Incentive program geared towards curbing job exits of 45% initial hires within half a year
The Indian government has launched the Employment Linked Incentive (ELI) Scheme, a flagship programme aimed at generating over 3.5 crore formal jobs between August 1, 2025, and July 31, 2027. The scheme, with an outlay of approximately ₹1 lakh crore, was announced in the Union Budget 2024–25 and was approved by the Union Cabinet chaired by Prime Minister Narendra Modi.
The primary objectives of the ELI Scheme are to create more than 3.5 crore jobs, bring 1.92 crore first-time employees into the formal sector, promote job creation with a special focus on the manufacturing sector, and improve social security and financial literacy among new workers.
To be eligible for the ELI Scheme, employers must be registered with the Employees Provident Fund Organisation (EPFO) and hire additional employees who meet specific criteria. First-time employees must be registered with EPFO, have a monthly salary up to ₹1 lakh, and possess an Aadhaar-seeded Universal Account Number (UAN). Employers with fewer than 50 employees must hire at least 2 additional employees, while those with 50 or more employees must hire at least 5 additional employees. These new hires must be retained for at least 6 months, and the employees must earn up to ₹1 lakh per month.
Under the ELI Scheme, first-time employees will receive a one-month's wage subsidy capped at ₹15,000, paid in two instalments via Direct Benefit Transfer (DBT). The first instalment will be paid after 6 months of employment, and the second instalment will be paid after 12 months, contingent upon the employee completing a basic financial literacy program. A part of the incentive will be deposited in a savings account to encourage saving habits, which can be withdrawn later.
Employers will receive incentives of up to ₹3,000 per month for each additional employee retained for two years. In the manufacturing sector, incentives will extend for up to four years to encourage the creation of sustainable employment.
The ELI Scheme is structured into two parts: Part A focuses on first-time employees, and Part B focuses on employers. Around ₹19,500 crore will be made available for Part A of the ELI Scheme, and the remaining ₹79,500 crore will be for Part B. Under Part A of the ELI Scheme, around 1.92 crore first-time employees will benefit.
The Employment Provident Fund Organization (EPFO) will implement the ELI Scheme, and the entire programme will be financed through the Budget. The ELI Scheme aims to fill the wide disparity in formal skilling between India and developed nations, where estimates suggest that only 2.3% to 5.4% of India's workforce has undergone formal skill training, compared to much higher rates in developed countries.
The ELI Scheme is designed to address a 45% attrition rate among first-time employees within the first six months, offering a comprehensive approach to formalize the workforce, encourage financial literacy, and boost job creation on a large scale. The scheme was published on July 6, 2025.
- Eligible employers who meet the criteria set by the Employees Provident Fund Organisation (EPFO) and hire eligible first-time employees can benefit from the ELI Scheme's finance incentives for promoting business growth and trade, especially in the manufacturing sector.
- The ELI Scheme, a part of India's overall economic strategy, focuses on education-and-self-development, providing a financial literacy program for first-time employees and supportive measures to encourage savings, contributing positively to the economy.
- As part of the ELI Scheme, live markets and corporate entities can monitor the progress of the program through Direct Benefit Transfer (DBT), ensuring transparency and accountability in the finance sector while fostering a culture of formal employment.
- By reducing the attrition rate among first-time employees from 45% to a more manageable level, the ELI Scheme aims to create a more sustainable workforce, contributing to the economic growth and stability of the country.
- To achieve its goals, the ELI Scheme, implemented by the Employees Provident Fund Organization (EPFO), will receive financing from the Union Budget, earmarking substantial resources for job creation, financial literacy, and workforce formalization in various sectors.
