corporate law

Employment-Linked Incentive Schemes in India's 2024-25 Budget

Introduction

In the Union Budget 2024-25, Finance Minister Smt. Nirmala Sitharaman unveiled three employment-linked incentive schemes as part of the Prime Minister's initiative to boost job creation in India. These initiatives are specifically crafted to assist job seekers and employers across various industries.

Overview of Employment-Linked Incentive Schemes

The government will launch the following three schemes, which will primarily focus on enrolling first-time employees in the Employees' Provident Fund Organisation (EPFO):

Scheme A: First Timers

This scheme aims to provide a one-month wage subsidy to individuals entering the formal workforce for the first time. Key details include:

  • Benefit Amount: Subsidy can be as much as ₹15,000.
  • Payment Structure: Direct benefit transfer will occur in three installments to first-time employees registered with the EPFO.
  • Eligibility Limit: Monthly salaries of eligible individuals must be below ₹1 lakh.
  • Expected Beneficiaries: Approximately 210 lakh youth are projected to benefit from this initiative.

Scheme B: Job Creation in Manufacturing

This scheme is designed to stimulate additional employment within the manufacturing sector. Notable features include:

  • Incentives for First-Time Employees: This scheme incentivizes the hiring of first-time workers.
  • Financial Support: Employers will receive reimbursements based on their EPFO contributions for the first four years of a new employee’s employment.
  • Projected Impact: It is estimated that around 30 lakh youth and their employers will benefit from this scheme.

Scheme C: Support to Employers

This scheme targets all sectors and focuses on enhancing additional employment opportunities. Key components include:

  • Salary Cap: Additional employment will be credited for individuals earning up to ₹1 lakh per month.
  • Reimbursement Details: Employers will be reimbursed up to ₹3,000 monthly for two years for each additional employee's EPFO contributions.
  • Impact Expectations: The scheme aims to facilitate the creation of approximately 50 lakh additional jobs.

Notably, Schemes A and C are planned for a two-year duration, while the incentives from Scheme B for the manufacturing sector are distributed over four years for each eligible employee, although the enrollment window spans two years.

The central outlay for these three schemes is approximately ₹1.07 lakh crore, which is often misstated as ₹2 lakh crore.

Conclusion

The launch of these employment-linked incentive schemes is a strategic initiative by the government aimed at enhancing employment opportunities and fostering economic growth. By actively benefiting both employees and employers, these programs are poised to strengthen the job market in India.