Who is eligible for the employee incentives under Part A?

First-time employees registered with the EPFO, earning up to ₹1 lakh per month, who complete UAN activation and Aadhaar-bank account seeding by June 30, 2025.

Q. What benefits do first-time employees receive?

A one-month wage subsidy (up to ₹15,000), paid in two installments: after 6 months and 12 months (second installment requires completing an online financial literacy course).

Q. Who can avail of employer incentives under Part B?

EPFO-registered establishments hiring at least 2 additional employees (for firms with <50 employees) or 5 (for firms with ≥50 employees), with new hires retained for at least 6 months.

Q. What incentives are provided to employers?

Reimbursement of up to ₹3,000 per month for two years (four years in manufacturing) toward EPFO contributions per additional employee, based on wage slabs (₹1,000–₹3,000).

Q. How are payments disbursed under the scheme?

Payments are made via Direct Benefit Transfer (DBT) using the Aadhaar Bridge Payment System for employees and PAN-linked accounts for employers.

Q. What are the three sub-schemes under ELI?

Scheme A: Supports first-time employees with wage subsidies. Scheme B: Promotes job creation in manufacturing. Scheme C: Incentivizes additional hiring across all sectors.

Q. What happens if an employer terminates an employee early?

Employers must refund the subsidy if a first-time employee is terminated within 12 months (applicable to Scheme A).

Q. How does the scheme promote inclusivity?

It targets youth and women through job creation and aligns with initiatives like working women’s hostels and creche facilities to boost female workforce participation.

Q. Is there a focus on any specific sector?

Yes, the scheme emphasizes manufacturing, with extended incentives (up to four years) to create 30 lakh jobs, aligning with Make in India.

Q. How many jobs are targeted for first-time employees?

Approximately 1.92 crore first-time employees are expected to benefit, with an annual target of 1 crore over two years.