Employment Linked Incentive Scheme: Key Features, Goals, and How It Works

The Employment Linked Incentive Scheme (ELI) is the new initiative taken by the government authorities of India. Announced under the Union Budget of 2024-2025, it offers financial incentives to Employers and first-time employees registered with the Employees Provident Fund Organisation (EPFO). The main objective of launching this scheme is to promote the job creation and enhance social security in India, especially in the Manufacturing sector. As we all know that India suffers the most with unemployment, underemployment, and a mismatch between the skills and industry demands. To solve this problem, ELI is introduced. It will help the employees stimulate the private sector participation in job creation and workforce development. Through this informational guide, you will know more about the scheme, its objective, features, benefits, components, and much more. Now, let’s explore the Employment Linked Incentive Scheme’s descriptive guide.

What is the Employment Linked Incentive Scheme?

The Employment Linked Incentive Scheme is a government initiative which is introduced to boost the formal job creation in India. The scheme was introduced under the Union Budget 2024-2025. The scheme aims to improve the incentives for job creation and reduce the practices of informal job creation. To receive the benefit of the ELI, employees need to enroll in the Employees Provident Fund Organisation (EPFO). After that, they have to activate their Universal Account Number (UAN) and link their bank account with their Aadhar Card. As per the latest update, by 2025, the EPFO deadline to complete these steps is 30th June 2025. 

The scheme mainly motivates the Employers to hire more labour, especially the freshers. But ELI also promotes skill improvement and employment retention. The scheme includes the three main stages to provide financial assistance to the employers and the employees. The government has planned a huge budget of Rs. 2 lakh crore (around US$23.70 billion) for 2024-29 under this scheme. It is a big step towards creating fair opportunities, reducing inequality, and supporting sustainable economic growth. The main goal is to equip India’s youth with the right skills and chances they need to succeed in today’s changing job market.

Goals of the Employment Linked Incentive Scheme:

1. The main goal of the scheme is to create more than 3.5 crores jobs over the time period of 1st August 2025 to 31st July 2027.
2. The second main objective is to bring 1.92 crores of fresher employees into the formal work space. 

3. Give attractive incentives to the employees, especially in the Manufacturing sector, to create more job opportunities. 

4. Another goal of the scheme is to extend the social security coverage and motivate the freshers towards financial literacy. 

5. The Employment Linked Incentive scheme aims to promote inclusive and sustainable employment growth in India.  

Key Features of the Employment Linked Incentive Scheme:

The following are the main characteristics of the ELI scheme:

Part A: For First-Time Employees

The ELI scheme is specially made for youngsters stepping into formal jobs for the very first time. It covers employees registered under EPFO and earning up to Rs 1 lakh per month. Eligible workers can get up to Rs 15,000, given in two parts.

• The first payment will come after completing six months of continuous work.
• The second payment will be released after one year, once a short financial training course is completed.
• A part of this money will be kept aside in a safe savings option, helping young employees build healthy money habits. Nearly 1.92 crore young people are expected to benefit directly from this scheme. 

Part B: For Employers

 Employers also get support for hiring and retaining new eligible workers. The incentives are:

• Employees making up to Rs 10,000 a month would receive Rs 1,000.
• Rs 2,000 per month for those earning between Rs 10,001 and ₹20,000
• monthly salary of Rs 3,000 for employers making between Rs 20,001 and Rs 1 lakh

To qualify, small companies (with fewer than 50 workers) must hire at least two new employees, while larger companies need to add at least five. These new hires should stay employed for a minimum of six months.

For manufacturing companies, the incentive period is even longer, up to four years, giving industries a strong and steady boost. All payments will be made directly to bank accounts (DBT) to ensure fairness and prevent misuse.

Components of the Employment Linked Incentive Scheme and its Benefits through EPFO:

The main components of the Employment Linked Incentives are divided into three main parts: 

Part A: First Time Employment

This part is all about boosting the formal workspace between the freshers entering financial jobs for the first time. 

1) Benefit Provided:

• Direct Bank Transfer of Rs 15,000 in 2 installments.
• The first installment of the money is directly transferred to the bank accounts of employees after 6 months of continuous EPFO-enrolled employment.  
• The second installment will be transferred after 12 months of successful completion of the mandatory financial Literacy Course. 

2) Salary Cap: Up to 1 Lakh/month

3) Duration: First-time Employment is valid up to 2 years for EPFO-enrolled candidates. 

4) Condition: If the candidate exits before 12 months, then the employer must have top refund the subsidy.  

Part B: Job Creation in the Manufacturing Sector:

This part of the ELI targeted the manufacturing sector of India. This part benefits the employers and the first-time employees in a structured way.

1) Eligibility Criteria: 

• Employer must have a proven track record of 3 years in EPFO. 
• Employer must hire more than 50 Non-EPFO employees, or 25% of the baseline, whichever is lower.
• This part only applies to the in-sourced employees. 
• Salary must not exceed more than 1lakh/per month (capped at 25,000 per month for subsidy calculation)

2) Duration: The Benefit of this part has been extended up to 4 years, with the contributions shared between the employer and the employees.  

3) Condition: Employer will have to return the subsidy if the employee exits before 12 months. This part is expected to benefit the 2.60 crore youth in India.

4) Percentage of Incentive Distribution between the employee and the Employer:   

First Year	24%
Second Year	24%
Third Year	16%
Fourth Year	8%

Part C: Support to the Employers

This section of the ELI scheme supports Employers in all sectors who want to grow their workforce. 

1) Eligibility Criteria:

• If the Employer has fewer than 50 employees, then they have to hire 2 new employees
• If the Employer has more than 50 employees, then they have to hire 5 new employees. 
• The salary cap of the employer must be 1 lakh/per month. 
• Employees don’t necessarily have to be first-time members of EPFO.

2) Duration:

• The duration of the support to the employer is 2 years. 
• Please make sure that this part to not applicable to employers covered in Part B. 
• If the employer creates 1,000 jobs in 2 years, then the subsidy will be continued in the 3rd and 4th year at the reduced rates similar to Part B. 

3) Subsidy Slabs (EPFO Reimbursement):

Monthly Salary	Subsidy Amount Per Month
Up to Rs 10,000	Rs 1000
Rs 10,000 to 20,000	Rs 2000
Rs 20,000 to 1,00,000	Rs 3000

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Detailed Guide on Coverage and Estimated Expenditure of the Employment Linked Incentive Scheme:

The table given below provides you detailed guide on coverage and expenditure of the 3 main components of the Employment Linked Incentive Scheme:

Scheme	Duration	Expenditure Duration	Central expenditure	Beneficiary Youth
First Time Employment	2 years	3 years	Rs 23,000	1.92 crore
Job Creation in the Manufacturing Sector	2 years	6 years	Rs 52,000	2.60 crore
Support for the Employers	2 years	6 years	Rs 32,000	50 lakhs

Application Process For the Employment Linked Incentive Scheme:

Step-by-step application process for the ELI scheme is given below:

1. The first step is to visit the official portal of the EPFO, which is epfindia.gov.in. 

2. After visiting the home page, search for the Apply Online option, which you will find under the online services option.

3. By clicking on the Apply Online option, a new page appears on your screen. Then fill in your personal and job details in the application form given on the new page.

4. After that, get your UAN number from your employer. Then enter it in the “Activate UAN” right under the Important links option on the EPFO site.

5. Please make sure that your UAN number is linked to your Aadhaar card, and your bank details are updated.

6. Employers can keep the new joiners for 6 months. If the conditions are met, then the incentive of the employer and the employee will be released.

7. All employees are advised to take the mandatory Financial Literacy course before claiming their second installment.

8. The government authorities will automatically credit the installments of the Employer and the Employee directly to their Aadhar-linked bank accounts.

The good thing about this application process is that the entire process will be tracked digitally. It helps to verify the job creation process and prohibit the misuse of funds.

Benefits of the Employment Linked Incentive Scheme: 

Some of the benefits of the ELI scheme 2025 are mentioned below:

1. More Jobs for Youth– Helps young people kickstart their careers with the right opportunities.
2. Support for Employers– Businesses get financial assistance to hire more staff, making it easier for them to grow.
3. Secure Employment– Jobs under this scheme come with EPFO benefits, ensuring stability and social security.
4. Money Management Skills– New employees receive financial training on saving, investing, and smart spending.
5. Boost to Manufacturing– The incentive lasts longer (four years) for manufacturing jobs, giving a push to this important sector.
6. Massive Job Creation– Aims to generate 3.5 crore new jobs, reducing unemployment and strengthening the economy.

Economic and Social Impact of ELI(Employment Linked Incentive Scheme) on People:

The Employment Linked Incentives Scheme has some economic and social impacts on the people of India, which are as follows: 

• The scheme facilitates the transformation of the job creation from an informal structure to a formal structure. 
• It strengthens the manufacturing sector, which holds more potential for mass employment opportunities. 
•  Enhances the financial literacy rate among the new job seekers. 
• Offering attractive incentives to employers that help shape the private sector growth and promote entrepreneurship hiring. 

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