WHAT?

The Employment Linked Incentive (ELI) Scheme is a significant government initiative in India, announced in the Union Budget 2024-25, aimed at boosting formal job creation, enhancing employability, and expanding social security.

Approved by the Union Cabinet on July 1, 2025, the scheme is part of a broader ₹2 lakh crore package targeting 4.1 crore youth over five years. With a specific outlay of ₹99,446 crore, it seeks to generate over 3.5 crore jobs, focusing on first-time employees and the manufacturing sector, with benefits applicable to jobs created between August 1, 2025, and July 31, 2027.

OBJECTIVES

1. Generate over 3.5 crore jobs, including 1.92 crore first-time workforce entrants.
2. Incentivize employers, especially in manufacturing, to hire and retain additional workers.
3. Formalize the workforce by linking benefits to Employees’ Provident Fund Organisation (EPFO) enrollment. What is Provident Fund? Click here to know
4. Enhance employability through financial literacy and skill development.
5. Reduce unemployment and promote inclusive economic growth.
6. It is a cart of a five-scheme package, including skilling 20 lakh youth and internships for 1 crore youth.
7. Aligns with initiatives like PLI schemes and addresses challenges like the 1.2% IIP growth in May 2025.

Key Features

The scheme is divided into two main components: PART A : FOR EMPLOYEES and PART B : FOR EMPLOYERS

Other features

1. Employees: Payments under Part A are made via Direct Benefit Transfer (DBT) using the Aadhaar Bridge Payment System (ABPS).
2. Employers: Payments under Part B are credited directly to PAN-linked bank accounts.
3. If employment ends within 12 months, employers must refund the subsidy.
4. Aadhaar seeding with bank accounts is mandatory for DBT eligibility.

Benefits

1. For Employees: Financial support (up to ₹15,000), social security via EPFO, and financial literacy training.
2. For Employers: Reduced hiring costs, especially beneficial for small and medium enterprises (SMEs) and manufacturing firms.
3. For Economy: Boosts formalization, supports manufacturing growth, and addresses youth unemployment (e.g., 47% working-age population affected as of 2023).
4. Implementation Timeline : Effective Date: August 1, 2025, to July 31, 2027 (2-year enrollment period).
5. EPFO Deadlines: UAN activation and Aadhaar seeding extended to June 30, 2025, for FY 2024-25 employees.

Challenges and Criticism

1. Implementation Risks: EPFO’s institutional constraints (e.g., 28% claim rejections in 2022-23) may hinder rollout.
2. Employer Burden: Refund obligations if employment ends early could deter participation.
3. Equity Concerns: Trade unions (e.g., CITU) argue it benefits employers disproportionately, lacking accountability.
4. Skill Mismatch: Success depends on aligning skills with industry needs, a gap noted in NITI Aayog reports.