Employment Linked Incentive (ELI) Scheme: Boosting Employment Generation and Formalization in India

In a significant stride towards promoting employment generation and formalizing India’s labor force, the Employment Linked Incentive (ELI) Scheme was introduced as a key initiative in the Union Budget 2024-25. This scheme, part of the Prime Minister’s package of five strategic schemes to enhance employment opportunities, skilling, and workforce formalization, is expected to play a crucial role in reshaping the country’s employment landscape.

Ms. Sumita Dawra, Secretary, Ministry of Labour & Employment (MoLE), chaired an inter-ministerial meeting to discuss the ELI Scheme’s broad contours with key stakeholders. The meeting saw participation from various Ministries, Departments, industry representatives, and labor unions, signaling the collaborative approach the Government is taking toward ensuring the scheme’s successful implementation.

A Holistic Approach to Employment Creation

The ELI Scheme is designed to formalize the workforce by incentivizing first-time employees and their employers. With the Employees’ Provident Fund Organisation (EPFO) as the backbone, the scheme will recognize and support employees entering the formal sector for the first time, offering a structured pathway to access social security benefits. The scheme also extends benefits to employers, particularly in industries like manufacturing, Special Economic Zones (SEZs), and Micro, Small, and Medium Enterprises (MSMEs).

Ms. Dawra emphasized the scheme’s potential to create formalized employment opportunities in previously informal sectors, providing these workers with access to much-needed social security benefits. The scheme is part of the Government’s broader strategy to achieve inclusive economic development through the formalization of labor in diverse sectors.

Key Components of the ELI Scheme

The ELI Scheme comprises three targeted components aimed at benefiting employees and employers:

Scheme A: Recognition of First-Time Employees

This component focuses on employees entering the formal sector for the first time, registered with the EPFO. The scheme offers a one-month wage (up to ₹15,000) to be paid in three installments. This financial support will ease the transition for first-time employees and encourage more workers to join the formal labor force.

Scheme B: Incentives for Job Creation in Manufacturing

Under this component, employees and employers in the manufacturing sector will receive incentives for hiring first-time employees. The benefits are directly linked to their EPFO contributions during the first four years of employment. Employees with salaries of up to ₹1 lakh are eligible, with the goal of fostering job creation and boosting the manufacturing sector’s workforce.

Scheme C: Employer Support for Additional Employment

This scheme aims to reduce the financial burden on employers by reimbursing up to ₹3,000 per month for two years towards their EPFO contributions for each additional employee hired. Eligible employees must have salaries of up to ₹1 lakh per month, providing a strong incentive for employers to expand their workforce and formalize labor engagements.

A Collaborative Approach to Implementation

The inter-ministerial meeting, chaired by Ms. Dawra, featured participation from key ministries, including the Ministry of Commerce & Industry, Ministry of Finance, Ministry of Micro, Small, and Medium Enterprises (MSME), Ministry of Textiles, and NITI Aayog, among others. These diverse stakeholders discussed effective ways to implement the ELI Scheme across various sectors such as SEZs, plantations, MSMEs, and the manufacturing industry.

A major focus of the discussion was on awareness-building initiatives to ensure maximum participation in the scheme. The Ministry of Labour & Employment has called on participating ministries to organize advocacy campaigns to inform both employers and employees about the benefits of the ELI scheme. By raising awareness, the Government hopes to encourage higher enrollment in the scheme and foster widespread formalization of the labor force.

Building Social Security for All

At the core of the ELI Scheme lies the Government’s vision of providing social security to all workers in the country. By ensuring that employees are registered with EPFO and providing incentives for both employees and employers, the scheme aims to integrate more workers into the formal economy. This shift will not only grant employees access to essential social welfare benefits but also create a more structured, accountable, and sustainable workforce for industries.

A Bright Future for Formalized Employment

The ELI Scheme holds great promise in advancing employment generation and labor force formalization in India. With support from the Government, industries, and other key stakeholders, the scheme is set to transform the labor landscape and improve the lives of millions of workers. The Ministry’s continued engagement with stakeholders, including employers, labor unions, and industry representatives, reflects its commitment to making the ELI Scheme a success.

As the scheme moves toward rollout, it is expected to bring immense benefits to workers in both the formal and informal sectors, ensuring greater job security, better financial stability, and access to long-term social security. The ELI Scheme is more than a policy—it is a pathway to inclusive and sustained economic growth for India.

For more information about the Employment Linked Incentive (ELI) Scheme and how to participate, stakeholders can reach out to the Ministry of Labour & Employment.