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Govt clears employment linked incentive scheme
The Cabinet approved an employment-linked incentive scheme to create 35 million jobs, offering financial benefits to new hires and firms.
The Union Cabinet chaired by Prime Minister Narendra Modi on Tuesday approved the much-awaited employment-linked incentive (ELI) scheme proposed in the 2024-25 Budget, which will offer fresh recruits in private-sector jobs a month’s wages, while firms hiring them will get financial incentives — steps aimed at boosting job opportunities and enhancing skills of working-age people.
The sops, aimed at creating 35 million new jobs in two years, will provide direct financial benefits up to ₹15,000 in two instalments to 19.2 million first-time employees, Union minister of information and broadcasting Ashwini Vaishnaw said at a briefing. The outlay cleared by the Cabinet for the roll out stands at ₹99,446 crore.
Firms participating in the scheme will also get a cash incentive of ₹3000 for each additional employee hired for two years, while for companies in the manufacturing sector, the sops will be available for an extended period of four years, according to an official statement.
The jobs scheme is part of the PM’s package to boost employment and skills, aimed at creating opportunities for nearly 41 million job-seekers in the long run, with a total estimated budget outlay of ₹2 lakh crore.
“The aim of the scheme is to create more formal employment and sustain it. It will promote formalization of the workforce, while complementing the national manufacturing mission,” the minister said.
According to the government’s Economic Survey 2024, India needs to create 7.85 million non-farm jobs every year until 2030 to absorb its expanding labour force, way higher than the current rate of employment.
While one part of the scheme deals with one-off payments of a month’s wages as direct benefit transfer to all first-time employees entering the workforce in formal sectors, up to a salary ceiling of ₹1 lakh, the second component is aimed at contributing a share of salaries.
The scheme has been designed to calculate a baseline of employee strength and firms with less than 50 employees will need to hire two additional staffers to be eligible for the incentives.
Employers with more than 50 workers will need to add five new employees to the payrolls. All employees need to be registered with the Employees’ Provident Fund Organisation, the state-backed retirement-income manager, according to the statement.
According to the details of the scheme, for new employees with a provident-fund base wage of ₹10,000, the incentive for hirers will be ₹1000 and for those who fall in the base wage slab of between ₹10,000 and ₹20,000, the incentive will be ₹2000. For salaries of between ₹20,000 and ₹1 lakh, the benefit will be ₹3,000.
The scheme therefore will offer incentives tied to EPFO contributions to both employers and first-time employees in the manufacturing sector in the form of funds linked to a specified pay scale for the period during which the plan will be in force.
The benefits would be applicable for jobs created between 1 August 2025 and 31 July 2027. “The target is to create jobs across the country for freshers, with a special focus on the manufacturing sector,” Vaishnaw said.
In an earlier briefing, labour minister Mansukh Mandaviya had said the government would put in place foolproof systems and AI-driven technologies to monitor hirings and utilisation of funds provided by the government, when asked how authorities would ensure firms don’t pass off existing employees as new ones to benefit from the incentives.
The corporate affairs ministry had been tasked with drawing the list of firms which will participate in the employment-linked sops, while the labour ministry was involved in finalizing the proposals.
