The Union Cabinet on Monday approved the rollout of the Employment Linked Incentive (ELI) scheme, with an out- lay of Rs 99,446 crore, aimed at generating 3.5 crore for- mal jobs between August 1 2025 and July 31 2027.
The ELI scheme is a flag- ship component of Prime Minister Narendra Modi’s third-term employment agenda, which prioritises large-scale job creation, workforce formalisation and economic inclusion. Senior officials had earlier indicated that the Prime Minister had directed key ministries to align fiscal incentives with measurable employment outcomes.
With Monday’s Cabinet approval, the scheme moves from budgetary promise to full-scale policy execution. The scheme was first announced in the Union Bud- get 2024–25, presented in July 2024 by Finance Minister Nirmala Sitharaman as part of a Rs 2 lakh crore employment and skilling package for youth.
The scheme is structured in two parts. Under Part A, first-time employees enter- ing the formal workforce will receive a one-time incentive equal to one month of their EPF (Employees’ Provident Fund) contribution, capped at Rs 15,000. This amount will be paid in two tranches—after six months of continuous em- ployment and again after twelve months, contingent on completion of a financial literacy course. Payments will be made through Direct Benefit Transfer (DBT) to the employee’s Aadhaar-linked EPF account.
The government estimates that 1.92 crore youth will benefit un- der this component. Under Part B, employers hiring additional workers on their EPF rolls will receive wage subsidies for up to two years. Firms with fewer than 50 employees must hire at least two new workers, while those with 50 or more must add a minimum of five to qualify. The subsidy varies by salary band: Rs 1,000 per month for salaries up to Rs 10,000; Rs 2,000 for salaries be- tween Rs 10,001 and Rs 20,000; and Rs 3,000 for salaries between Rs 20,001 and Rs 1,00,000. No incen- tive is available for salaries above Rs1 lakh per month.
This ensures inclusion of both low-income and mid- income jobs, though the fixed nature of the upper- tier subsidy may reduce proportional benefit for higher-wage hiring. For manufacturing sec- tor employers, the incentive period is extended to four years. The government expects this component to support 2.6 crore new jobs.
Subsidy payments will be credited directly to employers’ PAN-linked bank ac- counts. A central feature of the scheme is its emphasis on workforce formalization. By making EPF registration mandatory for eligibility, and requiring Aadhaar- linked identity verification and digital compliance, the scheme seeks to transition a large number of informal sector workers into the organized economy.
The inclusion of a financial litera- cy requirement is intended to instill savings discipline among first-time jobholders. The scheme’s scale and design make it one of India’s most ambitious job-linked initiatives and its end result will depend on how strictly its implementation is over- seen by the respective ministry. Globally, wage-linked hiring incentives have been deployed in countries like the United States (WOTC), United Kingdom (Kickstart Scheme), and Australia (JobMaker Hiring Credit).
However, most such programmes focus exclusively on employer-side incentives and are limited in scope or duration. India’s ELI scheme is distinctive in combining employee and employer incentives, mandating EPF-based formalisation, and layering benefits with financial literacy and digital compliance frameworks. With a four-year incentive horizon for manufacturing, it is also longer-term than many international counterparts.
The Cabinet’s clearance of the ELI scheme is widely seen as reinforcing the Modi government’s focus on job-intensive growth in its third term. By embedding incentives within formal employment structures, the scheme seeks to deliver not just immediate hiring outcomes, but lasting structural gains in India’s labour market.