Employment Linked Incentive (ELI) Scheme

Employment Linked Incentive (ELI) Scheme: A Major Push for Jobs, Youth & Manufacturing

The Government of India has launched a strategic and forward-looking initiative called the Employment Linked Incentive (ELI) Scheme, aimed at accelerating job creation across the country, empowering the youth, strengthening the manufacturing sector, and expanding the social security net for workers. This ambitious program is a key component of the government’s commitment to rostering inclusive economic growth by linking incentives directly to employment generation—particularly in sectors that promise long-term value, innovation, and workforce demand.

What is the Employment Linked Incentive (ELI) Scheme?

The ELI Scheme is a progressive policy tool that incentives employers—especially in the formal sector—to hire new workers, particularly first-time employees. It also promotes the absorption of existing informal workers into formal employment. The scheme’s core objective is to:

Boost employment generation

Support the expansion of labor-intensive industries

Enhance the ease of hiring first-time employees

Provide social security benefits to new workforce entrants

Launched under the Ministry of Labour & Employment, the ELI Scheme offers financial incentives to employers who hire new workers under predefined criteria. This model aligns with the government’s broader vision of Atmanirbhar Bharat (Self-Reliant India), emphasizing the need for sustainable and equitable job creation.

Key Features of the ELI Scheme

1. Incentives for New Employment

The scheme provides direct benefits to employers who hire new workers. These include:

Wage-linked subsidies for each new employee added to the workforce.

Contributions to EPF (Employees’ Provident Fund) for newly hired employees for a specified period, reducing the financial burden on employers.

Incentives are calculated based on the number of employees hired and retained over time.

2. Targeting First-Time Employees

One of the scheme’s unique attributes is its focus on first-time job seekers. These are individuals who are entering the formal workforce for the first time, often without prior EPF or ESIC registration.

This has multiple benefits:

It gives young people and fresh graduates a better chance to get absorbed into formal employment.

It reduces informal or exploitative working conditions by encouraging businesses to register their workforce.

It promotes career pathways for youth, especially in semi-urban and rural regions.

3. Support for Labor-Intensive Sectors

Although the scheme is open to all sectors, special emphasis is placed on labor-intensive and manufacturing sectors, such as:

Textiles and garments

Electronics and consumer durables

Food processing

Leather and footwear

Construction and infrastructure

MSMEs (Micro, Small, and Medium Enterprises)

These sectors are known for their capacity to absorb large numbers of workers with varied skill levels, thus making them key drivers of employment.

Benefits of the ELI Scheme.

Employment Linked Incentive (ELI) Scheme

1. Empowering Youth

India has one of the youngest populations in the world. However, youth unemployment remains a critical challenge. The ELI Scheme directly addresses this by:

Facilitating entry-level job opportunities

Reducing the skills-to-employment gap

Offering formal employment and social protection, like EPF and ESI

Encouraging the development of on-the-job skills

2. Supporting Employers

Small and medium businesses often struggle to expand their workforce due to high cost burdens related to social security contributions. ELI provides financial relief by:

Sharing or covering employer contributions to EPF/ESI for new hires

Offering predictability and cost reduction in payroll expansion

Encouraging businesses to formalize their workforce without fear of compliance overload

3. Expanding Social Security

With formal employment comes access to social benefits like provident funds, medical insurance, and pensions. By incentivizing formal hiring:

More workers gain social safety nets

Women and marginalized communities receive long-term benefits

It reduces informal employment, which often lacks stability and protection

Eligibility and Implementation

To avail the benefits under the ELI Scheme, employers must meet the following conditions:

They must be registered with EPFO (Employees’ Provident Fund Organization).




They must hire new employees who were not previously part of EPF records.

The minimum number of employees hired for eligibility may vary based on the size of the establishment.

Employers must retain these employees for a certain period to continue receiving benefits.

Employees, on the other hand, should:

Be earning up to ₹15,000 per month to qualify under certain benefits.

Not be previously enrolled in EPF or ESI schemes.

Implementation is being monitored via a tech-enabled portal, ensuring transparency, real-time tracking, and accountability.

Impact on the Indian Economy

The ELI Scheme has the potential to create a multiplier effect on employment and the economy. Here’s how:

1. Stimulating Formal Employment Growth: With over 90% of India’s workforce still in the informal sector, ELI acts as a gateway for millions to enter the formal workforce.

2. Boosting Manufacturing Sector: India’s target of becoming a $5 trillion economy by 2030 hinges on expanding its manufacturing base. By incentivizing job creation in this sector, ELI directly contributes to this macroeconomic goal.

3. Bridging the Skill Gap: Employers are more likely to hire and train new workers under ELI. This organically builds a skilled and semi-skilled workforce across industries.

4. Increasing Tax & EPFO Coverage: Formalization improves tax compliance and expands EPFO’s coverage, increasing government revenues and strengthening the pension system.

Challenges and Way Forward

While the ELI Scheme offers numerous advantages, its success depends on several factors:

Awareness among employers and workers: Many small businesses and job seekers are unaware of such schemes. Proactive campaigns, industry outreach, and digital awareness drives are essential.

Ease of compliance: The process must remain streamlined and not become burdensome for businesses, especially MSMEs.

Retention incentives: Employers must not misuse the scheme by hiring and firing frequently just to claim subsidies. Built-in checks and conditions are necessary to ensure sustainable employment.

Skill development integration: Linking ELI with programs like Skill India, PMKVY, and apprenticeship schemes can further amplify its impact.

Conclusion.

Employment Linked Incentive (ELI) Scheme

The Employment Linked Incentive (ELI) Scheme is more than just a government policy—it is a strategic vision to empower youth, strengthen industries, and transform India’s workforce landscape. By directly linking incentives to job creation and formal employment, the government is ensuring that growth becomes inclusive and sustainable.

If implemented effectively and scaled up with robust monitoring and participation from industries, the ELI Scheme could become a landmark employment generation initiative, helping India not only recover from unemployment challenges.