Employment Linked Incentive (ELI) Scheme 2025: A Historic Push for Job Creation and Formalization

🏛 Historical Context

India's employment landscape has long been dominated by the informal sector, with over 80% of workers lacking access to social security. Previous initiatives such as the Pradhan Mantri Rojgar Protsahan Yojana (PMRPY) and Production Linked Incentive (PLI) Scheme focused on incentivizing formal job creation and boosting industry productivity. While PMRPY subsidized the EPF contribution of employers for new hires, the PLI Scheme rewarded manufacturers based on incremental sales, indirectly supporting employment.

The COVID-19 pandemic disrupted the economy and labor market, highlighting the urgent need for secure, formal employment, especially for the youth. In response, the Union Budget 2024-25 unveiled a ₹2 Lakh Crore package covering five employment-linked initiatives to skill, support, and secure jobs for over 4.1 crore youth.

✅ Launch of the ELI Scheme

On July 1, 2025, the Union Cabinet, chaired by Prime Minister Narendra Modi, approved the Employment Linked Incentive (ELI) Scheme, with a dedicated outlay of ₹99,446 crore. The scheme aims to create over 3.5 crore formal jobs in just two years (from August 1, 2025, to July 31, 2027), with a dual benefit model targeting both employees and employers.

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👥 Part A: Incentives for First-Time Employees

This segment aims to encourage youth to enter the formal workforce, especially those registered under the Employees’ Provident Fund Organisation (EPFO).

🎯 Key Features:

• Eligibility: First-time employees with monthly wages up to ₹1 lakh.

• Benefit: One month’s EPF wage (up to ₹15,000), paid in two installments:

  • 1st installment after 6 months of continuous service.

  • 2nd installment after 12 months of service and completion of a financial literacy programme.

• Savings Element: A portion of the benefit will be deposited in a locked savings account, promoting long-term financial discipline.

🎯 Target:

• 1.92 crore new workers expected to benefit directly under Part A.

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🏭 Part B: Support to Employers for Job Creation

Part B of the ELI Scheme provides financial incentives to employers for generating sustainable new employment, particularly emphasizing the manufacturing sector.

💼 Key Features:

• Incentive Range: Up to ₹3,000 per employee per month, based on salary slab:

  Salary Range	Incentive
  Up to ₹10,000	₹1,000
  ₹10,001 – ₹20,000	₹2,000
  ₹20,001 – ₹1,00,000	₹3,000

• Duration: 2 years for all sectors; extended to 4 years for manufacturing.

• Minimum Hiring Criteria:

• Firms with <50 employees: Must add minimum 2 new jobs.
• Firms with ≥50 employees: Must add minimum 5 new jobs.

Sustained Employment: New jobs must be retained for at least 6 months.

🎯 Target:

• Approximately 2.6 crore additional employments incentivized under Part B.

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💳 Payment Mechanism

• Part A (Employees): Direct Benefit Transfer (DBT) via Aadhaar Bridge Payment System (ABPS).
• Part B (Employers): Direct transfer into PAN-linked bank accounts.

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📈 Expected Impact

The ELI Scheme marks a transformative step in India’s employment strategy, addressing both the demand and supply side of job creation:

👨‍💼 For Employees:

• Encourages formal employment.
• Provides wage support and financial literacy.
• Extends EPF benefits and social security.

🏢 For Employers:

• Reduces cost of hiring.
• Promotes sustained job creation.
• Encourages hiring in the manufacturing sector, aligning with "Make in India".

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🔍 Conclusion

The ELI Scheme 2025 represents a historic employment policy intervention, designed to formalize the workforce, empower youth, and catalyze industrial employment. By linking financial incentives with job creation and retention, the government aims not just to generate employment, but to transform the nature of jobs in India—from informal, insecure, and low-paid to formal, stable, and secure.

With careful implementation and monitoring, the scheme holds the potential to usher in an inclusive employment revolution, particularly critical as India eyes demographic and economic milestones over the coming decades.