Employment Linked Incentive (ELI) Scheme

• Context (TH): On July 1, 2025, the government approved the Employment Linked Incentive (ELI) Scheme as part of the Prime Minister’s Jobs and Skills Package announced in Budget 2024–25.

About Employment Linked Incentive (ELI) Scheme

• It will run in two parts for two years, with an extended duration for manufacturing.
• Nodal Ministry: Ministry of Labour & Employment.

Part A: Worker Incentives

• Target Group: This part covers first-time wage employees joining the formal workforce.
  • Employees must be registered with EPFO and have a monthly income of up to ₹1 lakh.
• Wage Subsidy: A one-time wage subsidy of up to ₹15,000 will be provided.
  • Subsidy will be released in 2 instalments: After 6 months & after 12 months of continuous employment. The second instalment requires completion of a financial literacy programme.
• Disbursal Mechanism: The amount will be paid via DBT using Aadhaar-Based Payment System (ABPS). A portion may be held in a savings-linked instrument with delayed withdrawal.

Part B: Employer Incentives

• Target Group: This part supports employers who generate new formal jobs. Employers must be EPFO-registered and retain new hires for a minimum of six months.
  • Firms must add at least two additional employees (if under 50 workers) or five (if 50 or more).
  • New hires must earn not more than ₹1 lakh per month.
• Incentives: An incentive of ₹3,000 per additional employee per month will be provided for two years. Manufacturing firms will receive the same incentive for a period of four years.
  • The incentive slabs are:
    1. ₹1,000 for wages up to ₹10,000,
    2. ₹2,000 for wages up to ₹20,000, and
    3. ₹3,000 for wages above ₹20,000.
• Disbursal Mechanism: The amount will be credited directly to employer’s PAN-linked bank account.

Current Affairs

Issues with the Scheme

• Employer-centric incentives: The Scheme heavily emphasises benefits to employers, often overlooking fundamental mismatches between worker skills and job requirements, thus reinforcing systemic labour inequalities.
• Neglect of the formal sector: By focusing on formal manufacturing jobs, the scheme ignores the informal workforce (~90% of India’s labour market), thus potentially exacerbating existing disparities.
• Demographic Exclusion: Scheme’s one-size-fits-all focus risks sidelining women, rural youth, and informal workers in more significant and high-growth sectors.
• Superficial Job Gains: EPFO-linked metrics conflate formalisation with job creation, ignoring underemployment and skill gaps.