Cabinet Approves Employment Linked Incentive Scheme for Job Creation

Employment Linked Incentive (ELI) Scheme Cleared by Cabinet: What It Means for Workers and Employers

In a major step towards expanding formal employment in India, the Union Cabinet has approved the Employment Linked Incentive (ELI) Scheme—a two-year initiative aimed at rewarding companies for job creation and directly supporting new employees entering the formal workforce.

The scheme, a key part of the government’s strategy to boost economic growth and social security coverage, is set to roll out on August 1, 2025, with an ambitious goal of generating over 3.5 crore formal jobs by mid-2027.

What Is the ELI Scheme All About?

At its core, the ELI Scheme does three things:

Encourages businesses to hire more workers by offering cash incentives.
Supports first-time employees with a direct wage-linked benefit.
Formalizes the workforce by linking jobs to EPFO, Aadhaar, and digital financial infrastructure.

The scheme spans all sectors, with a special focus on manufacturing, and is designed to strengthen both job creation and long-term job retention.

Key Highlights at a Glance

Feature	Details
Scheme Period	Aug 1, 2025 – July 31, 2027
Total Government Outlay	₹99,446 crore
Targeted Jobs	Over 3.5 crore
Focus Sector	All sectors (Manufacturing prioritized)
Mandatory Linkages	EPFO registration, Aadhaar, PAN

Part A: Benefits for First-Time Employees

The scheme directly benefits workers joining the formal sector for the first time.

Who’s Eligible?

Must be a new entrant in the formal workforce (EPFO-registered)
Monthly wage up to ₹1 lakh
Aadhaar-linked Universal Account Number (UAN) required

What’s the Benefit? Eligible workers can get up to ₹15,000 in direct cash incentives, paid in two installments:

1st Installment: After completing 6 months of continuous service
2nd Installment: After 12 months, conditional upon completing a basic financial literacy program

How Will It Be Paid? Payments will be made through Direct Benefit Transfer (DBT) using the Aadhaar Bridge Payment System (ABPS) to the worker’s linked bank account.

Part B: Monthly Incentives for Employers

Businesses that expand their workforce also stand to gain.

Who Can Apply?

Employers must be registered with EPFO
Must hire a minimum number of new employees:
- At least 2 hires if company size < 50
- At least 5 hires if company size ≥ 50
New hires must earn up to ₹1 lakh/month and remain on payroll for at least 6 months

What’s the Incentive? Employers receive monthly payouts per eligible employee for up to 2 years, or 4 years in the case of manufacturing:

EPF Wage Band (Monthly)	Incentive to Employer
Up to ₹10,000	₹1,000/month
₹10,001 – ₹20,000	₹2,000/month
₹20,001 – ₹1 lakh	₹3,000/month

Payments will be made directly to the employer’s PAN-linked bank account.

Why the Focus on Manufacturing?

To support India’s long-term ambition of becoming a global manufacturing hub, the ELI scheme allows manufacturing employers to receive incentives for up to four years—double the duration available to other sectors. This extended support is expected to deepen job retention and upskill industrial workers.

Important Deadlines and Compliance Notes

UAN-Aadhaar-Bank Linking: Employees must link their UAN, Aadhaar, and bank account by June 30, 2025, to qualify.
Wage Records: Employers must keep accurate, EPFO-compliant payroll records.
Second Employee Installment: Paid only after completing financial literacy training.

Frequently Asked Questions (FAQs)

1. Who qualifies as a ‘first-time employee’? Anyone entering the formal workforce for the first time, earning up to ₹1 lakh/month, with an Aadhaar-linked UAN and at least 6 months of continuous employment.

2. What must employers do to get benefits? Hire the minimum number of new employees, keep them on payroll for at least 6 months, and stay fully compliant with EPFO requirements.

3. Is this scheme limited to one industry? No. While all sectors are eligible, manufacturing companies can claim incentives for a longer period (4 years instead of 2).

4. What’s the total benefit to employers and employees? Employees can earn a one-time incentive of up to ₹15,000, and employers can receive monthly payouts per eligible hire—up to ₹3,000/month per employee.

Why This Scheme Matters

The ELI Scheme is more than a temporary wage support mechanism—it’s part of a larger vision:

To bring millions into the formal sector
To boost social security and long-term savings culture
To nudge employers toward inclusive hiring and business growth

By aligning economic incentives with workforce development, the ELI Scheme offers a powerful blend of job creation, compliance, and social protection