Cabinet Approves ₹1 Lakh Crore Employment Linked Incentive Scheme

In a major push to generate employment and formalize India’s workforce, the Union Cabinet Modi approved the Employment Linked Incentive (ELI) Scheme, with a total outlay of ₹99,446 crore. The scheme aims to create over 3.5 crore new jobs across sectors over two years, with a strong focus on the manufacturing sector and first-time employees.

Unveiled as part of the Union Budget 2024–25 under a ₹2 lakh crore employment and skilling package targeting 4.1 crore youth, the ELI Scheme is designed to incentivize both workers and employers through financial support, social security, and formal employment pathways.

Two-Part Scheme

The scheme is structured into two components:

Part A: Incentives for First-Time Employees

Targeting approximately 1.92 crore first-time workers, this segment offers a one-month EPF wage incentive up to ₹15,000, split into two installments. Employees earning up to ₹1 lakh/month and registered with the Employees’ Provident Fund Organisation (EPFO) are eligible.

• The first installment will be disbursed after six months of continuous employment.

• The second installment will follow after twelve months, subject to successful completion of a financial literacy program.

• A portion of the incentive will be held in a fixed savings account, encouraging long-term financial discipline.

Part B: Incentives for Employers

To promote additional hiring, particularly in the manufacturing sector, employers will receive incentives for each new employee earning up to ₹1 lakh/month and retained for at least six months.

• ₹1,000/month for EPF wages up to ₹10,000

• ₹2,000/month for wages between ₹10,001–₹20,000

• ₹3,000/month for wages above ₹20,000 up to ₹1 lakh

Incentives will be provided for two years, with an extended duration of four years for employers in the manufacturing sector. To qualify, EPFO-registered establishments must hire at least two additional employees (for firms with fewer than 50 workers) or five (for firms with 50 or more).

This component is expected to generate employment for nearly 2.6 crore persons.

Welcoming the announcement, Dr. Anish Shah, Immediate Past President of FICCI, said:

“FICCI welcomes the Employment Linked Incentive Scheme as a bold and timely step toward tackling India’s employment challenge. By incentivising first-time workers, boosting manufacturing, and encouraging employer participation, it reflects smart, inclusive policymaking. Its emphasis on dignity, security, and formalisation aligns deeply with industry aspirations. We commend the Government’s vision and commitment to creating meaningful jobs at scale.”

All payments to first-time employees under Part A will be made via Aadhaar-based Direct Benefit Transfer (DBT). Employer incentives under Part B will be credited directly into PAN-linked accounts, ensuring transparency and ease of access.

The scheme’s benefits will be applicable to jobs created between August 1, 2025, and July 31, 2027.

Through the ELI Scheme, the government aims to accelerate job creation across all sectors, with a strong emphasis on manufacturing. The scheme also seeks to encourage youth entering the workforce for the first time. A key outcome will be the formalisation of India’s labour force by expanding social security coverage to millions of young workers.