Introduction
The Union Cabinet on July 1, 2025, approved the Employment Linked Incentive Scheme (ELI), named as ‘Pradhan Mantri Viksit Bharat Rozgar Yojana’. The scheme was earlier announced in the Union Budget 2024-25, as an innovative initiative by the Indian government intended at addressing the country’s increasing employment challenges. As India tackles high levels of youth unemployment, underemployment and a mismatch between skills and industry demands, the ELI scheme emphasises on stimulating the private sector participation in job creation and workforce development. The scheme seeks to motivate employers to hire more labour, precisely freshers, while also encouraging skill development and job retention.
The ELI initiative includes three notable programmes initiated to provide financial assistance to employers and employees. These programmes target various sectors, including manufacturing, and support the establishment of formal, high-quality jobs. By recommending subsidies for new hires, as well as rewards for job retention and upskilling, the scheme aims to create an inclusive and robust labour market. With a projected central allocation of Rs. 2 lakh crore (US$ 23.70 billion) for 2024-29, the scheme is an integral component of the government’s broader efforts to foster sustainable economic growth, decrease inequality, and ensure that India’s youth is equipped with the skills and opportunities essential to thrive in an evolving job market.
Objective
The ELI scheme aims to address India’s employment crisis by incentivising the private sector for job creation, retention and skill development. The objectives of the scheme are:
- Enhance private sector employment opportunities: The initiative encourages private sector companies to recruit additional staff, especially new entrants to the workforce, by providing financial rewards for job creation.
- Promote youth employment: The scheme primarily aims to decrease youth unemployment by encouraging businesses to recruit young individuals, especially those joining the workforce for the first time.
- Promote job retention: The ELI programme features measures to encourage job retention by offering incentives to employers who maintain elevated workforce levels over time, especially those who recruit beyond a specific threshold.
- Encourage skill advancement: The initiative aligns with governmental objectives to improve skills, particularly among young people, by motivating employers to invest in training and upskilling their workforce.
- Enhance formal employment: The initiative aims to formalise employment, especially in industries that have historically depended on informal labour. This involves offering incentives to employers who transition workers into the formal economy, providing advantages such as Provident Fund (PF) coverage.
- Improve employment in the manufacturing sector: The programme features targeted measures for the manufacturing industry, seeking to boost job opportunities in this vital sector by promoting the recruitment of individuals new to the workforce.
- Decrease economic disparity: By prioritising job creation and skill enhancement for young individuals, especially those from underprivileged backgrounds, the initiative seeks to diminish economic disparity and improve social mobility.
- Assist employers in recruitment: By providing financial assistance, such as reimbursing employers for their PF contributions for new hires, the programme aims to lower employers' expenses and motivate them to increase their staffing levels.
Employment Schemes under the Union Budget 2024-25
The Employment-Linked Incentive programme encompasses five schemes aimed at employment generation, workforce formalisation, skill development and enhancing industry compliance. Below is a detailed overview of each scheme:
Scheme A: Support for First-Time Employees
This scheme targets individuals entering the formal workforce for the first time and is facilitated through the Employees’ Provident Fund Organisation (EPFO). Key benefits include:
- One-month wage subsidy up to Rs. 15,000 (US$ 177.74), disbursed in two instalments.
- Applies to all sectors, aiding employees and employers in adjusting to initial productivity curves.
- Workers must complete an online financial literacy course before claiming the second instalment.
- Employers receive refunds if the employee leaves within 12 months.
- Coverage goal: More than 3.5 crore job creation over two years.
Scheme B: Incentivising Job Creation in Manufacturing
Designed to foster employment in the manufacturing sector, this scheme rewards employers and first-time employees who contribute to the EPFO:
- Employment thresholds: Minimum of 2-5 additional hires, depending on the company's size.
- Incentive duration: Benefits extend for four years with contributions shared between employer and employee, up to a wage cap of Rs. 1 lakh (US$ 1,184).
- Additional incentive: For employees earning over Rs. 25,000 (US$ 296) but capped at Rs. 25,000 (US$ 296) for calculation purposes.
- Eligibility: Applicable to manufacturing employers with a proven three-year track record of EPFO contributions.
Scheme C: Employer Support for EPFO Contributions
This scheme offers financial relief to employers by reimbursing part of their EPFO contributions:
- Reimbursement: Up to Rs. 3,000 (US$ 35.55) per month per new employee for two years, benefitting employers who increase their workforce.
- Eligibility: Only applies to employees not covered under Scheme B.
- Extension: Extended to employers adding more than 1,000 jobs within the eligibility period.
- Frequency: Quarterly reimbursements, with a potential extension for a third and fourth year at a maintained scale.
Scheme D: Skilling Programme with State and Industry Collaboration
A new centrally sponsored scheme to skill 20 lakh youth, enhancing employability and meeting industry needs:
- Scope: Skilling will occur over five years, with a total funding of Rs. 60,000 crore (US$ 7.11 billion) split among the central and state governments and as per the industries.
- Upgradation of ITIs: Revamping 1,000 Industrial Training Institutes (ITIs) in a “hub and spoke” model, with 200 hubs and 800 spokes nationwide.
- Industry-tailored courses: Introducing specialised short-term courses in collaboration with industry hubs.
Scheme E: Internship Programme with Top Companies
This programme provides hands-on experience for one crore youth by enabling internships with leading companies:
- Duration: Internships last 12 months, with a monthly allowance of Rs. 5,000 (US$ 59.25) and one-time assistance of Rs. 6,000 (US$ 71.09).
- Eligibility: Unemployed youth aged 21-24.
- Contribution: The government will contribute significantly to the allowance costs, while companies cover administrative and training expenses through CSR funding.
- Metrics and training: Priority will be given to candidates with lower employability metrics, and actual skill training is mandatory, focusing on hands-on work over classroom learning.
Additional Reforms for Labour Welfare and Industry Compliance:
- E-shram portal integration: A centralised digital solution for job roles, skill matching and employment opportunities.
- Portal upgrades: Enhancements to Shram Suvidha and Samadhan for streamlining industry compliance and worker grievance redressal.
Coverage and Outlay
Each scheme has been designed with targeted durations and substantial financial support to maximise benefits for specific segments within the formal workforce.
- First-Time Employment Scheme
- This scheme aims to support first-time employees in the formal sector. Over its duration, it is expected to benefit around 3.5 crore beneficiaries.
- Enrolment is open for 2 years, while expenditure coverage extends to 3 years to ensure continued support.
- The government has allocated Rs. 99,446 crore (US$ 11.32 billion) to cover the incentives provided to employees and employers, facilitating easy transitions for individuals entering the workforce.
- Job Creation in Manufacturing Scheme
- This scheme specifically encourages job creation in the manufacturing sector, expecting to reach around 30 lakh beneficiaries.
- With a two-year enrolment period, the expenditure phase spans 6 years, allowing sustained financial support to boost long-term employment in manufacturing.
- A substantial Rs. 52,000 crore (US$ 6.16 billion) has been earmarked for this scheme, underscoring the government’s commitment to revitalise manufacturing through incentives for new hires.
- Support to Employers Scheme
- This scheme provides direct financial support to employers, anticipated to benefit 50 lakh beneficiaries by incentivising additional hires.
- Like the manufacturing scheme, this scheme features a two-year enrolment phase and a six-year expenditure period.
- The scheme is backed by Rs. 32,000 crore (US$ 3.79 billion), offering reimbursement and assistance to employers to cover part of their contributions to the EPFO.
Collectively, the central outlay for these schemes amounts to Rs. 1,07,000 crore (US$ 12.68 billion), with a combined estimated beneficiary base of 2.9 crore individuals. These initiatives emphasise a comprehensive approach to workforce formalisation, manufacturing growth and employer support, fostering job creation and sustained employment opportunities across the formal sector.
Benefits
The Employment-Linked Incentive (ELI) schemes offer several key benefits, particularly in terms of enhancing employment opportunities and supporting employers and employees:
- Promotes job creation: The ELI schemes encourage businesses to hire more employees by offering incentives tied to EPFO contributions. This stimulates industrial growth and boosts employment in various sectors.
- Supports fresh graduates and new entrants: The First Timers scheme specifically helps integrate fresh graduates and individuals new to the formal workforce. By providing them with a stable income, this scheme reduces the financial strain of starting a career, ensuring smoother entry into the job market.
- Encourages workforce expansion for employers: The Job Creation scheme incentivises employers to expand their workforce by linking incentives to EPFO contributions. This lowers the financial barrier for employers to hire more workers, helping businesses grow and meet increasing demand.
- Reduces financial burden for employers: The Support to Employers scheme specifically helps small and medium-sized enterprises (SMEs) by reimbursing a portion of the EPFO contributions for newly hired employees. This reduces the cost of hiring, making it more financially viable for SMEs to expand their teams.
- Boosts economic growth: By creating more employment opportunities and incentivising businesses to hire, the ELI schemes help ensure that the growth driven by other manufacturing incentives, such as the PLI schemes, translates into real, long-term employment gains.
- Enhances financial security for employees: By incentivising formal employment through EPFO contributions, the schemes ensure that employees have access to retirement benefits, enhancing their financial security in the long term.
- Encourages formalisation of the workforce: The ELI schemes, by incentivising formal sector employment, help transition workers from the informal economy to the formal one, leading to greater stability and access to social security benefits.
Conclusion
In conclusion, the introduction of the Employment-Linked Incentive (ELI) schemes highlights the government's strategic approach to addressing unemployment while driving economic growth. By offering targeted incentives to employees and employers, these schemes aim to create a more inclusive and dynamic job market. The ELI initiatives not only support workforce expansion and formalisation but also provide significant financial relief to employers, particularly SMEs, making it easy for them to grow and hire. As the details of these schemes unfold, stakeholders in the manufacturing sector are eager to explore how these incentives can be effectively utilised to foster industrial growth and job creation, ensuring a thriving and sustainable economy in the long term.
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