Employment-linked incentive scheme: Who will benefit?

The Union Cabinet on Tuesday approved the employmentlinked incentive scheme (ELI), nearly a year after the government announced it in the 2024-25 budget. The scheme is projected to cost the exchequer Rs 99,446 crore. ET looks at the eligibility criteria and benefits to employees and employers under the scheme, which comes into effect on Aug 1.

INCENTIVE TO FIRST-TIME EMPLOYEES
All those who are newly employed with a salary up to `1 lakh per month, and enrolled with the Employees’ Provident Fund Organisation (EPFO), will get an incentive equal to a month’s wage, limited to `15,000, in two instalments at an interval of six months. This money will be credited into the beneficiary account through direct benefit transfer. A portion of the incentive will be frozen for a fixed period to encourage savings. The government projects this to create around 19.2 million new formal jobs in the country.

INCENTIVE TO EMPLOYERS
Employers will get up to Rs 3,000 per month for two years for each additional employment created, where the employee stays at the job for a minimum of six months. For the manufacturing sector, incentives will be extended to the third and fourth years as well, but the registration window will remain open only for two years: from August 1, 2025 to July 31, 2027. This is projected to incentivise employers to create another nearly 26.0 million jobs.

Establishments with up to 50 employees and registered with the EPFO will have to hire at least two additional employees to get the scheme benefits. Those employing 50 or more will need to hire five additional employees. For every additional appointment with a monthly wage up to Rs 10,000, the government will reimburse Rs 1,000 a month to the employer. The reimbursement will be Rs 2,000 for creating jobs where the wages range from Rs 10,000 to Rs 20,000 a month, and if the wages are beyond that up to Rs 1 lakh, the incentive will be Rs 3,000. Payments to the employers will be made directly into their PANlinked accounts.

WHAT DOES IT MEAN?
EY India estimates that an employer in the non-manufacturing sector hiring 100 additional employees could receive up to Rs 72 lakh over two years. In the manufacturing sector, this would be Rs 1.44 crore over four years.